Keeping Up Appearances

My grandfather was a stockbroker. Very respectable. His family were very proud of his choice of profession and had no reservations talking about it when asked.

He lived in leafy Surrey, Chipstead to be precise, and went to work every day in the City with his bowler hat on and smart suit. He was good with numbers, searched for value, and acted when he found it. He paid taxes on his earnings.

His grandson was a ‘gambler’. Not quite so respectable. His family were not so proud of his choice of profession and didn’t like to talk about it when asked.

He lived in leafy Surrey, Caterham to be precise, and went to work every day in his spare bedroom with his underpants on – the only suit he possessed was the one he was born in. He was good with numbers, searched for value, and acted when he found it. He paid no taxes on his earnings, (although he did pay a hefty Premium Charge from October 2008).

They both flourished in their own areas of expertise, but it’s interesting to me how outsiders view both scenarios. Why is it more respectable to exercise your talents in stocks than sports? It’s certainly not as exciting (although yesterdays little plunge in the FTSE caught my attention).

As for insider trading? I would bet that there is far more inside knowledge in stocks and shares than there is in sports (excluding horse-racing).

My mother is actually coming round to the idea that what I do may not mean the end of the world. She seeks regular updates on my progress, but still tells the neighbours that I “am between jobs at the moment”. Got to keep up appearances.

Rugby Draw Layer

In case anyone missed it, there was some excitement on the Rugby forum yesterday. For the past few weeks, someone has been laying the draw in televised rugby league games for large sums at prices upwards of 50.

Yesterday's Salford City Reds v Celtic Crusaders game saw approximately £6,000 laid at an average price of around 86 (prices were layed between 50 and 100), probably requiring a bank of around £500,000.

As you have probably guessed from the fact that I am writing about this, the game indeed finished in an 18-18 draw after Salford's John Willshire scored a penalty in the last minute of the game. (Crusaders went on to win in extra-time, but I doubt that anyone involved cared about that).

One can only imagine who would take such a gamble, and hopefully it is a sum of money that they can afford to lose. Estimates on the forum suggest that he (or she) may have made £40,000 to £50,000 so far using this strategy, but I doubt that they will be returning after a hit like that.

Every cloud has a silver lining though and whover it was certainly won't need to worry about the Premium Charge for a while!

Graeme Dand - Situational Irony

My attempt at some humour at the end of last week seems to have upset a couple of people.

For the record, I have 'known' Graeme Dand for many months, and followed his progress in the early days with a lot of interest. As his focus is horse-racing, and mine isn't, a lot of his posts were not of too much interest to be honest, but the impression I got was that he knew his stuff. When he offered his one month free trial, I was curious to see how he did, and as we all know, it wasn't exactly his best month.

The point of my post was simply to highlight the situational irony* of starting to charge for a service (and attracting subscribers) after a disappointing free-trial period. In an attempt at humour, I linked this to my on-going opposition to the Premium Charge which, not so amusingly for me, will reduce my profits quite significantly on here. Perhaps in hindsight my sarcasm there was a little over the top and unnecessary.

Anyway, the post was not intended as a criticism of Graeme's horse racing knowledge nor of his subscription service.

This blog is about Betfair and gambling and is a place for me to comment on how I see things. If I see humour or irony out there, I will comment on it. Graeme's friend Andrew feels that the blog should be to do with 'creating a community' which sounds very serious, and presumably means 'don't say anything that might upset someone' but my blog is "Musings on Backing, Laying, Greening-Up and Other Goings On in the Betfair World Of Sports Investing" and will continue to be that.

I shall continue to read Graeme's blog and wish him every success with his venture.

http://theexperiment-self-indulgentbullshit.blogspot.com/ http://theformanalyst.co.uk/

* Situational irony is the disparity of intention and result: when the result of an action is contrary to the desired or expected effect.

Betfair Premium Charge

In addition to the other many reasons why this is so bad, I've thought of another. On occasion I do not trade, I have a straight bet which I allow to run the distance. I can't do that any more! At least not on Betfair. 5% off the top is one thing. 20% is quite another.

Fortunately it appears that for these bets, the pre-off prices on BETDAQ are the same as on Betfair, but more money out of the system for Betfair.

If they are trying to target traders or bot operators, which appears to be the case, perhaps they would be better off taxing those people who in any one market have more than a pre-defined number of transactions. 1-10 trades = 5%. 11-50 10%, or something similar. A sliding scale anyway. As a trader I would at least know going in what my charge will be (percentage wise). It's quite bizarre to have no idea right now what my real balance is.

Trying To Lose

My cunning plan to reduce my Premium Charges each week by investing on football isn't quite going according to plan. The idea is to break even, and have the Implied Commission reduce my net liability. Unfortunately, the system has proved rather more profitable than planned and if it keeps on like this, I am going to have to develop a horse-racing system to increase my losses.

Maybe I should subscribe to Graeme Dand's new subscription service? http://theexperiment-self-indulgentbullshit.blogspot.com/

After a trial month which he himself admits has been nothing short of terrible, he's seriously expecting people to pay for his analysis and tips starting from next month. I guess there's one born every minute, but really, if I'm thinking of buying a car, borrow it for a month, and 28 days that month it fails to start, I'm probably going to pass on it. Actually, in Graeme's case the car did quite often start - the engine just gave out during the run.

Which brings me to my next idea. Perhaps I should start offering my football selections for a month? If they mostly lose, then I'll start charging for them, but if they mostly win, then I'll start charging for them too.

Lou Holtz Quotes

A few quotes from legendary College Football coach Lou Holtz:

A bird doesn't sing because it has an answer, it sings because it has a song.

Coaching is nothing more than eliminating mistakes before you get fired.

Do right. Do your best. Treat others as you want to be treated.

Don't be a spectator, don't let life pass you by.

How you respond to the challenge in the second half will determine what you become after the game, whether you are a winner or a loser.

I never learn anything talking. I only learn things when I ask questions.

I think everyone should experience defeat at least once during their career. You learn a lot from it.

If what you did yesterday seems big, you haven't done anything today.

If you burn your neighbors house down, it doesn't make your house look any better.

If you try to fight the course, it will beat you.

If you're bored with life - you don't get up every morning with a burning desire to do things - you don't have enough goals.

In the successful organization, no detail is too small to escape close attention.

It is a fine thing to have ability, but the ability to discover ability in others is the true test.

It's not the load that breaks you down, it's the way you carry it.

Life is ten percent what happens to you and ninety percent how you respond to it.

Motivation is simple. You eliminate those who are not motivated.

No one has ever drowned in sweat.

On this team, we're all united in a common goal: to keep my job.

Show me someone who has done something worthwhile, and I'll show you someone who has overcome adversity.

The man who complains about the way the ball bounces is likely the one who dropped it.

The problem with having a sense of humor is often that people you use it on aren't in a very good mood.

When all is said and done, more is said than done.

You'll never get ahead of anyone as long as you try to get even with him.

You're never as good as everyone tells you when you win, and you're never as bad as they say when you lose.

Bad Loss - Good Lesson

Reviewing my spreadsheet, as I tend to do from time to time, I am constantly reminded of my worst day on Betfair - New Year’s Day 2007. I placed an ill-advised bet of an amount that I was not comfortable with on a football game where I had no edge, and of course the bet lost. £5k gone. Although it was money that I could afford to lose after a stellar 2006, it still wasn’t something I was happy about. I remember feeling overwhelmed with tiredness and having to take a nap - which is not something I do very often.

What possessed me to gamble like that? I think it was simply that I wanted to get the year off to a flier, and so anxious was I to do this and get some profits on the board, that I impatiently gambled instead of invested. A stupid impulse which completely backfired and which took me a little over 7 months to recover from.

Early 2007 was not good at all. Three losing months out of four, and a maximum drawdown of over £16k in mid-May before I was able to turn things around. Looking back on those days, I’m sure there was a subconscious element of chasing involved, and it was only when I fully accepted the losses that I was able to regain my focus and start clawing my way back.

But sometimes these losses can be good things, as strange as it may seem. They are a painful reminder of what works, and what doesn’t work, and of the importance of staying disciplined.

In a way I am glad that bet lost.

Guardian and that Premium Charge

One more post on the Premium Charge, although I can’t promise it will be the final one.

As I have said before, I have reduced my Betfair balance to a working minimum and have opened accounts with BETDAQ and WBX. I like to keep at least £10,000 in my account, but anything over this amount will be regularly withdrawn.

Because I am primarily a trader, and BETDAQ and WBX may not offer the markets I trade in-running, I do not have any realistic alternative but to continue to use Betfair for these events. When an alternative does exist, I shall use one of the other exchanges if the liquidity there makes it a viable proposition. BETDAQ have promised me that they are looking to turn more markets in-running, so hopefully this will be an option.

As much as the Premium Charge stinks, and the way it has been introduced at short notice with a retrospective aspect to it as well as a lack of accountability (we still have no way of knowing the implied commission on losing markets) really is disappointing, at the end of the day I would rather win a net of 80% of a gross profit of £100 than 98% of a gross profit of nothing.

I am also taking the opportunity to run a system on football that, somewhat bizarrely perhaps, I will be happy with if it breaks even, for the simple reason that my implied commission on the losing bets will help to reduce my Premium Charge.

Currently most of my markets are winning bets, so my implied commission is significantly lower than my paid commission. Thus when these two totals are totaled and halved, it leaves me with a bigger liability. The idea of the system is increase the ratio of losing bets to reduce this liability. Of course, if the system proves profitable I won’t complain, and if it proves to be a loser then I will try something else.

It’s also annoying to me that the Premium Charge is not deducted until up to 9 days after the winning bet has been settled. It really messes up my spreadsheet and where the week spans two months, it really, really makes things messy, but I guess that I shouldn’t complain too much. In a way, it’s a nice problem to have.

Good to see The Guardian continues to highlight Betfair's Premium charge.

http://www.guardian.co.uk/uk/2008/sep/24/gambling

Odds Are Too Short

A couple of people have told me recently that they don't like to back at less than 1.7. My question to them is "Why on Earth not?"

There seems to be a misunderstanding that 1.7 is 'too short', but what determines whether or not a price is 'too short' is not the number itself, but its relationship to value.

For me, it is all about value. If you could walk into a casino and get 1.6 at Roulette on numbers 1 to 24, would you turn it down because the price is too short?

Would you snap up the 36-1 available on a single number because the price is high?

I rather like backing at 1.x if the bet is good value. The losing runs are short, which suits my style, and the more people who don't like backing at low odds, the better.

See http://betyourlife.blogspot.com/2008/09/pulling-fast-one.html

NFL Rules

I traded last night's American Football, some on Betfair and some on BETDAQ. Although liquidity was significantly higher on Betfair, BETDAQ's wasn't too shabby. Unfortunately, the game was all over from a betting perspective for me by early in the second half, and as a trader I like close games with plenty of lead changes like last week's game.

I find the NFL one of the easiest games to trade. The market acts very predictably and it isn't difficult to lock in profits for no risk, (anyone who has watched these markets a few times should know what I mean). If you trade the game throughout, it's important to know the rules and be wary for flags. A turnover that is called back for a penalty and an automatic first down can be quite upsetting. Roll on next Sunday.

Sportsmanship, Or Lack Of

I see that Reading were awarded a goal in their game at Watford today. Apparently the linesman told the referee it was a goal, despite the fact that it had clearly gone out of play for a corner four yards wide of the goal!

Now we're all human, and we all make mistakes from time to time, but surely in a game like this, it wouldn't be expecting too much for the Reading players to tell the referee that there was no goal. If the referee insisted, then right the wrong by allowing Watford to score.

I remember Crystal Palace being similarly awarded a goal in 1971, which had actually hit the side-netting, but the referee changed his mind after speaking to Steve Kember who told him that it was not a goal.

While certain acts of sportsmanship are common these days (e.g. kicking the ball out of play for the sake of an injured player) - sadly others are few and far between.

I can recall Paolo Di Canio (West Ham) catching the ball rather than trying to head a late winner because Everton goalkeeper was down with a bad knee injury, and in a Carlsberg Cup match, Denmark were awarded a penalty when an Iran defender handled the ball thinking the whistle had gone. On instructions from his coach, Morten Wieghorst deliberately shot wide from the penalty spot.

There was the Arsenal v Sheffield United replayed FA Cup match a few years back, after Arsenal had 'accidentally' broken an unwritten rule and failed to return the ball to United after an injury.

Yeovil Town manager Gary Johnson told his side to concede a goal to Plymouth after a Yeovil player (ironically, Johnson's son) had accidentally scored when trying to return the ball to the Plymouth goalkeeper who was permitted to walk the ball through straight from the kick-off.

Today's goal will most likely not have a lasting impact on either team's future, but how nice it would have been for someone to have stepped up today and done the right thing. Now THAT would have been memorable.

And no, I had no financial interest in this game.

Total Bosman - Funny Guy

I hope he won't mind, but from the Betfair Forum comes this amusing post from Total Bosman in regard to the new Premium Charge:

James: Hi, I`m James. What do you charge?
Betfair: 5% commission, unless you win regularly, in which case it could be up to 22.5%.
James: And what do the competition charge?
Betfair: 2% introductory rate up to 5%, never more.
James: I`m out.

Duncan: So why would I place a bet with you rather than a bookies?
Betfair: The unique thing about Betfair is you bet against other punters?

Duncan: What difference does that make?
Betfair: Well, you can get 20% better odds and because you`re pitting your skill up against other punters you feel you have a greater chance of winning.
Duncan: But what`s the point in getting 20% better odds if you`re paying 20% commission to you guys.
Betfair: Well that only affects the small minority who regularly win
Duncan: So you`re telling me that you get better odds, and you can win regularly if you use your skill and judgement, and yet you`re also telling me that almost no-one does regularly win? And if they do you want to charge them more? This whole thing sounds ridiculous to me. I`m out.

Theo: So what`s unique about your site that would make me invest?
Betfair: Well, punters can lay and back bets, so by trading they can guarantee a profit rather than relying on luck.
Theo: That sounds good. And so these are the guys you charge the extra to?

Betfair: Yes, we think that`s fair, because they are deriving disproportionate benefit from the exchange.
Theo: Disproportionate benefit? You mean winning?
Betfair: Well, yes. But...
Theo: But you imagine they`ll pay the extra because yours is the only site which offers this feature.
Betfair: Well, no. But...
Theo: So it isn`t really unique then, is it?
Betfair: Well, no. But...
Theo: It sounds like you`re wasting my time. It sounds to me like there`s nothing unique about your product, yet you want anyone who uses it successfully to be charged 10 times what they would pay using your rivals. How are you going to advertise that?
Betfair: We were thinking about getting Danny Baker:
Theo: I`m out.

And one from myself (hey, it IS my blog!)

Roberto: Hi, I`m Roberto. How do I calculate my Premium Charge?
Betfair: Well, you can't.
Roberto: Why not? That sounds a little strange?
Betfair: Well it all depends on what commission rate other people are on in the markets you lose in. We have no way of knowing that before we settle the market.
Roberto: o....k.... so after the market is settled I'll know?
Betfair: We're hoping to be able to provide this information at some time in the future, yes.
Roberto: But from D-Day - September 22nd we won't be able to verify the charge?
Betfair: Er, well you can always call the help desk.
Roberto: Yes I've tried that. They're either rude, incompetent or both - I`m out.

MLB Review

When I returned from my summer holiday last month, I posted some predictions on the MLB season, and I thought I might review how some of them have fared.

Here's what I wrote: In the National League, I am expecting to see the addition of Manny Ramirez help the Dodgers to overtake the Diamondbacks in the West, (Dodgers now lead the Diamondbacks by 3.5 games) whilst in the East there’s a tight race between three contenders – the Phillies, Marlins and Mets with the Marlins my tip to fade away. (Marlins faded away - it's between the Mets and Phillies). In the Central Division the Cubs should be too strong for the Brewers (Cubs lead by 9 games) and may well end the season as the best team overall in the MLB. (Currently 2nd to the Angels).

Not too shabby, if I say so myself. (No one else will say it if I don't).

What A Difference A Day Makes

I made a little over £5,000 yesterday in the Stock Market and just shrugged my shoulders nonchalantly while telling myself it'll disappear again. I don't handle my sporting investment wins quite so casually I've noticed. A win of that level and I'm orgiastic (what a great word that is) for hours...

Stock Market

I lost a little over £5,000 yesterday in the Stock Market and just shrugged my shoulders nonchalantly while telling myself it'll come back. I don't handle my sporting investment losses quite so casually I've noticed. A loss of that level and I'm discombobulated (what a great word that is) for hours. Nevertheless, with no end to the bear market in sight, and my house dropping in value by the day, it does all get a little annoying, if not depressing. But I'm in for the long run and it's not always a smooth ride. Guess I won't be retiring this week.

On the Betfair front, still total confusion surrounding the Premium Charge. Some people on the forum seem convinced that the £1,000 applies to profits starting from the week of 22/9, but I have to say that I am quite sure they are wrong - it is an allowance to offset against the previous 60 weeks of profit, which isn't going to help me too much to be quite honest.

Betfair Premium Charge - Guardian Article

Betfair Stand Firm On New Charges
September 16 by Greg Wood

Betfair, the internet's dominant betting exchange, yesterday denied a report that it is preparing to scrap a controversial new charge to be paid by its most consistently successful clients.

"Contrary to reports, there was no crisis board meeting today," Tony Calvin, a Betfair spokesman, said, "nor was one ever planned."

However, the firm refused to offer any further comment on the charge, or the precise reasons why it has been introduced. A question-and-answer session conducted on the forum section of its website last week remains Betfair's only public comment on the new charge.

The premium charge, which will be levied for the first time later this month, will target clients who are winning significant sums annually while paying relatively little commission to the exchange. Betfair insists this will be an average of 600 clients per week, while about 2,000 can expect to pay the charge at some point each year.

In particular, this will affect clients who "trade" positions - that is, both backing and laying to guarantee a profit in a particular market - but could also snare some backers who have an exceptionally good strike-rate with their bets.

While suggestions of a "crisis meeting" appear to be wide of the mark, the announcement of the premium charge has been widely seen as a PR debacle for the exchange, not least because it has made so little attempt to explain its reasoning.

Betfair's competitors, including traditional bookies and its much smaller rivals in the exchange market, have also been quick to take advantage, with promises that they will not levy any unexpected taxes on winnings. The new charge has fuelled speculation that the business is being fattened up for a float, which would allow Betfair's founders to cash in shares worth many millions.

Another possibility, though, is that Betfair is concerned that a small number of its customers are making so much money from the exchange that the situation is unsustainable and they will, at some stage, effectively run out of losers.

On this basis, the premium charge can be seen as the price that consistent winners must pay for an ongoing supply of losers, though if this is the case, a clear statement of the fact is unlikely to do much to attract new business.

Promising News from the Daily Mail

Betfair in talks as punters look elsewhere

Betting exchange Betfair are holding a crisis board meeting today to debate their unbelievably rash decision a week ago to charge high-rolling clients a 20 per cent commission on their winnings. This stealth tax has seen a sudden migration of punters from Betfair to rivals Betdaq, who report one of their busiest weeks ever.

First Foray on BETDAQ

Having opened and funded by BETDAQ account, I have placed my first bets with them on the American Football today, where slightly better prices were available on the Denver Broncos - San Diego Chargers game. I rather ridiculously always see it as something of an omen if the first bet with a new account or new system wins, so my BETDAQ future is in the hands of the Chargers who surely cannot be as woeful as they were last week.

NFL is one of my favourite trading sports. The prices are constantly moving, and constantly overreacting. Whether I shall trade this in-running on BETDAQ or on Betfair remains to be seen.

Random Premium Charge Generator

Here is an example of how the Premium Charge can vary unfairly, taken from a letter to Betfair:

Sir/Madam,

With regard to the new Premium Charge, I would be grateful if you would please review the scenario below and let me have your comments on it. I may well be misunderstanding something (your logic is not exactly straight forward in the way that a flat 5% is).

I have two bets between Monday and Sunday, and I am already nicely in profit for the 60 weeks, and have played in enough markets to be eligible for the Premium Charge.

Bet A - I win gross £2,000, pay 5% commission (of £100) and net £1,900.

Bet B - I lose £1,000 to one of your customers who is on 2% commission who nets £980. My Commssion Generated for the week is therefore (£100+£20) / 2 = £60. Premium Charge applied is £140 (£1,000 gross profit * 20%, minus the £60 Commission Generated). So my total commission for the week is £100 + £140 = £240.

Bet C - I lose £1,000 to one of your customers who is on 5% commission who nets £950. My Commssion Generated for the week is therefore (£100+£50) / 2 = £75. Premium Charge applied is £125 (£1,000 gross profit * 20%, minus the £75 Commission Generated). So my total commission for the week is £100 + £125 = £225.

As I do not have a choice of who my bet is matched with (and indeed it could be matched with any number of people all on different commission rates) how is this formula fair?

Why should the amount I am charged vary? I cannot see how this pricing policy is fair? Customers should always know before making a transaction what their charges are going to be.

How am I able to verify that any charges are in fact accurate?

There is a disturbing lack of transparency to the way this Premium Charge is calculated.

I do hope that someone will be able to explain this to me, because right now I am very confused.

Guess The Amount!

So here's yet another thing. I received a reply from Betfair today in response to my question on how I am supposed to work out what the charge will be and verify it, and it raises yet another issue. The Implied Commission they calculate on my losing bets will vary depending on the commission rate of the person (or persons) with whom I am matched!

I could be matched with 100 people. How the heck are they going to work out what rate I am to be credited with Implied Commission at?

Here's the text in full: "We calculate the Premium charge on your Commission Generated. Commission generated includes the commission paid on winnings, but also the commission that Betfair makes from the other customers who win in markets in which you've lost, which we call ‘implied commission’. When you win, Betfair collects commission at your rate of commission, but when you lose, the commission collected by Betfair from the winners is at their rate. So we'll determine the commission generated by your betting activity to be: Commission generated (Commission + Implied commission) divided by two. Implied commission is calculated on the Market losses x Average market commission rate."

It's rather like shopping at Tescos - you know the price when you pull an item off the shelf, and you know there will be an extra charge, but that charge all depends on which checkout you go to, because some checkout girls (or boys) earn more than others because they are better at their jobs and therefore you pay more for the convenience of checking out with them. The final total of your shopping bill will be visible in a few days when you get your credit card statement. All you can do before then is make a best guess based on the average cost of your shopping over the past 60 weeks. All clear?

Any legal boys ever read this? Is this practice even allowed? I would seriously be very surprised if this random element of who you are matched with affecting your charge is lawful. It just goes from bad to worse.

Implied Commission

So here’s the thing. At the end of a profitable week, we not unreasonably want to know where we stand with regard to the Premium Charge.

To calculate what this charge will be, we need to know our Commssion Generated total, which as I understand it, is half of our Commission Paid + Implied Commission.

However, we have no way of precisely knowing our Implied Commission. The best we can do is approximate this sum by going through all our losing bets, but for an active trader, this is not an insignificant effort.

Our Account Statement shows Commission Paid on our winning bets, but does not show Implied Commission on our losing bets.

It does seem strange to me that this charging method would be legal. Can anyone name another financial transaction that you would commit to without knowing what your fees, taxes, charges, commission etc. would be? I can’t. I buy stocks or commodities and I know what my charges will be.

I’m not suggesting that Betfair would make up these numbers, but there is a certain lack of transparency here that, quite frankly, stinks.

Comments on Betfair's Premium Charge

As some of you may have noticed, I am still a little upset about this new Premium Charge that Betfair are introducing. I have opened and re-activated accounts with BETDAQ and WBX respectively, and will be closely monitoring both those sites. I enjoy, and make my profits, in the markets that are relatively volatile - sports like cricket, baseball, basketball and American football. Whether the liquidity will be there or not remains to be seen, but I am more hopeful now than ever that at last there could be a serious challenge to Betfair's position as market leader.

Representatives at both WBX and BETDAQ expressed their delight and surprise at this change in fortune and this could be a very costly own goal by the executives at Betfair.

Rumours are spreading that Betfair may be in some financial trouble. I personally doubt it, but if they are, it is because they have spent too much money on unpopular products - games I have never heard of for example. Get back to being an exchange, match backers and layers, take your (fair) commission and leave it at that.

Independent Article on Betfair Premium Charge

Betfair faces criticism for massive rise in charges
By John Cobb Wednesday, 10 September 2008

Betfair, the betting exchange which holds a dominant position in the market, has dismayed its customers and delighted its rivals by hiking charges for the most successful punters from around five per cent to 20 per cent.

The firm was quick to point out yesterday that the new "Premium" charges will affect fewer than 0.5 per cent of its customers, but the bombardment of the firm's online betting forum by punters reflected a more widespread anger at the rise.

The charges will affect the growing numbers for whom trading on betting exchange markets has become a full-time occupation, but those who aspire to that position are equally dismayed.

"Customers who traded with us today, some after an absence, were concerned that the next change might affect them," said Iain Turner of WBX, who along with Betdaq are the rivals most likely to benefit from the departure of customers from Betfair.

In particular, it is the highly active customers who provide liquidity by seeding the market who would be most missed by Betfair and greeted warmly by their rivals.

According to Betfair, "more than 98 per cent of winning customers would not have been charged" if the rate had been in place over the past year. It is to host a question and answer session on its forum tonight and can expect to come under fierce fire.

Guardian Article on Betfair Premium Charge

Betfair - where winners have just become losers by Greg Wood

Betfair retain a public image as a pioneering start-up, but customers' loyalty may be tested by their new "premium charges"

September 9, 2008 12:01 AM

The life story of the Betfair betting exchange is relatively brief, but it has certainly packed a lot into its nine-year existence. From a tiny start-up, fired by the vision and genius of its two founders, Andrew Black and Edward Wray, it has grown into a billion-pound business, with hundreds of staff in plush riverside offices, customers in dozens of countries, and a Queen's Award for Enterprise nailed to the wall.

And amid all the staggering numbers, there is another, less tangible, achievement. Betfair is now one of the world's biggest betting businesses, yet it has always managed to retain a public image of the pioneering start-up, defying the corporate norms. Many of its clients still feel like members of a club, and have the same sort of regard for Betfair that Apple-fanatics do for their Macs. This has always helped to keep them "sticky", and allowed Betfair to defend its near-monopoly.

The loyalty of some customers may be tested to the limit, however, by Betfair's decision, announced yesterday, to introduce "premium charges" for some of their biggest winners. Betfair insists that the new charges will affect "less than 0.5%" of its customers, but still seems to stand in complete contradiction to the company's oft-repeated boast that this is a place "where winners are welcome".

The charges, and the conditions under which these will be incurred, are explained in a 1,200-word posting on the Betfair website. The rules are, clearly, quite complicated, but plenty of their customers are starting to consider the implications. One Betfair client who contacted the Guardian yesterday said that if the charges had been imposed over the last few weeks, he would have been forced to pay "a five-figure sum".

"They think they can do it because they have an effective monopoly. I look forward to their next advertising campaign. Instead of 'where winners are welcome', they can say, 'come to Betfair, where winners get screwed'," he added.

At least one of Betfair's winners, though, took a different view. "It's the best news I've had for ages, as it's not going to cost me a penny," Harry Findlay, professional punter and owner of Denman, said. "I'm a gambler, so the way I bet, it won't make a difference. The people who will be screaming will be the maths professors with computer models, the ones who just never lose. If they clear off, it should be even easier for me to make money."

Even so, Findlay could still appreciate a basic problem with Betfair's move. "I'm in favour for selfish reasons," he said, "but when I first heard about it, I thought it must be a joke, as it's so completely against the ethos of the whole company." Betfair's enemies in the racing establishment may also be interested in the news. After all, if Betfair itself can cream off an extra charge from people who must, in effect, be running a business on the exchange, why can't the Levy Board do it too?

Betfair was started by punters, for punters, and has transformed the betting landscape in less than a decade. Yesterday's news, though, could mark the moment when it stopped being a plucky start-up, and turned into just another faceless corporation.

Commission Generated Question

Despite (apparently) being in the top 0.5% of Betfair's customers, I guess I am sometimes a little slow. When I first read about this new Premium Charge I assumed that if I had a gross profit of £1,000 in a week, and I'd already paid £75 in commission, then the Premium Charge would be £125 making my total commission £200, or 20%.

But this is not so - Betfair use the 'Commission Generated' to calculate what I will pay, not Commission Paid, so how the heck do I work out what my Commission Generated total is?

I guess I shall be making another call to find out how I can work out this number. I hate the idea of not knowing just exactly what hit I am going to take each Wednesday, and it certainly wouldn't be right to charge me a fee that I have no way of verifying is correct.

Betfair Premium Charge - Racing Post Article

Betfair bosses deny being ‘too greedy' by Paul Eacott

Senior management at Betfair denied accusations on Wednesday evening that they were being “too greedy” by introducing a premium charge on their most successful clients. News that the dominant betting exchange were set to bring in a new charging formula, which will result in certain holders of accounts in profit over a 60-week period paying a minimum 20 per cent commission, was greeted angrily by dozens of the exchange's users after it was announced late on Monday.

While Betfair were unwilling to make any public comment on Wednesday, chief executive David Yu, Mathias Entenmann, managing director for the UK and Ireland, corporate affairs managing director Mark Davies, and Tony Clare, head of strategic initiatives, took part in an hour-long question-and-answer session on the exchange's forum on Wednesday.

A number of contributors to the thread were vociferous in their opposition. In response to the accusation that the new charges are driven by greed, the four-man panel responded: “We don't think so. “We balance the demands of all stakeholders in the business: customers, employees, shareholders and industries which derive a percentage of our profit, like the racing industry.

“Our profit margins are not excessive and our profits are a fraction of those of other large gambling companies.” Betfair again reiterated “the likelihood of a ‘normal' sports punter qualifying for this charge is close to zero – even if he or she has a very positive ratio of wins versus losses”.

They added that the levy, to which Betfair's contributions have been a bone of contention with other bookmakers and industry factions, is set to benefit from the new charge, with the racing industry getting ten per cent “before we take any of the money from the premium charge and do anything with it”.

Although no figures are available as to how many of Betfair's customers will be subject to the new charge, with the exchange claiming to have up to 500,000 active users, it is not expected to exceed 2,500 account holders.

News of the changes to the commission system was poorly received by management and customers at the Elitebet Trading Centre in Highgate, London, some of whom anticipate being out of pocket when the premium charge is introduced on September 22.

In-running manager Ming Wong said: “The implied commission system – introduced without precedent and backdated 60 weeks – suddenly introduces a previously unmentioned element into the equation for calculating commission paid. “For every winning punter, the very nature of implied commission means they will not even be given credit for the commission they have actually paid.

On most accounts affected, this mathematical sleight of hand will cost thousands over the course of a year. “The idea that this change affects only traders and those who use bots is a fallacy. It affects virtually every in-running player who makes a consistent profit, and a significant number of pre-race players.

“Betfair appear to be dictating to its customers what sort of ‘winning' punters they want. Rollercoaster punters who turn over fortunes in a frenzy and make a tiny return on investment are welcome. More considered punters who lower their risk are targeted directly by this charge. This separation is completely against the ethos of Betfair.”

One of Elitebet shop's customers, who wished to remain anonymous, added: “The calculations are fundamentally flawed and the only resolution I can see is a mass exodus of clients to another betting exchange. It is yet another example of a company monopolising the market and being overwhelmed with greed and the desire for yet more profit. “Monday was a dark day for Betfair and the betting industry as a whole.”

Rival exchange WBX on Wednesday reported a “high sign-up and enquiry rate” following Betfair's announcement. Public relations manager Iain Turner said: “At WBX we understand that if you are lucky enough to hit a winning streak you don't want to be punished by paying even more commission.”

Betfair Premium Tax

More thinking today about Betfair's Premium Charge. It occurred to me that if my bank was to send me a letter informing me of a new charge that would be based on my average balance over the past 60 weeks, then I would consider that most unethical. I'm sure that had most of us known about this change we would have traded or bet with other exchanges / bookmakers and been prepared. Now I am to be penalised because of a strong past 60 weeks. It has been suggested that this may even be illegal, though I doubt that a company the size of Betfair would make a mistake like that.

A couple of other thoughts. The £1,000 allowance over 60 weeks works out at £16.66 per week. £2.38 a day. To anyone who is a serious investor/gambler on here, that really is worthless. Similarly the 250 markets. I am sometimes active in over 100 markets a week. What good is an allowance of 250 markets?

It seems obvious that Betfair are trying to limit their customers to losers and occasional winners. In other words, they are moving away from the Exchange model towards a more traditional bookmaker. A typical exchange makes their money from commission, and doesn't differentiate between big winners, small winners or losers. Buy stocks or commodities, and you pay commssion at the time of the trade - not up to 10 days later depending on how your investment fared! Perhaps Betfair think they can best grow their business this way. Maybe so, but the genie is out of the bottle, and the new generation of punters rather likes the Exchange model and the idea will not wither and die even if Betfair does.

In the long-term, the gap will be filled by another Exchange who will hopefully learn that you need winners to draw in the losers. In fact, when I first opened my account and lost 80% of my bank over 18 months, I was within a whisker of giving it all up, but it was reading the forum and stories of people like Troy McClure that motivated me to learn and to master trading. (I remember reading an article about Troy in, I believe, a Betfair online publication - funny how they don't want people like him any more!)

In the short-term, it appears that BETDAQ is already seeing a big increase in turnover with the Yorkshire v Warwickshire cricket match yesterday seeing a higher total matched on the Purple site than on Betfair. Given that for many people there has not been enough time to transfer funds over, and open accounts, this is very encouraging news. Come 22nd September, and perhaps that tipping point we hear about in business will have been reached, and there will be a new market leader.

And Betfair will dry up quicker than their 'not so sharp-minded' executives could ever have imagined.

BETDAQ v Betfair

BETDAQ have replied to my e-mail requesting details of their commission and offered a flat 2% until 2009. No word on what happens after that, but I am going to pull out some funds from Betfair and take advantage of this offer. 

They did also express surprise at Betfair's move, which I'm sure met with some disbelief from BETDAQ's executives. They must be rubbing their hands in glee at this change in fortune.

I have written to Betfair to complain about this swingeing tax, but I doubt that I shall receive a personal reply.

Should an Exchange even care who the winners are? Just a thought. Personally I'm fine with the winners paying all the commission, but 20% is just wrong. 5% seemed fair and reasonable.

I did also point out that there is currently no credit given for the balance I keep, which typically is between £15k and £30k. Very disappointing.

Oh Dear, Betfair

A rather disturbing message today awaited me today when I signed on to my Betfair account.

Whilst, in a way, it is nice to know that I am in the top 0.5% of customers, the news that winners like myself will soon have to pay 20% commission is not such good news. Not by a long way.

I understand that other exchanges, notably BETDAQ are aware that a number of bigger bettors may be headed their way, and this is an option I will need to look into. Betfair had a huge advantage as first mover in this area, but once the door opens to another competitor, they could suddenly find themselves left high and dry.

There's not much benefit to getting better prices and then paying a 20% tax on any winnings. A big own goal from Betfair I feel.

The full text of the letter:

Personal Message
Changes to Betfair’s Terms and Conditions Dear customer, We will shortly be making changes to our terms and conditions that will come into effect 22nd September 2008. From this date we will be introducing a new charging mechanism (Premium Charge) that will affect a small number of our most successful customers. We are writing to inform you that had the new charges been in place over the last 6 months then you would, at some point, have been required to pay Premium Charges. If your betting in the future continues to be as successful as it has been in the past then you could be required to pay Premium Charges in line with others who, like you, fall into the top 0.5% of our customers. The changes to our terms and conditions and full details of the new charge can be found here . Any questions that you may have in relation to the new charge should be directed to premiumcharge@betfair.com. Please tick this box to accept the changes to our terms and conditions. The Betfair Management Team.

I hope that Betfair will realise this is not a good move. If an alternative is not here today, then there will be one along tomorrow.

Update: It's worse than I thought. Over the last 60 weeks my profits total a little over £52k, and assuming I have paid commission of £2.6k at 5% , then the new tax will cost me about £7.8k. That is a lot of money by any measure. Come on BETDAQ, get your act together.

NFL Starts Today

The NFL season gets under way today with 13 matches. The official kick-off was on Thursday night with one game but tonight is when it all gets going for real. Last season I did very nicely on this sport, laying teams that I thought had been backed too low, and there were a handful of 1.01s turned over.

My three picks of the day are Jacksonville Jaguars (1.7) @ Tennessee Titans, Arizona Cardinals (1.8) @ San Francisco 49ers, and Seattle Seahawks (2.163) @ Buffalo Bills. The Patriots and Chargers will also win, but at low prices (1.07 and 1.23 respectively).

It's A Funny Old World

Made a complete mess of the Federer - Djokovic game today, but a smile returned to face on reading a story about a woman who awoke just before 2am to find a man in her bedroom 'committing a sex act'. Nothing funny there, well, maybe, but the next part of the story amused me:

"The suspect then jumped into a trash bin, and other neighbors slammed the lid on him and kept him inside until police arrived".

Football (Mostly) £10 Quiz Time - Saturday Seven

No Premier League or Championship action today, and I stay clear of mismatches, so to help fill the day, here's a little quiz.

Note that 'League club' here can refer to an English or Scottish team. Here we go:

1. Who was the first Italian to be inducted into the English Football Hall of Fame?

2. What is the only League club whose full name doesn't contain any letters than can be coloured in?

3. Who are the only League club to be mentioned in the Bible?

4. Which country has the world's longest life expectancy at 83.5 years?

5. Of the 15 original entrants to the first FA Cup in 1871/72, only one survived to be a current League club - name it?

6. Who are the oldest professional football team in London?

7. In what year did the Queen last attend the FA Cup Final?

A tenner (via PayPal) to the first person to mail me all 7 correct answers.

In the event of any disputes, Signore Cassini's decision is final. In boca al lupo...

Competition Status: Closed - the winner was Sven - from Holland.

Mr Eko and Holte Ender

Cracking thread on the Betfair forum posted by Mr Eko. I don't get involved in markets which depend on people being in the know, but apparently Betfair had a market on the first managerial change of the season in the Premier League. Mr Eko kindly posts a thread titled "1.07 free money - even BBC are reporting it" in reference to the story that Kevin Keegan had left Newcastle. Of course, we all know now that he hasn't, at least not yet, and that particular market has been 'won' by Alan Curbishley. £254,682 traded between 1.04 and 1.14. Ouch.

Now I do have some sympathy for Mr Eko for putting his faith in the BBC, but the most ridiculous thing is how he refuses to hold his hands up and admit to a bad call and to losing all of £10, but claims to have got out at 1.06. I mean seriously. If you really consider a bet to be free money, (and free money is seldom that), then back it with a little more than a tenner! And don't make a complete arse of yourself by claiming to have got out when everyone knows you didn't.

Reminds me of Holte Ender's "Sussex v Lancashire - INPLAY TRADING LESSON" thread last week. After backing Lancashire at 2.3 (£100) and then "Back Lanc at 3's for £50", he went very quiet for a while before returning with the classic line "you should now be all green" - never mind that the price had never dropped to allow any greening out from his suggested bets. I think this guy likes attention - check out www.gubbed.com and type in "Holte Ender" and there are pages and pages of his nonsense.

I read the forum for entertainment, and some days it certainly provides a lot.

Premier League

Looking at the Premier League winner market for this season, I see Manchester City - who are currently trading at 60/65 - have been backed as low as 3 and as high as 990. That's quite a range, although the 3.0 was almost certainly an error and the true low is 40. Interesting days ahead I feel. Liverpool must be worried. Once they fall out of the Big Four and lose the Champions League income, it's a slippery slope. Forget that new stadium boys! See if you can negotiate a ground-share arrangement with Tranmere Rovers...

The real reason I'm looking at this market is because I'm seeing a big reaction these days anytime either Chelsea or Manchester United fail to win. I've not looked, but presumably this would be a way to circumvent the "SUSPENDED" any time one of these teams falls behind or loses a lead. Anyone try this?