Thursday 11 September 2008

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.

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