Small Fish

Peter Webb again writes an interesting post, which I would have commented on, except for the fact that comments are closed for some reason. The core of the post was this:

On Saturday I was working a position into the Liverpool vs Arsenal match. I’ve often maintained there can’t be many big gamblers / traders out there as I rarely see big amounts in the market. OK there are reasons why I may not be able to see them, but even then, I rarely see anything that looks like a bigger player.

In total my bet was taken by 49 different opposing bets. There was an £800 a £280 but those were the largest bets taken. Most of them were pretty small. 95% were below £100 and 90% below £50, 75% below £25. You have to get to below £10 before the balance tips over 50% . Even if people were trading the the price I was at, it wasn’t with much money it would seem.

From a commercial perspective, much fuss it made about how premium charge payers ‘take out’ money from the ‘exchange ecosystem’ but my bet appears to deeply contradict that statement. My bet cost the same, from an infrastructure perspective, on it’s own as any one of those 49 bets. Therefore I conclude that my business was 49 times more efficient as it only took one transaction to place. As I offered money to be taken, I would classify that as providing liquidity as well. I didn’t nick a few quid off somebody else, beat a clock and nobody was under any obligation to take the counter-side of my bet. I fully exposed myself to the market.

So there you have it, I placed more volume, with less overhead to the exchange than all those 49 other people and created liquidity to boot. Not exactly the sort of customer you would encourage to take there business elsewhere? No, you would think you would want to encourage them into your fold. You get the feeling to put people off doing this would definitely be a strategic error, don’t you?

It has occurred to me in the past, and this post reminded me again, that it's perhaps a little strange that Betfair treat makers and takers in the same way regarding commission and charges. There's certainly a strong argument that making an offer should be encouraged by the exchange, perhaps in the form of lower commission relative to that paid by bet takers. As Peter mentions in his example, it is not unusual for a decent sized bet to be matched by close to 100 smaller bets.

Peter's reference to 'big gamblers' is of course relative, but relative to the financial markets, it is true that there are no big players on the exchanges, but when you are a £2 to £10 player, and there are many of those out there as evidenced by the size of bets matched, anyone putting four figures into the market probably seems a big player.