Sunday 14 October 2018

Takers v Makers - Matchbook Premium Charge

Matchbook this week back-tracked on this comment which was formerly on their Commission FAQ page:

"This model not only allows Matchbook to be the best and cheapest place to bet, but also ensures that Matchbook will never have to apply an additional charge to winning users, as some of our competition has chosen to do."
...with the announcement that they are introducing a 60% Premium Charge applicable to anyone who exceeds one of two thresholds:
1. $1,000,000 (one million US Dollars) of Betting Volume; and/or
2. $20,000 (twenty thousand US Dollars) of Betting Profits
A lifetime profit of $20,000 is effectively nothing, £15,252 at today's rate, so for anyone serious about betting, Matchbook is no longer a viable option. At least Betfair lets you win £250,000 before taking 40%, 50% or 60% from you.

I've seen comments that this is 'a terrible business decision', but unless the commenter works for Matchbook and understands the rationale behind it, they really have no idea. 

One can presume that Matchbook executives felt they had no choice, especially given their rather snarky comment above, now removed, that they would NEVER apply additional charges "as some of our competition has chosen to do". 
While there were plenty of voices raised in objecting to the introduction of the Betfair Premium Charges, many were from people for whom it was never likely to be an issue, but as Mark Iverson commented this week:
It's all about the dream. Without that nobody starts.
Very true. Mastering betting takes a lot of time, and has an opportunity cost. 

While $20,000 is very low, and has little room to drop further, there's no guarantee that Betfair's £250,000 will not be reduced. It's not exactly encouraging for new entrants.

As Smarkets' Jason Trost commented on Twitter:

And there lies the basic problem for exchanges, mostly, I suspect, the result of the opportunities offered by in-play whereby scalpers (e.g. court-siders) take advantage of slower reacting market makers. Allow that scenario to continue and the market makers sensibly walk away. 

Matchbook could have tried tweaking their dual commission approach (they charge 'takers' a higher rate than 'makers'), but presumably felt that casual bettors would be discouraged by a higher 'taker' rate which in turn would not be enough to deter the professional scalpers. 

Of course outright barring of the scalpers would be another option, but that turns a supposedly neutral exchange into an interested party. I say 'supposed' because in the case of Matchbook, there is some debate on how much money on the markets is seeded rather than from other players. That could certainly explain the low bar and the action taken.     

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