The BetFair Starting Price is such a phenomenal success that their MSR-like system melted down under pressure last Saturday, April 5th, 2008, for the British equivalent of the Kentucky Derby —the Grand National at Liverpool.
Chris F. Masse April 8th, 2008
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Settlement of Grand National win market
Betfair Customer Services 05 Apr 18:35
The reconciliation of the Betfair SP for the Grand National win market resulted in prices which we believe were significantly unfair for backers of some horses, most obviously the winner. Therefore we unreconciled the Betfair SP to return what we believe were fair prices. As a result of unreconciling bets after the race, some matched bets (which would have been winning bets for customers) became unmatched bets. In addition, some customers may have traded in-play based on bets they believed had been matched. If you believe that you have been disadvantaged as a result of this, please contact us at bets@betfair.com. We will look at our records to determine the amount you should be due and provide compensation accordingly. Please be aware that this may take some time and it is unlikely that we will be able to address all enquiries until next week.
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Payments to customers in relation to Grand National win market
Betfair Customer Services 07 Apr 12:05
Following our decision to roll-back the initial Betfair SP reconciliation for the Grand National win market, some customers were left in a worse position than had that initial SP stood. We are in the process of assessing which customers were disadvantaged by the roll-back and by how much. All affected customers will receive payments from Betfair to reflect this. In other words, if a customer would have been in a better position had the initial SP reconciliation stood, then a payment will be made by Betfair to the customer to reflect this, irrespective of whether the customer has contacted Betfair. No customer will be left in a worse position following the roll-back than would otherwise have been the case.
Thank you to those customers who have already emailed the bets@betfair.com address with details of circumstances in which they believe they have been disadvantaged. This has helped us to confirm that our calculations match the expectations of those customers and we will look to respond individually to relevant customers.
The decision to roll-back the initial SP reconciliation was taken following extremely high level of demand from Betfair SP backers in the Grand National win market. Had the initial SP stood, the prices returned on several horses for those backers would have been much reduced from what they could reasonably have expected. As a result, Betfair made the decision to roll-back after the race, to reflect an SP overround as close as possible to 100%, which is typical of the Betfair SP in the normal course. We believe that this was an exceptional case and don’t anticipate a reoccurrence, but obviously the result of the roll-back was that some other customers were left in a worse position than had the initial SP reconciliation stood.
We will begin to make account credits today and expect all payments to be made to affected customers within the next 48 hours.
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Steve,all fair comments. I’m away from the action now [he is on a sabbatical] - I’ve been in the mix on this one though [he co-created the BetFair SP].
I think (hope) that this is a one-off. The BSP was, bizarrely, a victim of its own success - having moved along quietly doing relatively little turnover for a few months [*] it suddenly burst into flame. The win market for the National yesterday was nine times bigger [**] than any BSP market we have ever had before, and almost all the new business was business to back. It was always going to be big but the BF planner didn’t envisage or plan for this sort of scale [***] (it would have been easy to have alerted more layers). The demand for Comply or Die bust a hole in the tissue and the price died.
This was a mistake - no question - but I have some sympathy as the numbers were way higher than my expectations too. Hopefully the guys can paper it over - BF will surely be the financial loser here and not the customer. I see it as a one-off mistake - BF must learn from it and make sure it doesn’t happen again.
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[*] Sports betting volume peaks some times during the year for regular, recurring events (SuperBowl, March Madness, World Series, Kentucky Derby, etc.) —and at some occasions (the Olympics, the World Cup of Soccer, etc.).
[**] “nine times bigger”… Interesting number. But how does Grand National 2008 compare with Grand National 2007, for BetFair, in terms of revenues?
[***] “didn’t plan”… Does BetFair have enough “layers” (short-sellers), who could be alerted, next time? Probably.
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Grand National @ BBC Liverpool
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BetFair has hired a TV-famous horse racing pundit: John McCririck.
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Previously:
- BetFair Starting Price
- BetFair SP vs. MSR
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See the comments about this BetFair SP “fiasco”, on Midas Oracle, on other posts…
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- Exchanges & Markets , Expiry , Market Designs
- Comments(4)
Long discussion here:
http://site.forum.betfair.com/.....tting#null
QUOTE
My big worry for the day was the Betfair SP, which was overwhelmed by demand and came in very short on the winner, Comply or Die. It was embarrassing for the SP mechanism - I’m away from the company at the moment, but I initiated this project and it matters a lot to me. The guys papered it over - they made more of a meal of it than they might have but the end result was fine. When the dust cleared and we looked at the numbers I was pretty staggered at the number of people who had bet at Betfair SP (on win and place) so I didn’t feel that bad.
UNQUOTE
Andrew Black
http://www.bertsblog.co.uk/hor.....-lows.html
I’m not sure why Black says the BF SP is important to him. There is a lot of criticism of it as a flawed product, with a distorted market (proven by BF’s rejection of the price generated by the free market forces, which led to the ultra-skinny price on the horse that happened to have won the Grand National). If Black sees this as a way to generate big potential profits in the future, he must have his reasons for doing so, but I can’t see the rationale why he would think this.
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The SP mechanism relies on the price in the main market reflecting real probabilities of horses winning. This is possibly a mistake. Racing markets are often steeped with ‘informed’ money, seemingly presenting ‘value’. The more BF reject their own SP mechanism to generate market-driven prices, the more weakness in the overall product. Someone wanting to pile money on to one horse, for whatever reason, would have to do so at ever lower increments on the actual market odds, but with this SP system, there is the chance that they can just ask for large chunks at SP, meaning that the main market does not have to adjust an equilibrium price downwards to cater for the heavy money pouring on to one horse. The result in future high profile races will be that the main market odds will be artificially higher, and BF will feel under pressure to again “top up” the SP price, as the heavy money crashes the SP price again. The next Cheltenham Gold Cup and Grand National will be obvious targets. There is almost no way that the BF SP for the next Grand National will be allowed to be lower than bookie SP, so surely a huge lay of a horse in the main market, and a huge back in the SP market, will see a small downside and potentially enormous upside, from that trade.
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The BF SP is I think supposed to help Joe Bloggs get a bet on, and has the side product of avoiding matching Joe Bloggs against the skimming bots which take fortunes out of the racing markets, often without taking much if any risk on which horse wins the race. That’s a nice by-product for BF and Joe Bloggs.
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I don’t agree with Black over many things, and I don’t am in total disagreement with his relaxed attitude towards betting integrity. His decision to describe voiding winning bets as “papering it over” is curious to say the least. You can’t just cancel bets that the robot BF designed placed, after the race has finished, when you’re not happy with the SP generated by your own robot. It was stealing, in the very strongest sense of the word, and was fortunately rectified as someone realised quite how bad that decision was. “Papering it over”, hmm. I don’t think so.
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