Is the BetFair’s brand-new bet-matching logic (which matches bets across related selections) the first time a prediction exchange manages to increase liquidity WITHOUT augmenting the number of traders or relying on an automated market maker?
Chris F. Masse July 14th, 2008
Professor Giberson,
What do you make of that?
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- Analysis (Meta) , Exchange / Market Liquidity , Exchanges & Markets , Market Designs , Mechanism Designs
- Comments(5)
I’d expect Professor Giberson to be surprised at the claim that liquidity is being increased from say, six months ago, whilst Betfair {The Exchange} have introduced this matching logic which sees extra money taken risk-free from Betfair users and going straight into the pockets of Betfair {the bookmaking company which is a separate legal entity running the cross matching process}.
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Taking more money out of the pool increases the rate of attrition of users and automatically damages medium and long term liquidity. That’s not an argument, that’s a fact. (Unless someone can put forward why increasing the cost of using a product is actually going to lead to an increase in demand for that product, something which is almost without precedent in economic terms, but has actually existed at times with extreme luxury items).
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Looking at the statement, its a much better and fairer scheme than the diabolical trap bet robot was earlier this year. The best thing about it is that Betfair have dropped the stuff about how they are helping customers get their bets matched etcetera, as if it was a forward step without any faults, and now recognise that even with the new logic, there will be many instances where Betfair users are worse off with the new scheme than before, and overall they think the pro’s outweigh the con’s of the new logic. I actually agree that the pro’s outweigh the con’s, but it is nice to see them recognise that many people will be worse off at times as a result of the new logic
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There’ll now be far, far more circumstances where you would have been matched anyway , but instead you’ll now get a better price, than situations where your bet would have been unmatched and you might have had the chance to cancel. On average we would expect customers who place bets in error to be better off as a result.
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Nice to see that they have spotted that many Betfair users will be worse off, but that the overall picture takes precedence. A welcome change from the inept failed spin from earlier this year, which annoyed pretty much every Betfair user who posted comment about it.
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The change where the matching engine will look for best price not only say backing runner A, but also laying runner B, is a huge step forward, where this time round it is the user who is matched at best price, rather than what happened earlier this year with Betfair siphoning off the profits and not telling anyone they’re doing it.
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Thumbs up overall, and well done whoever dropped the failed spin tactics.
Actually, I would expect the change to improve liquidity, but the real surprise for Ed Murray is that other than his liquidity argument, I pretty much agree with him this time.
It is a better scheme than before, as the exchange will match traders’ bets more efficiently and offer price improvement when available.
As Betfair observes (and Murray notes) the downside is for traders who make a bet in error, and now find the more efficient market has matched the bet before it could be withdrawn. If this is a frequent problem for a trader, perhaps they need to exercise a little more care at the keyboard. But as the Befair announcement indicates — and this time Ed Murray is repeating the Betfair company line! — at least there is the possibility that the trader will be matched at a better price than he would have otherwise.
[...] Michael Giberson (professor of economics and chairman of our scientific advisory board): [...]
I’m happy to repeat the BF company line when it matches reality
Betfair made a mess when they offered the first version of their matching algorithm.
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This is from the Gambling Commission’s ”License conditions and Codes of Practice” :
Licensees must satisfy themselves that the terms on which gambling is offered are not
unfair under the Unfair Terms in Consumer Contracts Regulations 1999 and, where
applicable, meet the reasonableness test under the Unfair Contract Terms Act 1977.
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And this is from the Unfair Terms in Consumer Contracts Regulations :
“The requirement… is one of fair and open dealing. Openness requires that
the terms should be expressed fully, clearly and legibly, containing no
concealed pitfalls or traps. Appropriate prominence should be given to terms
which might operate disadvantageously to the customer. Fair dealing
requires that a supplier should not, whether deliberately or unconsciously,
take advantage of the consumer’s necessity, indigence, lack of experience,
unfamiliarity with the subject matter of the contract, weak bargaining
position or any other factor listed in or analogous to those listed in Schedule
2 of the regulations. Good faith in this context is not an artificial or technical
concept; nor, since Lord Mansfield was its champion, is it a concept wholly
unfamiliar to British lawyers. It looks to good standards of commercial
morality and practice.
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It isn’t hard to see why betfair pulled the plug on the first version of their skimming bot. Should I be happy about it ? Why ? Should I be happy about betfair being more open ? They will choose whatever strategy works best for them. Lots of people have been wasting their time with them. Their future actions should form the basis on which they will be judged.
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You will have to do without the links because it is considered to be “spammy”.