We need Jason “VP” Ruspini‘s informed opinion on that:
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PREVIOUSLY: BetFair impose new “Premium Chargesâ€â€¦ Do BetFair gag the critics, too?
UPDATE: They announce a Q&A.
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If there is competition, customers will tend to go to other exchanges. Liquidity means pricing power but only to a point.Â
It is almost as if Betfair thinks they are in competition with racing tracks, where such rakes are the norm. Do you still fault US readers interested in prediction markets for not caring much about Betfair, Chris?
I want Europeans to take a close look at the US scene, and the Americans to take an informed look at the British scene.
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What I fight is people who “hit the delete key” each time they see that I blog about BetFair.
You didn’t fully answer the question in the title.
It would be interesting to know what the average profitable derivative trader paid in commissions. I guess it would depend on what type of trader you were but in all likelyhood any active day trader / scalper would already pay more than 20% on gross profit.
Betfair’s problem is that commission is charged at the end of an event, after settlement as opposed to charging a small commission every time someone makes a trade, I definitely prefer this way of doing things but as a business model it fails to extract the appropriate fee from the traders, whereas punters, who take positions and do not trade, end up paying a lot more in commissions disproportionately to the traders.
As a side note, gambling is tax free in the UK, most people making money from the financial exchanges will have to pay tax to the government but not so on Betfair, so maybe Betfair are taking advantage of this fact.
Interesting comment. Thanks.
More:
http://www.midasoracle.org/index.php?s=betfair+structure+fee&searchsubmit=Go