In a blow to the French, BetFair choose Bastille Day to premiere the revised version of the bet-matching logic of their prediction markets. – IMPROVEMENT MEANS BETTER LIQUIDITY FOR THEIR EVENT DERIVATIVE TRADERS.

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Improvements to Betfair’s bet matching logic today, Monday 14th July:

What’s changing?
We’ve improved the code that matches bets. As well as matching backs against lays as we’ve always done, we’ll also try to match your bet against bets on other selections in the market. We‘ll give you an improvement over the price you‘ve requested where possible, and we‘ll match you against whichever bets get you the best price.

For example in a tennis market:

Roger Federer is 1.9 to back, 2.1 to lay.
Rafael Nadal is 1.8 to back, 2.0 to lay.

If you try to back Federer at 1.9 or less, previously we would have matched your bet against the customer looking to lay Federer at 1.9. Both bets would have been matched at 1.9, even if you‘d asked for a shorter price. In theory we could do even better than that though: we could match you against the customer trying to back Nadal at 2.0 (backing one player at 2.0 is of course the same as laying the other player at 2.0). Our new bet matching process will see which match gets you the better price. In this case we would get you 2.0 by matching you against the Nadal backer (who is offering a better price than the layer of Federer).

When placing a new bet you will only ever be matched by the new process if doing so gives you a better price than you would otherwise have got. We will match your bet at the best price possible that’s a valid increment on Betfair’s odds ladder, as we explained in our update of 6th June.

Does this only work for 2-runner markets like tennis?
No. The new matching logic works for any number of runners in a market. An example with a 2-runner market is probably easiest to understand, but the principle is the same for markets with 3 runners or more. For example if a football market looked like this:

Spain 2.3 to back, 2.5 to lay
Germany 3.9 to back, 4.0 to lay
The Draw 2.9 to back, 3.0 to lay

Then if you want to back Spain we could match you with customers looking to back Germany and the Draw at 4.0 and 3.0 respectively, which would result in you being matched at 2.4, a better price than you would have got had we matched you against Spain layers (who are only offering 2.3).

Which markets will this affect?
We’ll introduce the new code on Monday 14th July, but initially matching will be done exactly as before. As explained earlier in the year, introducing best execution across selections wasn’t possible without significant change to the existing code that matches backs and lays, so we will need verify that performance is as expected for the existing matching process before enabling the new functionality. All being well we’ll enable the new code for a small number of markets to ensure that everything is as it should be later on Monday. We’ll announce which markets on Monday. Again if all is well we’ll roll out to a wider range of markets on Tuesday.

We’d expect to match across selections on the same range of markets as we currently do:

Match Odds in Basketball, Boxing, Cricket, Ice Hockey, Rugby League, Rugby Union, Snooker, Tennis and Volleyball, Greyhounds win markets, Darts match odds, correct score and handicaps and Soccer match odds, HT/FT, correct score and unders/overs.

Horse racing will not be covered for now, due to the possibility of non-runners, and the new process isn’t applicable to markets where runners can be added (for example “Next manager” markets), where runners listed might not take part (e.g. First Goalscorer) or where the runners in a particular “market” are treated independently (e.g. Accumulators).

What about bets placed in error?
We’re aware of a concern that this change might make it more likely that customers would match bets placed in error, for example asking for 1.2 when you really wanted to back at 2.2. One consequence of the change we’re making is that any bet you place is more likely to get matched – making it easier to get a match is the whole idea. Being realistic though, if you had placed a bet in error like that in the past, in the vast majority of cases you would have been matched (against lays on that selection). 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.

On a related point, we’d also expect this change to make it more difficult for people who place “trap bets” to get matched (a trap bet is an offer that is only likely to be matched if another customer places a bet in error). While putting up “trap bets” is against Betfair’s terms and conditions and we close the accounts of persistent offenders, on an exchange where any customer can ask for any price it’s difficult to eradicate this practice. In most instances where a trap bet is the best price available on a selection, customers will in future be matched at better prices against bets on other selections rather than matching the trap bet.

How will the change affect liquidity?
We would expect the change to be beneficial to liquidity. Obviously if we have opposing customer bets in the system that could be matched, whether on the same selection or across different selections, the best thing for liquidity is to match them.

Further to the above, we’ll be enabling the improved matching on the following markets later today.


Czech Republic U19 vs. England U19
FC Inter vs. MyPa

Andujar vs. Hanescu
Minar vs. Rochus

11:28 Sheffield
11:48 Oxford

3 thoughts on “In a blow to the French, BetFair choose Bastille Day to premiere the revised version of the bet-matching logic of their prediction markets. – IMPROVEMENT MEANS BETTER LIQUIDITY FOR THEIR EVENT DERIVATIVE TRADERS.

  1. 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? | Midas said:

    […] Site Map In a blow to the French, BetFair choose Bastille Day to premiere the revised version of the bet-matc… […]

  2. Ed Murray said:

    There are two advantages from this

    (1) – When you submit a bet it looks for the best price for you across more than one selection, rather than just the single selection

    (2) – Betfair look to have changed towards a much healthier PR strategy, with a much more positive reaction from their users, and have stopped the “spin” tactics, which annoyed pretty much every Betfair customer who posted comments about the logic put up in spring 2008.

    There is one disadvantage

    (1) Money is still being taken risk-free into Betfair coffers by matching people at best increment and not best price (there is a significant if small difference between giving someone 1.83 and 1.8333333 say).  Its still free money for Betfair, and will have a negative effect on liquidity (all commission/rake/skims on a market will decrease the amount wagered over time on the markets – the higher the cost of placing a bet on Betfair, the less bets will be made, so at the margin, because of the small risk-free skimmed money, liquidity will fall because of this bet matching logic).

    There are plus points to the latest bet matching logic.  Overall I think it is a good thing.  However, extra liquidity clearly isn’t one of them.  Extra liquidity would come from more users betting as a result of the new bet matching logic (why would this logic in itself attract any extra users to the site?), or from the same current users betting more (which is unlikely to happen, as Betfair are still incorporating a skimming feature giving them extra profits on top of their commission). 

    The real effect is a temporal one.  If you submit a bet there might be ?1000 available at the price you ask for, but with the new logic, BF will match your bet laying other selections as well as backing the one you for example wanted to back.  Therefore your bet will be matched quicker, however, less bets will then get left up on the exchange.  The increasing attractiveness of submitting a bet (you are more likely to get matched instantly) is offset by the increasing unattractiveness of leaving a bet up, relatively speaking (which has to fall relative to taking a price off screen, if taking the price becomes more attractive).  It works in the same way as perhaps a credit card does – you get the chance to buy things now, with money you haven’t yet earned, swapping consumption in the future, for consumption now.  The real effect isn’t an increase in liquidity on the Betfair markets, its solely easier to get on straight away, and the overall liquidity on an event will stay the same (or fall slightly if the commission takes a bite at the margin, which it will do to a fractional extent). 

    I’m in favour of the new bet matching logic, but linking it to an increase in liquidity is a red herring.  The total liquidity on each event will probably fall overall, as a result of the non-best execution part of the new logic.  Perhaps it is like supermarkets delivering to your door – you will get your food much more quickly, but it is unlikely you will actually want any more food.  If you want to back tennis player A, that is the same as laying player B, and the logic looks for best price on both ways of wagering on player A to win a match.  Overall liquidity is linked to the cost of using Betfair for Betfair users, on supply and demand curves, and this bet matching logic makes it easier for someone to get matched submitting a bet, BUT that bet is less likely to be left up on the exchange as a result, for other people to take, so the effect on liquidity is completely neutral, ceteris paribus, and assuming zero Betfair skimming profits.

  3. Ed Murray said:


    $50 is available in the backing column at 1.8 (and another $40 is available to lay at 2.25 on the opposite player), and Chris F. Masse submits a $100 bet at 1.8 backing player A, $50 is available and matched at 1.8, the other $50 remains up on the board at the price he asked for, going into the lay column.  Then Ed Murray 30 seconds later submits a lay bet of $50 at 1.8, and the remainder is matched.   However, there was 2.25 available to lay on the opposite tennis player, which could have matched Chris’s bet 30 seconds earlier, but was left up on the board in a 100% book. 

    2008 new bet matching logic

    $50 is available in the backing column at 1.8 (and another $40 is available to lay at 2.25 on the opposite player), and Chris F. Masse submits a $100 bet at 1.8 backing player A, $50 is available and matched at 1.8, the other $50 is also matched against the $40 lay at 2.25 of player B.  Chris’s bet is fully matched and therefore there is none of Chris’s money left up on the board.  Then Ed Murray 30 seconds later submits a lay bet of $50 at 1.8, and the bet stays up on the screen. 

    Overall there is no improvement in liquidity, Chris gets his initial bet matched, but it also becomes harder for subsequent players to match Chris’s money.  The benefit of a quick match for Chris is exactly cancelled out by the difficulty of a future bettor trying to match Chris’s money, which becomes much harder. 

    Conclusion: Overall liquidity is completely unaffected by the new bet matching logic.

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