Wednesday, 6 July 2011

Make Or Take?

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After reading countless forums over the last few weeks I stumbled across details of Betdaq's new commission structure.  I say new, but it would seem that this structure has been in place since the beginning of the year except I didn't know about it! The good news is that the post was from Betdaq's team themselves and it makes total sense.  Here's an extract:
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The reason for this post is to inform you that we have been studying the impact on our product and on our business of the activities of API users. We have noticed over the past year the increasing influence of such users who take offers made by other users while rarely making offers for other users to take. This has the impact of reducing the available liquidity for normal retail users.
 
Following this review, we decided to change the way in which we charge commission to customers using the Betdaq API.

From March 1st 2011 we introduced a new commission structure that operates for API users as follows:

Betdaq will operate a scalable commission structure whereby the greater the proportions of offers you make that are taken by others, the lower your rate will be. Commission will continue to be charged on your market winnings from any single market. 

The standard commission rate is 5 per cent, but you will be able to bring that down to as low as 1 per cent depending on your activity Take/Make % over a rolling 7 weeks period.
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What makes this so appealing?  Well, Betdaq are obviously trying to attract market makers who will in turn attract liquidity to their markets.  By putting up orders rather than taking them it's then possible to reduce the amount you pay in commission to just 1%. Imagine that, winning £100 and getting to keep £99! Here's the full commission table: 
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A different approach to normal maybe needed, but it's hard to see any initial drawbacks.  The full post can be found by clicking here.
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14 comments:

Anonymous said...

Surely this commission structure doesn't make any sense - it is reward people not to match bets and simply place orders.....so both sides of the market will end up with a stand off not wanting to take a bet!

Why single out API users, does it matter who matches a bet? I thought bet matching is the whole purpose of an exchange, if you see a price you like - take it? Crazy.

Mark Iverson said...

Hi Anonymous,

It seems a perfect structure to me. One of the issues why people refrain from using Betdaq is because there's no money in the market - no one wants to run the risk of getting stuck in a trade.

By attracting market makers who'show' liquidity to the market it will in my opinion increase it's appeal.

I'm mostly a market taker so as long as there's someone there happy to take my bet I'll bite their hand off for a 5% commission rate.

All the best,

Mark

Anonymous said...

@anon, it's applied to the API because so many applications out there are arbing via the API. They basically strip the exchange of out of line offers reducing available liquidity. So it makes sense to reward the market makers rather than takers.

Curly said...

I'm inclined to agree with Mark, its definitely a good way to encourage people to pump money into their markets.

As a separate point, in theory in the short-term people may be willing to take bets at 5% commission given their alternative at Betfair - anything upwards from 20%. However in a post-Betfair world its unlikely many with ambitions of being successful would continue to take at a level of 5%. That would appear some way off currently though.

Anonymous said...

It's matched bet volume that attracts liquidity and drives an upward spiral, not how deep do the offers look at either side. It's also matched bets that drive profitability (and loss) which again promotes liquidity...

Mark Iverson said...

Hi Anonymous,

Although I understand what you're saying, I have to disagree that matched volume is the main attraction. If it was that easy then why don't Betdaq just copy Betfair's way of calculating amounts matched? From your viewpoint they'd attract more liquidity?

If there are plenty of offers on each side the punters/traders will come.

All the best,

Mark

Anonymous said...

It's an interesting one and I can see your side of the argument. We'll have to agree to disagree on this one!

Keep up the good work!

Mark Iverson said...

We'll call it a draw ;-)

Anonymous said...

Going by the way I trade, the open would be market take and the close would be market make with an 88% strike rate, the times that I have to close because the trade has gone against me would be at market take and therefore overall my trades are around 2/3 market take and my commision would be around the 2.5/3% mark. I don't think that I would change the way that I trade to get reduced commision, interesting concept though.

Mark Iverson said...

Hi Anonymous,

Surely 2.50/3.00% commission is better than giving Betfair 60% though?

All the best,

Mark

Anonymous said...

Im so wanting to make a switch to Betdaq for all my needs, but upon previous attempts it has been very fruitless. Heres the reasons why a lack of liquidity, a slow Gruss betting assistant and prices consistantly been a tick below betfair on the back side and a tick above on the lay side.

The above are the key factors ... Im just hoping that come next Monday some of this may change. I fear though that the exchange world isnt big enough for 2 super efficiant sites, hopefully betfair are shooting themselves in the foot with the new charges and Betdaq can prosper from it... I have my reservations though.

Mark Iverson said...

Not long to go until the 18th now.....

Scott Ferguson said...

wasn't aware of that commission structure - you'd think they'd publicise it considering that style of trading is much more my go, plus they obviously don't cross-match.

Mark Iverson said...

Hi Scott,

I agree as it seems a great structure to me.

All the best,

Mark