Thursday, 30 June 2011

New Betfair Premium Charge Disgrace

It's the talk of the trading world this week and although I'm a little slow off the mark in discovering this new piece of news, I certainly have plenty to say on the matter. For those who've not heard, Betfair are increasing their (already massively unfair) premium charge from 20% to an incredible top rate of 60% as of next month. Here are full details:


From 18th July 2011 Betfair will be making some changes to the Premium Charge. The current Premium Charge mechanism will remain in place but higher rates may now apply to a small number of customers (less than 0.1% of annual active customers).

Full details of the changes can now be found on the Betfair Charges page under the About Us section of the website. However, the changes can be summarised as follows:

• Customers will only be subject to Premium Charges at higher rates if they satisfy all of the following conditions:

o Lifetime net profits* exceed £250,000
o Lifetime commission generated less than 40% of lifetime gross profits
o Bet in more than 1,000 markets

• Customers that satisfy all of the above conditions will be asked to pay Premium Charges at rates between 40% and 60% on all future exchange activity.

All customers that will be affected by these changes have already been contacted.




I'm not going to go over old ground and write about the basic unfairness of the Premium Charge. We all know that it's pure greed, wrapped up in a fake moral and financial justification. We all know that Betfair (the company whose mantra was always based upon providing a place where winners were welcome) have become a greedy, bloated monopoly, who actually despise those who are successful. They cannot bear the way a select few have benefited from their exchange model to make fantastic money and will do whatever it takes to rob them of a slice of that profit. And why? Well just because they can. That's the benefit of having a monopoly.

But let's focus (and believe me, this is something I have no problem in focusing on!) on what this means for you and me, the average trader who doesn't make a big wage and the newcomers who aspire to one day be successful. Don't be fooled by the £250,000 threshold. If you were to make £25,000 a year from trading (the average wage in the UK today), it would take you 10 years till you begin to get charged. That might seem a long way off but I'm guessing that most of us would want to make more than the average wage. We will certainly want the option of being able to scale up our business and make a more comfortable wage. But let's say you are earning £25k every year and you are 20 years old. By the time you hit 30, you'll be getting charged potentially 60% for the next 40 years - your profit becomes just 10k per year! What if you built your trading up through years of hard slog from nothing and were eventually lucky enough to be making, say, £100,000 per year? It would be another 2 years MINIMUM before you were getting charged 60 GRAND A YEAR! Betunfair take the lion's share of your hard toil, all of it achieved through fair means, where you've given up your day job and taken huge risks financially.

They keep trotting out the old lines that it will only affect 0.1% of account holders and that they want to only penalise those who they feel are taking advantage and not contributing. In reality, that percentage is much higher because they are not just punishing the guys with fast pics, the courtsiders, the big syndicates with huge sums of cash and the boffins with bots. They are forgetting about the little guys, the average Joe at home with just a laptop, a free copy of The Geek's Toy and a Eurosport subscription. The majority of people who want to trade rather than gamble, which is what Betfair is built for, will have aspirations of becoming successful. So this charge affects EVERYONE who has ideas of going full-time.

So where does that leave me? Well, if I start earning £25k a year then I will be more than happy right now! But in a few years time, I'd like to think I will be averaging a fair bit higher than that. And you can bet your bottom dollar that this won't be the end of the unfairness. They have tripled the charge in just 3 years, whose to say what they will introduce in another 3 years? It means one of two things; I either need to completely reconsider taking on trading as a career or I need to find a way around paying the PC. If I was just a newcomer on the ladders, I would probably not even bother. But I've been through a year of hard-ship to get to the stage where I feel I can make it as a trader, so I'm not about to quit now. There are two ways around the PC; move to another exchange (i.e. Betdaq) or start losing more on Betfair to avoid the charge altogether.

There is a movement starting via Facebook which I would urge people to take a look at:

Betfair Fiasco Facebook Page


The big problem with this is that it may be fine for 'big players' and the long term profitable to boycott or move some of their money elsewhere but the likes of myself just can't afford to do that. And it's going to need a lot more than the small number of big players to move their money to make a big difference. It needs ALL of us traders at all levels to make the switch and that includes newbie gamblers who are just learning about trading. I believe it can be done but it's going to need a great deal of organisation and a big helping hand from Betdaq. I remain unconvinced that they are doing anywhere near enough to help drive people towards their site and away from Betfair. Maybe they are happy being second best? I'm sure they make enough from the customers they have to be very happy indeed. How much do they really want to upset the applecart and expand?

In all reality, the best thing that us new and aspirational traders can do is to start making it impossible for the PC to take affect in readiness for when we are consistently profitable. How do we do that? Take a read of this anonymous post, taken from Mark Iverson's Professional Sports Trader blog:


Anonymous said...

Hey Mark, no you are not missing anything. But this has nothing to do with fast paced trading. Say you start trading tomorrow. You make £10,000 in the first month. Great. Now you go and find a short priced favourite that you are fairly certain will win. Lay it for £5000 on Betfair and back it for £5000 on Daq (you are up £10k so you can do this). If it loses, you are up £15k on Betfair sure but if it wins as expected, you are now still £10,000 up but only £5000 up on Betfair. I have been doing this ever since the Premium Charge came in and have never paid it. By arbing with bookies and the Daq my Betfair P&L is fairly close to zero, they think I don't make any money. Combined with having two accounts, in different names, one at work and one at home so the IP's never get linked, I am assured of never having to pay a charge unless all of the bookies ban me or Betdaq and WBX cease to exist.

So whilst you are not missing anything, you see that this has nothing to do with juggling a winning trade while it is in play, there is no rush to offset.

But don't wait until you are £230k in front before you start reducing your "apparent" Betfair winnings.

30 June 2011 12:18

It's not a perfect solution but it is the only way I have heard of to prevent those pigs at Betunfair getting their snouts into our hard-earned troughs. If anyone knows of any other ways, I'm all ears! But for now, if you are new to trading, think very carefully about the future. And if you are already successful, why not think about setting up a new exchange? Cos until that American market opens up (which should kill Betfair dead in a few short years) we don't have much hope.

Flavia Pennetta:

17 comments:

  1. Great write up m8, have linked this post...60% so greedy, why on earth Betdaq dont make more of an effort I have no idea..

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  2. Cheers Sledge. It's astounding how they've come up with the figure of 60%, I just don't understand how they feel they deserve to take the MAJORITY of anyone else's profits.

    As for Betdaq, if I worked for them I'd pulling out all the stops for a huge marketing campaign which directly slates Betfair. When the PC was introduced they didn't do enough then, so I won't be holding my breath. But if not now, then they are never gonna do it. Maybe it's up to us.........

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  3. Betdaq need more than a bottomless marketing budget, they also need the infrastructure to support a surge of traffic - currently they are a long way off that.

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  4. I had a feeling that the site may be an issue. I'm not clued up on those technical aspects though, so thanks for sharing Scott. Do you think it is possible sometime in the near future, that they will have the required infrastructure?

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  5. Great post!

    Betdaq have had ample opportunity to capatilise on Betfair's 'foot-shooting' antics. They really need to pull their finger out and get their site ready and robust enough to cope with being a major force in the betting exchanges market.

    Unless they are happy playing 2nd fiddle.....

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  6. In my opinion no profitable trader will ever leave betfair . Imagine learning to trade like entering in a dark room with no light , just one pc and one monitor , the more he learn to trade the more the room become lighter but in the same time outside the room become more darker (social issues ) , after many attempts and perseveration(7-10 years ) we have a very succesfull trader but for him to go ouside (in the dark) it would be need it the same process as it was to become a trader. So he has to choose between much smaller amounts but doing the only job he learned in the last 10 years or get out in the jungle . Betadaq IF they improve their platform will do the same thing - it will try ,in time, to have relatively the same comission as betfair (maybe a little smaller ) because greed rules the world right now . So ,as ,the newbies we must think if we want to trade losing our personal money in the long process of becoming a trader only for betfair to take 40-60% of our hard work just because they can ask for it ,and take it .

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  7. No offence Speedwave but that is not the right attitude to take. It's very negative to say that we shouldn't move because Betdaq MIGHT do the same thing one day. If everyone moved to Betdaq and they became number 1, why on earth would they repeat the mistakes that Betfair made? We'd just all get up and go back to Betfair! It doesn't make any sense. It's exactly this sort of attitude that will never change anything.

    And you are wrong about 'no profitable trader ever leaving'. They HAVE left and they ARE leaving. There was a surge in new customers at Betdaq during the first premium charge 3 years ago and there is a surge happening NOW. But we all need to get together and make this a huge thing and that includes you and me and all the small players.

    Got to be more positive and pro-active Speedwave - you can read about it in my next post :)

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  8. I think it will be easier to help Betdaq to improve their service, rather than making Betfair step back on their greedy decision. Two strong exchanges in competence between them will be much better than only one in the long terms. Specially if our API's, with some programming work, could easily run in both sites alternatively (or even simultaneously!).

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  9. By the way, a few of us, affected by this new PC, are going to book a meeting room in a hotel near Heathrow, to talk and discuss about future actions (strike, move to Betdaq...).

    Dates to be confirmed. Those of you who want to join, just drop me a mail_ davidllada@gmail.com . Soon afterwards, 2 or 3 people (choosen at the meeting) will head to Dublin for a visit to Betdaq headquarters, with our requests and suggestions.

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  10. Whilst the charge is certainly controversial many people (yourself included) are not getting the figures correct.

    Remember Betfair will only ever charge to a maximum of 40% of your profit. And remember that implied commission is included in that figure. So if you earned £100k and had an implied commission (what you pay on your winnings & what you would have paid but lost) of 15%. They will charge you up to 60% until your profit to commission/charges is up to 40%.

    Big difference from taking 60% on total profits. In this case it would only be £25k a year, rather than 45k you suggest.

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  11. Great stuff David. This is what I mean about being pro-active rather than just moaning and putting up with it. I will make a new post and add your comments to it.

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  12. I will have to bow to your superior knowledge on this Ken, as numbers are not my speciality! However, I don't think it changes anything with regards our cause. They are still taking our money, doing so in even greater amounts and still likely in future to up that amount again.

    In fact, I would say that the very fact that the PC is so convoluted in it's calculation, only makes it even more ridiculous and in need of an overhaul. It's the principal of the whole debacle that rankles just as much as the financial losses.

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  13. When you discuss principles you could also say that Betfair is reducing the profitability of long term winners in order to attract & reward long term losers.

    Whilst they posted record profits this month, much of that has to do with cost & tax savings.

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  14. You could say that but do you really believe it? Betfair: The Robin Hood of Betting Exchanges!!

    Besides, they are not really rewarding long term losers at all because most losers are trying to become winners. As soon as they become winners, they are getting taxed! What is the incentive to become successful?

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  15. ++++++++++++++++++++++++++++++++++++++++++++++

    Anonymous said...

    Hey Mark, no you are not missing anything. But this has nothing to do with fast paced trading. Say you start trading tomorrow. You make £10,000 in the first month. Great. Now you go and find a short priced favourite that you are fairly certain will win. Lay it for £5000 on Betfair and back it for £5000 on Daq (you are up £10k so you can do this). If it loses, you are up £15k on Betfair sure but if it wins as expected, you are now still £10,000 up but only £5000 up on Betfair. I have been doing this ever since the Premium Charge came in and have never paid it. By arbing with bookies and the Daq my Betfair P&L is fairly close to zero, they think I don't make any money. Combined with having two accounts, in different names...

    +++++++++++++++++++++++++++++++++++++++++++++++

    I have only just seen this post.....I thought that I better post something to the effect that the above tactic is NOT a good idea.....

    In the long run, you will end up worse off, it is fine whilst you keep losing on Betfair, but obviously this cannot be guaranteed...As soon as you start winning on Betfair, you will incur BIGGER charges to your Premium Charge....Since your implied commission is only credited at 3% you will actually pay MORE PC in the long run.....

    Do NOT try the above....AND certainly do not try any Martingale tactics on the above....

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  16. I don't really see how multiple betfair accounts isn't a solution to this problem. trade from your spouse or a family member or friend's account. and make 250k and go to new clean slate betfair account. I would love some day to have 250k profit on betfair, the charges of 60% are ridiculous to say the least.

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  17. I had multiple accounts they linked them and took £20k off me and closed my accounts that was in oct 2011 my profit was 500k and markets 2000 as I've been trading since betfair began so was on the 60% they link accounts through pho SS details and computers now I use a friends account and pay him 10% of profits and stay under the 250 markets

    ReplyDelete

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