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  #1  
Old 03-10-2009, 11:16 AM
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Default New Matchbook Fee Structure

Matchbook has announced a new fee structure on their front page.

My summary - Price Makers get a 0.2% DISCOUNT, Price Takers pay 1%, win or lose. The amount used for computing the fee/discount is the lesser of the bet/win amount.

At first glance it seems like a good change for most of us. It should improve prices/liquidity and if you were always figuring in a 2% commission on arbs (like I did), it makes them more profitable.

As an example.. say there is a +110(mb), -105(5dimes) arb. Let's say under the old fee structure you did:
Matchbook: $202 to win $217.76
5Dimes: $215 to win $204.76
So you win $2.76 either way

Under the new fee structure, it would be:
Matchbook: $202 to win $218 ($200 to win $220, minus $2 always)
5Dimes: $215 to win $204.76
So now you still win $2.76 one way, but you win $3 the other way.

That doesn't even account for the fact that the price, theoretically, should be better now on the same arb (to the extent that it can be).

If you're bold enough to make the prices, the change is even better. But that introduces a lot of risk into what is meant to be a low risk strategy.

I wonder if this new fee structure will help matchbook in the long run? If it is good for us then how is it good for Matchbook? The easy answer is "volume". But will it increase volume enough to be a net benefit to them? I have no clue.. but I wouldn't count on this lasting forever. It will be interesting to see how the liquidity changes over the next couple months, though.

Unfortunately, the Arb calculator isn't going to be correct anymore for Matchbook. I will have to add it to my long list of things to do.
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Old 03-10-2009, 03:18 PM
California California is offline
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Thumbs down Matchbook New Commission Structure

Lyndon Johnson once said . . . if someone started off a conversation with him by saying that they were 'just a good ole boy from back home', the first thing he did was put his hand on his wallet.

Matchbook states in their opening paragraph "Matchbook won't earn as much per trade . . . " and that is possibly true; however, what they don't say is that they will most likely earn more on the bottom line . . . or else why change the present commission structure?

As presented, it looks good. With .2% payments being made to price makers whose offer is taken, offers should increase and spreads decrease. But does that mean that actual trading volume will increase . . . MB should post trading volumes so that there is trading transparency.

Under the present commission structure, 2% of net wins for a single runner is charged. So if one invests $100 each in two separate runners at 50% and wins one, the net commission is $2, or 1% on average.

However, to have to pay 1% for each offer taken, appears to severely limit those who provide liquidity by trading say 30 times in a game (especially a back-and-forth one). Currently, winning $1,500 on the winning side and losing $1,400 on the losing side, to net $100 profit, one pays a $2 net win commission.

Using the above example, under the new commission structure, it appears that the commission could be $29 if all trades were at 50. If the average trade were at, more realistically, numbers other than 50, it would still appear to, most likely, be far greater than the $2 presently charged on a net win on price taking of $2,900!

We shall see . . . .

Last edited by Jizay; 03-10-2009 at 03:42 PM.
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Old 03-10-2009, 04:11 PM
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I guess I didn't really think of it from a trading standpoint, since I don't do much trading. (I started the thread in this forum, because I figured most people that use Matchbook like the live trading).

You could rack up substantially higher fees, especially if you trade big amounts and cover for less risk.

It's definitely a win for me.. I will be in there making more prices pre-game.

Especially since they FINALLY HAVE NCAA TOTALS! About time. They also have NCAA ML.
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Old 03-10-2009, 04:48 PM
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Default My Email to Matchbook

Hi Matchbook,

The new commission structure looks like it will help pregame offers and liquidity.

However, for Live Betting, which is what I mostly do, I have a major concern.

It is very common for me to place 30 bets in a game as a price taker, adding a lot of liquidity, winning $1,500 on one side, and losing, say $1,400, on the other side, netting $100.

This type of trading is not for the purpose of "scalping" but rather reflects my changing opinion as the game progresses and paying heed to runs as they pertain to basketball.

The current commission for $100 net profit is $2 . . . I can only imagine how much of my meager $98 (3.3&#37 net profit will be eaten up in higher commissions as a price taker!

In this instance, I don't think that the "one size fits all" approach is fair to Live Betting participants . . . the new commission structure should have a different system for Live Betting trading versus other types of MB wagering.

Last edited by Backslider; 03-10-2009 at 04:53 PM.
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Old 03-12-2009, 12:33 AM
Jizay Jizay is offline
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Some thoughts:

• Obviously, this system will always be better if you are a price maker.

• If you are a price taker, the situation gets more complicated.

• If you are taking a position on one side and not trading out, even if you add to it, you will be weakly better off. It’s 1% now on wins and losses, which is like 2%, but the fee is applied to the lower of the stake/win amounts, so you can’t be made worse off.

• Of course, the new system is weakly stochastically dominant, meaning that you expect to be better off on a single position, but that doesn’t mean you will be in all states of the world, just on average. Obviously, if you lose, the new fees are worse than they would have been.

• That means arbs will be more profitable with the new system. Calculations will have to be adjusted.

Frequent trading on the same game will likely lead to more fees under this system, as California points out, because you are charged for each trade and not the net result of all trades. Regardless of how Matchbook framed this new fee system, it is actually a trading fee rather than a profit tax, just like old school Tradesports or Intrade. The difference is that the size of the fee here is not fixed, but depends on the price at which you are buying.

• Of course, there is a tradeoff between higher fees and better prices. If people are cutting in front of each other and making tight markets, I have no problem trading frequently in game, even if the fees are higher now. I always want to buy good prices, and like to know that I can get out. Some have doubts as to whether these fees will create such a situation in game, but if that’s true then at least you have a shot at making prices, and the frequent traders will simply have to do that more.

• I think when they mention scalpers, they are mostly referring to people who buy and sell before the start. Everything in the description seems oriented to pregame players, which is likely the vast majority of business. These fees may further stunt live trading, but they should make the exchange stronger for pregame trading. Sadly, this deepens my suspicion that Matchbook will survive as an exchange, but that live trading may not.

• Weird stuff results from paying people to make prices. For example, if I put up crossing bids, I can profit. That is, if I put up +110 on one side and -110 on the other side and both are first in line, I profit simply from being matched. Line moves become an issue because they could leave me long on one side, but this will create some interesting new strategies. All sorts of questions arise regarding the timing of bids. But again, this will make for tight pregame markets.

Last edited by Jizay; 03-12-2009 at 12:49 AM.
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Old 03-12-2009, 05:26 PM
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Cool

Jizay, nice analysis.

In my observation, once the Live Betting trading pointspread (or moneyline) is firmed up, pregame markets are usually fairly tight . . . occasionally, I will make a pregame Live Betting purchase or put up an offer figuring it may be difficult to get an equivalent price later or get it in at least moderate size . . . if the spreads become as tight during Live Betting as they are pregame, this may result in fewer Live Betting pregame transactions.

As with most changes, while many outcomes are predictable, not all usually are . . . and this major MB commission calculation change will probably be no exception to the general rule.
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Old 03-12-2009, 05:50 PM
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Default MB Response

Thanks for your comments. We are getting a lot of similar comments from live bettors and will look into if there's a way to create a separate rate schedule for live betting.

Regards,

Matchbook Trading Desk

_________________________________________________

For anyone who shares my concerns as it relates to Live Betting, it may help facilitate a different commission approach if you add your perspective by emailing MB.

Also, it would be instructive for STC Forum readers if you would post your email in this thread.

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Old 03-17-2009, 10:55 PM
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It seems like it worked.. they do listen!

" LIVE TRADING RATES
In response to client feedback, Matchbook will reduce live rates to 0.5% accept side, -0.2% offer side. Our current goal is to encourage more live market-making, which we hope outweighs any cost increases to accept-side-only, multi-team traders.
"
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Old 08-22-2009, 12:42 AM
Corey Corey is offline
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Could you delete this spammer?
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