Friday, 22 January 2010

Market managers?

Word reaches my ears that the latest great idea doing the rounds from those insistent on treating Betfair differently from other bookmakers is to argue that Betfair is actually a 'market manager', and should be distinguished from other fixed odds bookmakers as a result.

The basis of this argument is presumably that Betfair does not take any risk on its singles bets.

Over the years, people have got very hung up on what the level of risk you take does to your status. This is curious for a number of reasons, not least of which is that if risk-taking were a pre-requisite, then we could change our matching algorithm to offset 99.9% of the risk and change status. Or 99.99%, perhaps. What's the threshold of risk that works for you? Am I a 'bigger bookie' if take more risk than someone else? And would it be sensible for any government to base any system of regulation (in any field) on requiring operators to run riskier businesses in order to secure more favourable treatment?

Risk-taking is not a pre-requisite of bookmaking, and neither is it the domain of bookmakers. Punters take risk, by definition; and it's the bookmaker who is in a position to reduce his risk by balancing supply and demand (that is, his book). We happen to balance ours perfectly (on our singles bets, at least; on our multiples, we take risk). We do that by only accepting a bet if we can offset it, matching supply and demand around the world. We do it perfectly, and quickly, because we built technology to help us. That doesn't mean we're doing anything different from a bookie who calculates his risk in his head, any more than a supermarket is doing something different from a small shopkeeper by having an electronic check-out instead of using a pencil and paper.

I accept that this has been questioned again and again: some have commercial interests in making sure it is; others presumably can't understand the mechanics of our business and therefore mistakenly think that regulation should be predicated on the way the business is marketed. But the argument that we can be distinguished from any other fixed odds bookmaker just by virtue of our risk appetite and our means of risk management has actually gone to court in the past to be properly debated an analysed - in the Constitutional Court of Australia.

The result was that seven judges agreed that we are, if you look at the mechanics of our business, just like any other bookmaker; and none came to the opposite conclusion.

A 7-nil whitewash is fairly comprehensive...

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