Where is the money (on exchanges)?

[kasparov]

I notice trading volume today for the Welsh National win market is currently higher on smarkets (2% comm) than Betfair. Liquidity is better on Betfair if you are a big punter but it’s adequate on smarkets for most people so I think the Betfair 5% comm rate will come under pressure soon. Matchbook also offers better comm on football.

One caveat: I am not sure if Betfair and smarkets account for trading volume in the same way. I can’t see why they would be different but it’s possible there may be different approaches.

[apracing]

Here’s an extract from a Q+A with the company boss:

SBC: In terms of the markets you offer, how does the liquidity and the amount of money available to back and lay stand up on key sports such as football and horse racing?

Smarkets: We calculate volume in a market by adding up how much has been risked. Volume traded can be larger elsewhere though this does not impact the liquidity available. In the context of horse racing I’ve found our liquidity to be at the same level as our competitors. If a trader wants to place a very large bet then he should have no problem getting matched with us if the market is also liquid elsewhere.

SBC: How do you calculate how much money is traded (i.e. the liquidity?) I ask as when I compare a horse racing market available on Betfair with Smarkets, there does seem to be a much greater volume of money matched on Betfair.

Smarkets: The volume traded at other exchanges can be significantly more though it is also worth considering that all exchanges use different formulas for measuring this. Whilst volume traded may be larger elsewhere this does not impact the liquidity available. In the context of horse racing I’ve found our liquidity to be at the same level as our competitors. If a trader wants to place a very large bet then he should have no problem getting matched with us if the market is also liquid elsewhere.

Which is pretty vague, but I’d guess that using the total liability to produce the figure displayed on the screen, would mean that a race like the Welsh National, where every bet produces a liability at least ten times bigger than the stake, would produce a higher ‘traded’ figure.

Afaik, Betfair use a figure which is double the stake, so for a £100 back at 11.0, they’d show £200 traded, whereas Smarkets, if I have guessed correctly, would show £1000 traded.

The Betfair approach is why they appear to have high volumes traded in markets with a long odds on favourite, as £100 @ 1.5 would show as £200 on Betfair, but less if you’re using liability as the measure.

And I may be totally wrong about all of this. It’s certainly not a subject that any of the exchanges talk about openly.

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