Parallels
The Betfair IT department has once again been in the news for their impressive exploits building and managing one of the most robust and successful electronic markets on the planet (shhh don’t tell the NYSE!) Referring to the opening match of last year’s football World Cup:
On the day of England’s first match, 4.4 million bets were placed and only 20 took more than one second to process. It means 99.999 per cent of bets were placed in less than one second.
‘To get five nines is fantastic,’ says Devine. ‘The reason why performance is so important is that lots of activity is done on the site in a short timeframe.’
Last summer, Betfair worked with its database supplier Oracle to increase the target percentage of bets processed in less than one second from 99.1 per cent to 99.9 per cent.
Devine says estimating opportunity cost for delays in processing transactions is not an exact science, but he suggests the mathematics is impressive.
‘Reducing the amount of time it takes to process a bet by 0.5 seconds – on five million bets per day – saves 694 hours, or 28 days of total customer waiting time per day,’ he says.
I’d be interested in finding out how this performance stacks up against the major stock exchanges and financial futures markets. (Any readers that have this information to hand please feel free to comment.) In any event, I’d be surprised if Betfair didn’t stack up nicely.
The parallels with more ‘traditional’ exchanges or derivative markets continue to grow and mature. One parallel I find particularly compelling is the vibrant community of professional traders and trading solution providers that has arisen around the Betfair exchange; with automated and algorithmic trading solutions adding significant liquidity to the markets (and creating their own challenges in terms of managing traffic on the exchange.) This is something I’ve highlighted before. The founder of RacingTraders, one such software provider, eloquently describes why Betfair has enjoyed much success with traders:
In appearance Betfair was no different from the financial markets, the only difference was the underlying instrument which was being traded. Instead of buying and selling stocks or bonds, people were buying and selling bets on sports events. There was nothing stopping me from Laying a bet with one person at a certain price and then placing that same bet with somebody else at a slightly higher price, so long as I could read the short term direction of the market. The major advantages that Betfair had were how easy it was for anyone to get started and also how cheaply you could start learning. To get back into the futures exchanges as a trader takes capital and some hefty monthly bills on seat lease, round turns etc, Betfair immediately struck me as the poor man’s stock exchange, instantly accessible to anyone. Even their commission structure was better than the financial markets: Betfair takes a small percentage of your winnings instead of a fixed transaction fee based on Volume. I was free to trade huge volumes of ultra short term positions whilst trying for only single tick profits and was still able to make it pay.
In addition to trading systems like RacingTraders above and others like the Sports Trading Workstation and Bet Angel, there are many blogs that focus on discussing Betfair trading strategies and results, such as The Betfair Trader and WizardGold (the latter who interestingly comments both on sports and forex trading strategies and systems.) I will continue to look for connectors between these parallel (market) universes, and increasing signs of convergence, especially on the institutional front; in jurisdictions such as the UK, convergence on the retail (buy & sell) side is an already well established niche with providers from Betfair to IG Group offering a variety of options to trade both sporting and financial outcomes.
