For over two hours, the Betfair Trading Platform was down last evening resulting in chaos for punters/traders who were actively working the markets in running on Southampton versus Sunderland or the Ireland/New Zealand World Cup cricket match. The fact that the high profile downtime on a major bank holiday occurred in parallel to a nationwide billboard campaign by Betfair will only have heightened their anger and embarrassment.
It is common practice for Asian bookmakers to directly target competitors in both Asia and Europe with the creative usage of computer worms and viruses. Some European layers have followed suit and have recently enhanced their own internal tactics through the development of suitable guerrilla software. The use of such software has to be carefully timed for maximum effect - eg coincidence with a marketing campaign or a major turnover day and/or event or both - although some layers target competitors in turn over a window of several weeks. The fact that corrupting behaviour of this type is accepted and sought out by the major firms is a further indication of the levels that these operators regard as valid competitive advantage.
With online betting transforming the global industry, the online platforms are suitable territory for the seeking of control. However, the Europeans are out of their depth when it comes to high tech IT guerrilla wizardry. The Asian firms have been developing and utilising software with an aggressive IT strategy for years and have a considerably more enlightened response to the creation of an IT edge. We mentioned in a previous post that we always use very protected systems to collect prices globally (see: http://footballisfixed.blogspot.com/2007/04/information-and-value-in-price.html). The European layers have no idea that we are accessing their price databases while some Asian firms not only know what we are up to but also actively test their system's defences against our intrusions in an ongoing intellectually competitive manner. This exactly mirrors the Far East bookies attitude to market information ie "let's talk".
Betfair needs to address the various issues relating to their glitchy trading platform. Since upgrading to a new platform earlier this season there have been numerous problems affecting the site. As football gravitates towards being the equivalent of any other mature market sector, the global trading concerns will require trading exchanges that are totally reliable and efficient with minimal transaction costs. Whether the future results in individual companies like Betfair, Tradesports, Betdaq or any of the major Asian operations providing the trading platforms or incorporation into the global financial system directly via Wall Street, London, Tokyo, Singapore, Hong Kong or Beijing, a reliable 24/7 global trading presence has to be assured (even if this results in different groups sharing strategies and technologies). Consolidation in the betting exchange and spread betting sub-sectors should be expected sooner rather than later - there's already some private equity money being sloshed around potentially receptive boardrooms. The primary level market makers of the not-too-distant future will also be required to undertake consultancy and research for specific and general clients respectively as well as for internal market efficiency considerations. The betting exchanges do need to sharpen up as several leading investment banks, to our knowledge, already operate private internal/group markets relating to global football matches and some financial centres in Asia accommodate the football markets on the full IFM trading screen.
Betfair have done more than any other European operation to improve the lives of ordinary punters. They may be London moneyheads but, by undermining the Big 3 cartel (represented by the Association of Major Levy Payers and other semi-masonic groupings), they have performed a major service to all traders. Betfair have increased the competition and the Big 3 still haven't reacted as they are effectively ossified by their slovenly mature structures. Just as on the pitch, the nimble and fleet-footed succeed. As they turn their competitive gaze towards more worthy opponents, Betfair will need to remain aware of the semi-legal and outright illegal practices utilised by the dinosaurs. Last night, we were desperately trying to get out of a large position taken at market opening in Asia on Charlton -0.0,0.5. The disappearance into the ether of Betfair resulted in some chaotic trading as we opened a multiplicity of new accounts in the hour leading up to kick off to hedge our liabilities. No reason has been provided for the downtime; their apologies during the downtime were sniffily insincere public school utterances of the sort "if I must talk with you, I will..."; there is no statement today on the Betfair site explaining the disappearance. Betfair should note that billions of dollars of professional and institutional money were withdrawn from the Tokyo Stock Exchange following the system crash a year last January. A platform is only valid if it provides an efficient trading efficiency together with total security of transaction and platform. Betfair is still some distance from being able to offer this.
Finally, there are two types of downtime. There is the sort described above which is malicious and external in it's origin. There is also the deliberate internal removing of websites by the companies themselves. This applies particularly to horseracing markets. There are some races that are effectively certainties - one horse is far ahead of the competition, the favourite is up for it and there are no corruption routes available to the layers. On numerous occasions, in the dim and distant past, I have been unable to place bets with Ladbrokes and William Hill as their web presence disappears in the ten minutes leading up to the off and I've been informed by contacts in Ladbrokes that the phonelines are cut in these windows too. The reasoning is obvious. It's a treble whammy. The manipulative bookmaking operation has no exposures on the race within it's own books as they are illiquid; all public money on the favourite will find it's way into the satchels of their competitors; the invisible bookies actively trade the information in the betting ring and on the rails. Money money money...
The utilisation of inside information and the cornering of markets is a post for another day...
