Betfair exchange : Premium Charge question

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pyrrhus80
Posts: 24
Joined: Tue May 30, 2017 2:22 pm

Fri Jan 19, 2018 10:09 pm

I'm not particularly mathmatically minded but I've read about how the premium charge is calculated...both betfair's explanation and numerous simplified versions... and I think I have a basic understanding of it.

What I'm confused about is something I've read a few times on on numerous blogs and forums... that unless you are a trader, you will be unlikely to ever face the premium charge.

Can someone please explain why this would be the case? (If it even is!)

Does that mean that, for example, someone who only places back bets on the exchange would be unlikely to face the premium charge, even if they consistently won?

I don't understand why it would make a difference.

Sorry if this is a dumb question, I'm just getting myself confused.

xitian
Posts: 441
Joined: Fri Jul 08, 2011 2:08 pm

Fri Jan 19, 2018 10:38 pm

Basically all you need to think about is your gross profit (exclude any market commission for now). Just add up all the bets placed across all markets for whatever period you're interested in (you can get that from your bet history download). Multiply that by 20% and that's the total fees you'd eventually be paying (and therefore keeping 80%) once you reach the lower tiers of premium charge.

Some of that 20% will already have been taken from you through base market commission after each event. Any of it which isn't, will be deducted each Wednesday. (To work out how much you've already paid in market commission - take the gross total you calculated from your bet history and subtract the amount you got paid in your p&l download).

Now how much you'll already have paid in market commission vs what you have left to pay on the Wednesday will depend on how consistent you are. For example, that backer who wins every bet will have paid 5% base commission on every winning market (assuming you have no points discount), so will end up with an extra 15% bill each week. Most traders also tend to be quite consistent, and therefore are positive on most markets, meaning that their market commission will be close to 5%-7% of their gross profits.

On the other side of the fence you might have more gamble-y type bettors who have big wins and big losses. For example lets say across two different markets you win £150 and lose £100 on another. You've paid £7.50 commission (assuming 5% base) on the £150 win, and have a gross profit of £50. You've paid 15% on your £50 profit, and therefore only have 5% (or £2.50) to be paid as premium charge on Wednesday. If you're mega inconsistent across independent markets (+£100, -£93, +£110, -£104, etc...) you may find your market commission is already more than 20% of your gross profit, and therefore you'll have no premium charge to pay. (Unfortunately you don't get anything over 20% back!).

Hope that makes sense!

weemac
Posts: 300
Joined: Mon Sep 16, 2013 8:16 pm

Fri Jan 19, 2018 10:51 pm

If you deposit a million pounds with betfair as a new customer and only ever back winners, you'll pay 5% (decreasing slightly over time) of your winnings to them until such time as your profits reach a certain amount, at which point betfair will say "Hey, you're good at this, so we want a bigger percentage than 5%, so when you reach this amount we'll put you on premium charge" -the effect being that you will ultimately pay them 20% (or more if your winnings justify it) of your future winnings.

That's about all you need to know. It's really simple and the same principle works whether you back, lay, trade, or do a combination. It doesn't matter to them. They want 20% minimum, and by golly they're going to get it.

Traders get singled out as candidates for PC because, in the longer term, the survivors among the trading fraternity do so by being consistently profitable, thereby awakening betfair's interest in their commission payments relative to how much they've won. It's generally much harder for people who only back or lay to be so consistently profitable in such a way as to have paid less than 20% of their winnings in commission.

Of course, people never mention the non-survivors. They conveniently get left out of the discussion, having left behind a substantial proportion of their (or their descendants') net worth in betfair's pockets.

xitian
Posts: 441
Joined: Fri Jul 08, 2011 2:08 pm

Fri Jan 19, 2018 11:15 pm

weemac wrote:
Fri Jan 19, 2018 10:51 pm
Of course, people never mention the non-survivors. They conveniently get left out of the discussion, having left behind a substantial proportion of their (or their descendants') net worth in betfair's pockets.
To be fair, an even larger portion goes to the professional winners - 60%. I suppose winners (including me) might argue that the winners should keep more. But ultimately it's a zero-sum game so who's to say who should keep what amount (I'd say Betfair take more than they should for what they do though).

I'd hope that mostly people aren't losing a "substantial proportion of their net worth" though. I think if they were then they would have a problem with gambling.

Derek27
Posts: 2588
Joined: Wed Aug 30, 2017 11:44 am
Location: UK

Sat Jan 20, 2018 1:39 am

Premium charge is actually more than 20%. If you predominantly win, only half the commission you pay gets counted as implied commission. If your commission rate is 4% and you have a week of winning markets, you're credited for paying 2% when you've really paid 4%, 18% gets added resulting in 22%.

A simple way of looking at PC; if you lose around £75 for every £100 you win, you're paying approximately 20% commission, £5 in £25 profit. People who lose less than this are liable for PC.

pyrrhus80
Posts: 24
Joined: Tue May 30, 2017 2:22 pm

Sat Jan 20, 2018 2:31 pm

Thanks for the replies.
I still feel kinda confused about a few things though.

What is the purpose of the 'exchange points'/'commission discount' system if you just end up paying 20% anyway? Surely it makes the discount meaningless. Or am I missing something?

Derek27
Posts: 2588
Joined: Wed Aug 30, 2017 11:44 am
Location: UK

Sat Jan 20, 2018 2:50 pm

Commission discount is only relevant ton non PC payers - if you pay PC it gets taken back because your PC will be bigger. If anybody is interest I'll post my premium charge spreadsheet which calculates accurately your premium charge for the week. It's usually no more than a penny out due to rounding off ?

Geordie
Posts: 98
Joined: Fri Sep 12, 2014 10:54 am
Location: North East

Sun Jan 21, 2018 7:21 am

Derek27 wrote:
Sat Jan 20, 2018 2:50 pm
Commission discount is only relevant ton non PC payers - if you pay PC it gets taken back because your PC will be bigger. If anybody is interest I'll post my premium charge spreadsheet which calculates accurately your premium charge for the week. It's usually no more than a penny out due to rounding off ?
Yes please, Derek, that would be great. Thanks.

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Naffman
Posts: 2463
Joined: Sun Aug 11, 2013 5:46 am

Sun Jan 21, 2018 9:39 am

Derek27 wrote:
Sat Jan 20, 2018 1:39 am
Premium charge is actually more than 20%. If you predominantly win, only half the commission you pay gets counted as implied commission. If your commission rate is 4% and you have a week of winning markets, you're credited for paying 2% when you've really paid 4%, 18% gets added resulting in 22%.

A simple way of looking at PC; if you lose around £75 for every £100 you win, you're paying approximately 20% commission, £5 in £25 profit. People who lose less than this are liable for PC.
Implied commission means generating commission on losing markets. I.e. Market loss x 3% so if you lose £80 thats £2.40 generated in I. comm.

Commission generated = (Commission + Implied Commission) / 2

So over a week lets say I win 2k and lose 1.2k (£800 GP) - using the formula above that would calc. as (100+36)/2 = £68 so then the PC would have to cover the rest to make up 20%.

Derek27
Posts: 2588
Joined: Wed Aug 30, 2017 11:44 am
Location: UK

Sun Jan 21, 2018 2:04 pm

Naffman wrote:
Sun Jan 21, 2018 9:39 am
Derek27 wrote:
Sat Jan 20, 2018 1:39 am
Premium charge is actually more than 20%. If you predominantly win, only half the commission you pay gets counted as implied commission. If your commission rate is 4% and you have a week of winning markets, you're credited for paying 2% when you've really paid 4%, 18% gets added resulting in 22%.

A simple way of looking at PC; if you lose around £75 for every £100 you win, you're paying approximately 20% commission, £5 in £25 profit. People who lose less than this are liable for PC.
Implied commission means generating commission on losing markets. I.e. Market loss x 3% so if you lose £80 thats £2.40 generated in I. comm.

Commission generated = (Commission + Implied Commission) / 2

So over a week lets say I win 2k and lose 1.2k (£800 GP) - using the formula above that would calc. as (100+36)/2 = £68 so then the PC would have to cover the rest to make up 20%.
Premium charge would be (£800*0.2) - £68 = £92

68+92 is 20% of 800

But you actually paid £100 commission, not £68.

So your charges on profit is (100+92) / 800 which gives 24%

I think it's outrageous for Betfair to assume money lost has 3% commission applied when most people would pay more than 3% commission.

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