Betfair Premium Charge: How much would I pay?
A huge discussion is taking place all over the online betting and trading forums about the Premium Charge Betfair have introduced last month. The charges led successful traders to flee over to Betdaq but liquidity isn’t there; yet. Out of curiosity, I looked at my 2005 betfair trading stats to find out how much more would I pay if the Premium Charge would have been applied back then. It turns out that Premium Charge would have a huge impact in my Betfair winnings.
If you are not familiar with the new Premium Charge Betfair applied to their commission structure, you can read the Premium Charge summary below:
Premium Charge Summary
You will only be considered for the Premium Charge if, over the previous 60 weeks, you satisfy the following criteria:
- Your account is in profit;
- Your total charges generated are less than 20% of gross profits; and
- You bet in more than 250 markets.
Two further conditions reduce the likelihood that you will be required to pay the Premium Charge:
- Any single win that constitutes more than 50% of your gross profits over the previous 60 weeks will be excluded from the calculation; and
- Each customer will have a 60 week allowance of £1,000 against the Premium Charge.
Each week the customers who meet all the conditions set out above will be charged the lesser of:
- The difference between 20% of the previous week’s gross profits and the total charges generated during the week; and
- The difference between 20% of the previous 60 weeks’ gross profits and the total charges generated during that period.
You can read more in the Betfair Charges page.
I rarely trade the horse racing markets but in 2005 betfair trading had been very profitable to me and I kept all my performance stats in excel spreadsheets. Those stats include how much money I made each month, how much volume I traded, how many horse races I traded and how much commission did I pay. Every single month was a profitable one so I have got a good sample to calculate the average commission I paid. My Betfair trading was done in the last 10 minutes prior to the races’ start and I never traded in-play. My available bankroll to make that money was €6,000 at all time, withdrawing the winnings almost every month.
What I found out is that Premium Charge would cost me 10-15% more money. The commission I paid to Betfair (how to calculate your Betfair commission) each month was about 5-8% of my total winnings from betfair trading. According to the new charges I would pay 20% since I fulfill all the criteria: My account was in profit, my total charges were less than 20% of gross profits and I had traded more than 250 markets in the last 60 weeks.
So, say a Betfair trader made €106,000 in 2005 and paid Betfair €6,000 in commission. His net profits would have been €100,000. If Betfair Charges had been introduced back then, he would have paid €21,200 meaning €84,800 in net profits. The Premium Charge would have a 15.2% impact on his Betfair winnings! That is surely a lot in my book.If I also take into account my trading volume which exceeded €5million per month, I can’t think of a better way to “reward” a Betfair trader who provides liquidity.
If Betfair increased their 5% commission to 10%, it would still be more profitable for the successful Betfair trader than this Premium Charge. However, that would drive away ALL the bettors and the not so successful traders which obviously Betfair didn’t want. So, in other words Betfair kept the commission fixed to 5% (or lower) for everyone to feel happy but the most successful traders or bettors, who in fact charge them more than 15%! Of course if you lose or win just a little from the Betfair markets, you won’t pay more. What a surprise!