Order books EUREKA MOMENT!

  • It has been bugging me since hearing @Vespasian32 and @IRISHFI discuss it on the HWAH podcast, but I woke up this morning and it came to me! By George I think I've got it! 😀

    So, using Betfair as the model, let's begin...

    Firstly, imagine the word is BUY instead of BACK ALL and the word is SELL instead of LAY ALL here...

    Let's now pretend Herbert Park is a footballer (and not a horse!) and let's say he is already sat in your portfolio with a current price of £2.45.
    You then go to the order book page to see how the demand is for him -

    0_1576058774269_Exchange each-way-1-1.png

    So, if you want to top up on Herbert Park, you can see the best price on offer from another trader is currently £2.44 (1p cheaper than his current overall assumed price in this example). Pretend the number below is 16 shares and not £16, and apply the same principle across the other boxes too...

    So, I would assume that once the total number of shares in the BUY section (which is from traders in the sell queue) exceeds 900, then your overall price in Herbert Park drops a penny to £2.44.

    The number of shares in the SELL section is irrelevant to the overall price because this is just traders putting in a "buy request" - I could put in a request to buy 1000 Herbert Park shares at £2, so that cheeky little offer shouldn't be able to move the market.

    Does that make sense guys and gals? Am I right? Have I missed anything?

    Edit: The Sell figure ("lay all" on the screenshot) should be LOWER than the buy figure of course.
    Also, the figures in the grey boxes next to the blue 2.44 box should be be incrementally HIGHER and not lower
    0_1576061316715_Exchange each-way-1-1.png

  • This looks about right and how I'd see it working. However in order to keep the market going (and not introduce fear and significant risk) you would still need to have an instant sell price option. So I would expect that would also exist in the queue with an undefined number of shares available? You could I guess put in buy price lower than the IS price as the IS price will move. Either that or IS only appears for players with no buy orders, or none over a certain % of current value?

  • Is the order book purely for sells or can you put 'buy offers' in.

    I. E. Let's say no one has currently listed a pogba share and he is £5. As a buyer I can currently buy for £5

    With order books would I be able to put a 'buy order' in for £4.95 and hope a holder accepts?

    I assume/hope you can't, and you have to wait for people to put sell orders in below the buy price to get a bargain? And this is where the idea comes in about filling the gap between IS and buy price

  • @Vespasian32 I would imagine you can put buy orders in as that's what will become the sell price for anyone looking to offload which removes a large part of the liability on IS for FI.

  • @janner73 said in Order books EUREKA MOMENT!:

    @Vespasian32 I would imagine you can put buy orders in as that's what will become the sell price for anyone looking to offload which removes a large part of the liability on IS for FI.

    This is where I get worried about how prices will then go up as quickly as now (or at all)

    So with my example... Currently no sells, pogba is £5 with IS £4.80

    I put a buy order in for £4.81, no takers... Another chancer comes and offers £4.82...still no one sells

    The people aren't selling cos they think pogba will rise 10p cos of a good mb score...

    However, potential buyers (who in the current mechanics would just buy at £5) now think... OK I'll bid £4.83 etc

    Think of all the pogba holders who've not sold cos they were put off by the spread... They are now thinking.. Hmm not much demand

    Eventually someone will always cave before full price and take the dangled carrot.

    This is just going to make for a very slow market?

    Maybe I'm overthinking it...

  • @Vespasian32 said in Order books EUREKA MOMENT!:

    However, potential buyers (who in the current mechanics would just buy at £5) now think... OK I'll bid £4.83 etc

    To expand on this... They would buy at £5 cos in todays FI there is no alternative to put a cheeky offer in... And you don't have a visible, tangible idea of what other buyers are thinking.... So there is the internal question mark 'is today the day this player rockets... I'm gona beat the rest and buy' and when pogba goes to 5.01 it's a signal to market and other buyers think.... Yes this is it I'm going in, he's bottomed out.

    Fomo kicks off and you have your 10p rise

  • @Vespasian32 It's where liquidity is key - and the biggest risk FI have with order books.
    If there's enough traders and enough shares then it wont be an issue and I would be very surprised if they don't use market makers to help with that liquidity initially.
    The other point to remember is that, at a guess, at least 50% of people wont even use the order books as such - they will just buy at the buy price and sell at the sell price because they either don't really understand order books or they don't have the patience to wait in a queue to buy that player they want.

  • Not order books again, It will change everything, you will need market makers. Bots will eventually be allowed en mass , the market will be controlled by the "few", cap app will be nowhere near like it is now, opportunity to manipulate will be increased, scaring the market will be easier and 90%+ of clientbase will lose money. Also not really sure why fi is being likened to betfair any more than indices/commodities and/or forex as they are more alligned as most of betfair is determined to a single timed event as opposed to long term investing/betting whichever way it wants to be perceived. Liquidity is nowhere near where it needs to be. It will turn the site into short term trading/flipping as so much downward pressure can be created. Heaven forbid if neymar/dybala/messi etc get seriously injured at 3am in copa america. the price will plummet like never before .

  • @shilly That's certainly the "glass half empty" way of looking at order books. The other way to look at it is that it will make the platform more professional and appealing to bigger investors which there simply aren't enough of. It will provide better opportunities to pick out of form players up at better value and therefore profit more when they become flavour of the month again.
    I know the types of traders that will lose out big time when order books come in - it's the sheep, those that follow risers blindly or any old pump on twitter. Buying at a peak out of FOMO will be punished far more severly than it is today and if anything that will bring a sense of rationality back to prices. Holding players that have real underlying value will become even more important.

  • I personally can't wait for order books.

    Be the best thing that can possibly happen for the platform.

    Sooner the better.

  • @Ericali That's 2 things we've now agreed on today.

  • @janner73 Agree with that.

    I also wonder about IS and the deltas. Presumably there will be more transparency over how many shares are queued and how this has/ will move the price?

    As for IS, does anyone foresee bigger spreads on IS prices? Or maybe not if the same process FI use now is applied, just with greater transparency.

    Like everything, the success of order books will depend on how they are implemented. I imagine we will see a very basic version first to bring us up to speed and then more complexity/ layers introduced later on.

    I'll nerd to observe a few match days first to gauge how they work
    Hopefully FI roll out a beta version ASAP...

  • @janner73 said in Order books EUREKA MOMENT!:

    @Ericali That's 2 things we've now agreed on today.

    People are scared of the unknown - there's absolutely nothing to be scared about.

    It's just another layer that enhances the platform.

  • @Metropolis If FI are smart they will go with as simple as possible a system to start with.
    Long term I think the aim will be for FI's IS price to disappear entirely and the sell prices you see will all be from buy orders. That's gonna be nowhere near feasible for quite some time so I expect they will slowly widen the spread to the IS price they offer as they see more and more liquidity through buy orders.
    I also would expect them to provide some kind of incentive for placing buy orders to encourage the liquidity they need to get on that side of the order book - maybe a reduced commission level or something along those lines.

  • @janner73 OK, but big concern about removing IS. It makes FI very forgiving for new traders which could impact the appeal of the platform and customer retention. Last thing they (and us) want is a complex system where the experienced make money at the expense of those who are still finding their feet. I don't FI will intentionally do that, but could happen. Perhaps offer IS for first month? I still use it myself though so hope they do keepit in some form.

  • @Metropolis I think IS will be there for much longer than the first month. It will be a long-term aim but one that will probably take years rather than months to get to. They will continue to provide it until they are comfortable that their is sufficient liquidity in the market to not need to.

  • @janner73 oh, no I meant first month for new users.

    Also, there are too many players with essentially no value if IS was removed. They wouldn't just let the shares expire surely?

  • @Metropolis Once the liquidity is there they wont need to provide IS though. If I place a buy order on Pogba at £5.56 right now. That £5.56 would be the IS price that anyone sees until it's taken. As long as they can get liquidity built up on the buy orders side then those buy orders are the IS prices. How they visualise that for new users though without over-complicating the UI will be key.

  • For the 50 thousandth time, there doesnt need to be an IS sell price as the price you can instantly sell at is the highest price that there is buy orders which in an ideal market will be basically a couple of pence below the current buy price (lowest sell order). Is this really that hard for people to understand?

  • @janner73 thank you. Every time order books come up people bang on about a lack of instant sell. With good liquidity, the "instant sell" will be higher than it currently is

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