Market Maker

  • I have read several threads regarding the introduction of market makers which have differed greatly and wanted to post my understanding of them and how I think they will eventually improve things.

    Firstly the traditional role of a market maker is to do as the name says is to create a market for others to trade on. So on Betfair they act like a bookmaker offering a price to both back and lay on an event and those prices are usually very close to the odds you could get elsewhere with say paddy power. If a customer wants to then offer more favourable terms then they can do that but the market maker ensures that there is an attractive market if no customer is willing to offer a fair price.

    Here at FI until full order books are in place it is impossible to know exactly how the MM will operate but it is worth noting that currently.

    LP1 is owned as a separate limited company by Football Index
    It’s role is to provide liquidity to the index
    It’s not here to profit from us it is to help keep the market moving
    Initially it looks like it will be buying massive amounts of new shares in the higher priced players.
    The idea behind this is that it reduces the market sell queue of these players and frees up traders cash for reinvestment in other players.
    This does tie up say a couple of million of FI funds but will sit on the balance sheet of the new company and either make them a few quid or lose a few quid dependent on how it is set up (do they pay commission/do they waive dividends).

    Currently this action will have limited effect on spreads as to start with some cash will leave the platform as unhappy traders get cash out at market price and leave. Others are listing at Market Price hoping LP1 buys there shares to hopefully buy back at a lower ME price. Others are using the cash to buy goalkeepers not the lower priced outfield players.

    However over time and probably when we get to the start of the new season we may start to see this approach change behaviour because of the following reasons.

    Those that want to leave should have left so less negativity will surround the product
    Mass marketing campaign will generate new traders
    Goalkeeper frenzy will have finished
    Traders setting up portfolios for the new season
    Traders will know that if they list to market shares will sell as MM does buy from the market sale queue
    This in turn will push up instant sell price as it will need to be attractive to make it worthwhile selling quickly rather than waiting.

    If FI can convince external MM’s to join this will accelerate the benefits to all as if there are several entities buying shares at market price it means there may be no queues which means FI sell more new shares and player prices rise so both us and the MM make money.

    Eventually it would not surprise me to see LP1 or some other entity start to hoover up some shares in the lower priced players - the effect would be that a majority of traders list the player for market sale thus driving down the players price to a more reasonable level the entity buys them up and with less shares in circulation trading becomes more normal due to supply and demand.

    There is a lot to happen and market makers need time before we really see the benefits and these are just my assumptions but by Christmas I think we will see some real benefits but it will need several MM’s each with a few million to get things right.

  • @Fletch

    Completely agree MM's have been treated with suspicion generally across the forum & given FI's recent erratic & inconsistent behaviour that's unsurprising but they are unequivocally a good thing, that will bring increased liquidity & benefits all round. I guesstimate maybe £20m would be needed to shift the current market & whether LP1 has that sort of firepower alone to inject into this flaccid market I personally doubt but it's a good start & your analysis is completely accurate IMO.

  • Banned

    Is it a fact that the market maker LP1 is a company owned by FI?
    I was under the impression it was a company employed by FI.

    Both vastly differing propositions and something I would like clarification on.

  • @MrWh1te

    I suggest you read market maker FAQ

  • @MrWh1te said in Market Maker:

    Is it a fact that the market maker LP1 is a company owned by FI?
    I was under the impression it was a company employed by FI.

    Both vastly differing propositions and something I would like clarification on.

    Pretty clear mate

  • @Fletch said in Market Maker:


    I suggest you read market maker FAQ

    The FAQ does make reference to 3rd party MMs potentially being introduced but I can't imagine that happening (or MMs wanting to) until full OBs are implemented?
    So I assume LP001 is part of Betindex. Would love to see their purchase plans 🤓

  • Banned

    @Millerman clear as mud tbh

    That doesn't say what Fletch says it does.

  • @MrWh1te

    Maybe I can see clear through mud?

    Let me see if I have this right.

    BetIndex Ltd launched a company called Footballindex
    Index Labs Ltd owns BetIndex Ltd

    The Market Maker trades on behalf of the accounts held by Index Labs Ltd who in turn own BetIndex who launched Football Index but is independent, but trades on behalf of the accounts that belong to Index Labs Ltd that are independent of FootballIndex who was born from Index Labs Ltd.

    As clear as clear can be as far as I am concerned, quick google and its shows that it used to be called FAME VENTURES LTD.

  • @MrWh1te

    It is obvious to all that you are being purposely negative to anything that FI do and as you are a teacher I hope you do not teach business studies as your knowledge of how companies operate is definitely lacking! To make things very clear for you:

    As Index labs Ltd and BetIndex Ltd are separate legal entities that makes them independent of each other, however it does not mean they are not jointly interested in the success of the platform.

    The market maker does not need to turn a profit for Index Labs to be successful as Index Labs require BetIndex to be successful.

    The whole purpose of LP001 is to ensure that the platform has liquidity and trading levels are kept high so that the 2% commissions flow into the index and new shares are purchased.

    For example LP001 could input £5 million for into the index that could have a market sale value of £4.8 at the end of its financial year and costs of say £50,000 which would possibly be covered by dividends (if it takes them) which to us would be bad but if that level of activity freed up £5 million of our money any we traded actively four times during the year the 2% commissions would equal £200,000 and as FI say holds are actually very short term you can start to see the benefit.

    In reality the shares they hold should over time rise so the risk is incredibly small.

    Finally for those who like a little extra clue my guess is that the LP stands for Liverpool the city from which some of them are from and why the Sun is not used for media!

  • @Fletch great thread that has given me some clarity on MM. Only been on FI since Covid began so threads like this with useful content are great to help give some understanding to the current situation. So many people seem to be constantly negative about FI and it confuses the fuck out of new traders like me as I imagine they have made a fair bit of money from the product.

  • @FIiron you will work out there are a few that believe FI to fart flowers, those that think its shit, hate it, its shit, they rob us, and hate us and then some of us have a bi-polar disorder type love affair with FI.

    Bottom line, I don't know of one person that has left out of their own accord.

    FI no matter how frustrating it is, is still growing, and will when you work out who to follow earn you money (EDIT - I didn't mean to say follow, I meant to say who to follow and then decide on advice and bet accordingly)

    Like many people who bet, they usual lose more than they win - however many people who bet and lost expect FI to be a freebie and continue to shell out money hand over fist to them.

    I have often wondered why they make so much noise, and are such experts as to why they don't work in the industry and already have made their millions???

  • @Fletch nice insight mate, certainly hadn’t considered a lot of what you for thought.

  • Banned


    LOL, I think :p

  • Banned

    @Fletch said in Market Maker:


    It is obvious to all that you are being purposely negative to anything that FI do and as you are a teacher I hope you do not teach business studies as your knowledge of how companies operate is definitely lacking! To make things very clear for you:

    To be clear, I am not being in the slightest bit negative about market makers and FI here.
    I like they are using them. Hell they bought half my port and allowed me to be trading on here in pure profits.

    I think they are essential here, they will get the market moving and it might even convince me to keep some money in here.

    I was just trying to understand them more is all.

  • @MrWh1te

    If that is your true position then why not ask open questions rather than the sarcastic sound bytes - you would you start to regain some trust and respect back if you did

  • @Fletch LP001 - liquidity provider 001 🤔😜

  • @Gregolocky

    😂 we could run a competition on its actual meaning!

  • Well thought out..Well Done

  • @Karl

    Its referred to as a Liquidity provider in the tweet

  • Banned

    It wasnt a sarcastic soundbite, at least it wasnt meant to be.

    It was just an actual question :p

Log in to reply