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Betfair SP v Industry SP
Betfair SP v Industry SP by David Renham
Before I get into too much depth let me explain what Starting Price (SP) actually means. It is the aggregate of the odds being offered on a horse, just before the start of a race, by the on-course bookmakers. So, if the majority of the on-course bookmakers are offering ‘Dave’s Dynamo’ at odds of 4/1 just before the start of the race, then the horse’s SP will be given as 4/1. It is essentially that simple. The strict method of calculation for SP did change a couple of years ago, but for this article it makes no real sense going into the change. For the remainder of the article, I will be referring to this traditional Starting Price as ISP (industry starting price).
On December 12th 2007 Betfair launched its own Starting Price product called not surprisingly ‘Betfair SP’. The calculation that determines BSP is something I am not going to go into here, as all I am interested in is a comparison between it and ISP. For the rest of this piece, when I refer to Betfair SP, I will abbreviate it to BSP for simplicity.
BSP immediately made an impact as the first day results at Southwell showed:
A £10 bet on the seven winners at ISP would have returned £471.20. However, at BSP, with the maximum commission rate of 5% factored in, returns would have been £596.22 – an improvement of £125.02. On this first day, BSP out performed ISP in 6 of the 7 races.
The following day a similar pattern occurred. At Ludlow all 7 races saw BSP outperform ISP:
On this occasion betting £10 on each winner at BSP would have netted you £113.16 more than simply backing at ISP. Indeed, on the same day at Wolverhampton, My Mate Max won at 25/1 (26.0) for SP punters, while BSP punters were returned at 59/1 (60.0). After commission it still meant a difference in returns of £310.50 for £10 stake!
Everything seemed to be running smoothly for BSP until the dreaded Grand National of 2008. In Betfair’s own words, the BSPs on the National were “not appropriate to the race”. In fact, the BSP on the favourite, Comply or Die, was much lower than the industry returned SP. Betfair, therefore manually re-calculated the BSP using “methods at its disposal”. Now this was not a good day for Betfair with the most famous horse race giving them a major headache. However, this is not the time to dwell on this particular incident. Suffice to say it seems to be a one off.
Moving back to overall comparison of ISP versus BSP I decided to take a variety of industry returned SPs and see what the overall difference was.
At this point I will explain how I worked out the percentage difference between BSP and ISP. Basically I averaged out the BSP winners’ prices (with commission taken into account) at the ISP price I was testing, and then divided them to give me the percentage difference.
Winners at Evens (2.0)
I decided to look first at winners at Evens (ISP). In the period of study there were 124 winners at Evens. Of those 124, BSP outperformed ISP 95 times. This equates to 76.6% of the time. The shortest BSP was 1.86, while the biggest was an impressive 3.25 – or 9/4 in old money. This big price was a one-off it has to be said however, which the next biggest price being 2.6 (nearly 13/8). However, if you had bet £10 on all Even money winners you would have been £107.21 better off after commission using BSP. In percentage terms there was an average price difference of 9%.
Winners at 3/1 (4.0)MISTER GLOSS (IRE)
Moving onto 3/1 winners at ISP. There were 512 such winners of which BSP outperformed ISP on 419 occasions or 81.8% of the time. The lowest returned price on Betfair was 3.35, while the highest was 6.2. Using my normal practice of comparing results, if you had placed £10 on each “3/1” winner you would have been £1414.82 better off after commission using BSP. In percentage terms the price difference on average equates to 9.3%.
Winners at 10/1 (11.0)MISTER GLOSS (IRE)
I am now going to look at a much bigger price – 10/1 ISP. There were 412 such winners of which BSP outperformed ISP on 379 occasions or 92% of the time. So a pattern is emerging as one would expect – the bigger the price, the less chance ISP will beat BSP. The lowest returned price on Betfair was 9.4, while the highest was a huge 30.0. BSP was 20% bigger than ISP (taking commission into account) in 58% of cases. If you had placed £10 on each “10/1” winner you would have been a very healthy £12,687.90 better off after commission using BSP. In percentage terms the price difference on average equates to a very healthy 30.3%.
It is clear already, that the most significant edge is at the bigger prices. This is to be expected of course, but if you are a “player” at double figure odds you surely must use BSP rather than ISP.
Winners at 20/1 (21.0)MISTER GLOSS (IRE)
The final ISP I am going to look at is 20/1. Not surprisingly there were less winners in total than at 10/1 – 240 in fact. BSP outperformed ISP on 226 occasions or 94% of the time. The lowest returned price on Betfair was 17.51, while the highest was an incredible 112.29. BSP was 20% bigger than ISP (taking commission into account) in 78% of cases. If you had placed £10 on each “20/1” winner you would have been a staggering £31,810.74 better off after commission using BSP. In percentage terms the price difference on average equates to a massive 66.3%.
Of course before you rush off and back outsiders on BSP, you need to realize that none of the above calculations have taken losers into account. However, it is clear that given the choice, BSP looks by far the best option if you have to take a starting price…. and this is for any price.
From a personal perspective, I think returns can be enhanced further if you are able to watch the Betfair markets all day, but for many this is impossible and hence BSP looks the next best option.
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