How to avoid Betfair premium charge?

Hey Rox / Caz,

Betfair premium charges will NOT hit you for matched betting! Do not panic.

Lets clear this one up and explain premium charge for you…

Betfair brought in premium charges to effectively tax the super-successful exchange users, like me. They did this because a very small portion of successful customers were consistently sucking all the money out of the exchange, without bringing any value to their business.

You see, everyone turns up on Betfair and exchanges bets against each other. The winners take the money and go home, paying a tiny amount of commission. The losers leave and are less likely to come back, and Betfair have to attract them back but only got a very small cut…

If we think it’s right or at a fair rate is another debate, but Betfair’s solution is to effectively ‘tax’ the super-winners so they can then spend the money on development and marketing to bring back the losers – feeding the whole ecosystem. This is why premium charge exists.

Matched bettors don’t even come into this debate because sometimes you win, and sometimes you lose – you’re just betting.

Your ‘edge’ is beyond the exchange itself with a bookmakers bonus.

Also, you will be pleased to know, there is a strict criteria that has to be met before you qualify for the premium charge. If you’re not a successful Betfair trader or cours-sider, there’s very little chance you will even come close…

Qualifying for Betfair premium charge:

You have to…

• Bet on more than 250 exchange markets
• Be profitable overall (£5,000 PC free allowance)
• The commission must be below 20% of your lifetime profit (exchange only)

When you consider matched betting sees money bounce back and forth between the bookie and exchange so much, you realise its extremely hard to be in this ‘club’.

Calculating Betfair premium charge:

If you are though, they calculate it on a weekly basis. The actual math goes like this:

Weeks premium charge = % week profit – week commission (standard)

The bracket of the premium charge depends on the level of overall account success. For example, once you get past £250,000 lifetime exchange profit you’re going to be on an enhanced rate.

The basic premium charge rate is 20%.

Again, practically impossible if you’re matched betting without doing any Betfair trading!

….and even harder if you’ve been successful arbing as the value is on the bookmaker’s side of the book, thus your lifetime P/L is reduced.

250 grand? I dont even think I could find enough shoes to spend all that on!

Betfair must make a fortune out of premium charging the biggest customers on their winnings. How can it be legal for them to do that? it sounds like a tax on winners.

If only trading software could allow trading between multiple exchanges, now that would help avoid commission charge!

You know that’s a great thought L0U, and I would agree. For the end-user, it would be great…

Although having spoken to the Geek about it before, it’s clear why it hasn’t been done already. The exchanges wouldn’t allow it as they want to keep all the money on their platform. Filtering money off one exchange and on to a competitor would be seen as even worse than consistent winners because it’s supplementing the competitions liquidity.

They can’t stop people from trading between exchanges on desktop and the like, so if that’s your thing it could be worth trying between them. However, there are a couple of additional problems:

• website updates slow and doesn’t give an overall picture of the markets
• the commission is charged on wins, not net hedge figures

The software vendors can’t get away with doing it between exchanges as they have to get an API license from the exchanges, who would revoke it if they knew cross-exchange trading was happening.

…so, unfortunately, it looks like it’s buttoned-up wherever you go in regards to Premium Charge.

I’m led to believe you can get sub-accounts from some large foreign brokers that means your profit and loss comes under one large master account.

The beauty of this is that many other accounts do too – losing accounts, meaning that the chance of hitting premium charge is a lot lower. Just my ten pence!

Yes and no; the master account comes under the one big account but the sub account would be yours.

Perhaps not something to get involved in unless there’s a lot of trust!

Im only a sportsbettor(football). Been doing this for the last 4.5-5 years. Banned on almost every sportsite. But when i started with betfair in jan this year i was happy cause they dont limit you. 

But then for about 1-2 month ago i got the email that im gonna get premium charge. Of course i missed the email (come in trashcan) and suddenly they(betfair) where starting to take a lot of money from me. Read the rules and yea what to say. 22% its a lot of money. I have never traded(booking)games. My cup of tee is placing bets on what i think its good. 

Read this thread and i guess its nothing you can do about the premium charge? I read that Caan wrote something about heavy arbing but isnt that hard to do on the same site? I have never done arbing before but i know what it is.

Regards!

I don’t see how that could be the case aceboarder?

Matched betting is reliant on the bonus offers for value extracted. You aren’t making money from the odds…

And even if you did short-term, variance would rear it’s head and keep you within the premium charge constraints due to the way it is calculated.

Also, matched betting relies on the lay side being on the exchange. Assuming you are taking odds at close to true value (efficient matches) then you would be laying off at true value with the commission, making it overall a net loser on the lifetime position – again, not contributing to PC allowance. If you were backing on Betfair and laying on another exchange at value, effectively arbing then there’s a case to be made for it hitting your allowance, but you’d need commission deals on both and to be exploiting incorrect exchange prices to do so.