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how to start a riot - change commission structure at an exchange

North American betting exchange Matchbook will be fairly anonymous unless you bet on US sports regularly. This week they've announced changes to their commission structure, switching from the commission on winnings model which everyone else operates to a fees per trade structure. Funnily enough, that hasn't been popular with punters - the SBR forum thread has gone ten pages so far, and doesn't look like stopping anytime soon.

The question is - is this Matchbook trying to stimulate business or trying to stay profitable?

By charging market makers less than market takers (people accepting offers), this encourages people to post odds and make the markets more competitive rather than just suck up liquidity. But the fee-per-trade option kills off the trader who bets again and again in-running, as I love to do.

Staying profitable though is another consideration. Betfair's annual reports shows they make nearly 25% of profits from the interest on client deposits. With the financial world collapsing, that income stream is gone for the foreseeable future. And if they don't have the peripheral products such as casino or poker, then their margins will be very tight. Any plans for growth and development have to be funded somehow, and if the banks aren't lending either, then perhaps, just perhaps funds are tight?

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