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Order Book Pricing vs Old FI Pricing

01/10/20 

Trading

Buy and sell Shares in footballers for real money. Profit from your football knowledge by buying low & selling high, and winning Dividends along the way.

Order Book Pricing vs Old FI Pricing

01/10/20 

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Now we’re in a new market paradigm there are inevitably differences between the way the Order Book Price Mechanism works, and how price was determined in the old model.

How did Prices move before?

Our old pricing model was a simplistic incremental system, which was relatively predictable - price was driven by supply and demand. In short, it was not entirely a ‘free market’ where price was determined exclusively and directly by Traders. 

Order Books means we have handed the reins to the Traders to determine price, although currently with some restraints - mainly the floor on the Offer Zone and the VWAP of 900 Shares on the Offer side. 

Why has the Market Corrected? 

There may be a large number of reasons for current Trader sentiment that don’t relate to football or Dividend yield on Shares. It would be a surprise if COVID-19, the economy and Brexit didn’t play a part. It’s a difficult time. 

Of course, confidence in the market may also be a factor. Change is challenging. But sometimes it’s inevitable and, in the case of the changes made to Football Index, there are strong reasons for it, which are discussed below. 

What we can say is that we have now been operating for 5 years and we’ve never been in a stronger financial position than today. We’re working continuously to improve the platform we love and, with our expanding and reorganised tech team, the speed of that delivery is increasing by the day. 

The Value of Shares: Dividend Yield 

With respect to the platform itself, the Dividend yield on the market is extremely high. We paid out 2.1% in Dividends in September. This is based on the total Dividends paid out during September divided by the total cost paid by all Traders for all Shares held as of 1st September, represented as a percentage. 

Annualised, this is a return of just over 25% and is remarkable by any standards. 2.1% is the highest rate we have paid out since blipping above that briefly in March 2018. As you know the bulk of our growth as a platform has been seen since that date. 

Player Yield 

In this context of yield, take a look at this table of Dividend Return on the Top 100 Players. Remember this yield is not just on the players you bought for value – their potential for Dividends - but actually includes the players bought for growth – capital appreciation - that were less likely to win Dividends. It’s the return if you owned every single Share on the platform.








This chart shows the top 10 Dividend yielders from the top 100 players on FI over the last year.

Why have we changed to Order Books? 

Some Traders have asked why we have changed from the old model in which we substantially controlled prices. There are three reasons, firstly from a regulatory standpoint, it has been made clear to us that it’s not our place to determine the prices at which Shares are Traded in the market. This must be determined by our Traders.
Secondly, as we’ve grown, we’ve been subject to more sophisticated accounting policies which effectively drive us to the same conclusion. 

Lastly, and most importantly, for us to reach our growth potential, which is still huge just in the UK, we need to embrace a trading style in-step with global markets that trade trillions every day - whether that’s equities, derivatives, FX or crypto. We need to adopt the same conventions as those markets  – Order Books which enable the market to establish price are an essential pre-requisite. 

Vision for the Future 

In line with our future goals, we have engaged with financial regulators with the objective of holding a license that is more appropriate for our ‘market’ than our current ‘betting’ license. If successful, this outcome would take us a step closer to realising our vision of becoming a fully regulated sports market, trading a high-yield asset and sitting alongside financial markets. It's an exciting development for all of us, although at this stage embryonic.

(Updated as of 02/10/20) A further note on this, we are not authorised to provide tax advice, and we're still in the exploratory stages of this process, but our intention is that any change to the regulation of our product would not attract capital gains tax for UK customers.

The price correction that we’re seeing now is due to Shares passing to Traders who can see the opportunity to acquire Shares at a significantly lower price than before, with a terrific yield. Remember - and this is stating the obvious - the lower the price the higher the yield. 

The basic fundamentals of the proposition and platform are now stronger than ever. Our 5th Birthday Bonus continues to run to the end of October. 

We are also hosting a Trader Panel on Monday (05/10/20) to listen to feedback from customers who represent a cross-section of our user base. Your feedback is important to us so if you’re not on the panel please email feedback@footballindex.co.uk. We would actively encourage people to share their feedback via the email address rather than on social media. This is a far more useful and constructive way of sharing your thoughts as it allows us to compile and analyse genuine feedback comprehensively.

We’re still working through the final stages of delivering our new Media Monitor. We’ll update Traders on our progress in due course. The new Media Monitor won’t be implemented without a significant warning to Traders, and we’re hoping to be able to trial it in the next week.

Lastly, I would like to personally assure you that our team is continuously working to improve and grow the platform into a very real market dedicated to a sport we are all passionate about. We hope to take as many of you as possible with us on our exciting journey. 

Onwards and Upwards.