What is the Betfair SP?
Background
The starting price, or SP as it is frequently abbreviated to, is the odds for horse or greyhound that are declared at the point at which the race starts and no more betting is allowed. The SP allows for bets to be placed when there are no early fixed odds available for a particular event.
Different countries use different methods to calculate the SPs. The typical method is to use a panel of "SP reporters" who are appointed to a panel that determines prices by consensus. They base their decisions upon observations of fluctuating prices at the racecourse. In the United Kingdom, the SP is set by several reporters, including the Mirror Group newspapers, the Press Association and freelancers, but mainly by on-course bookmakers. The SP is also partly determined by the price movements on betting exchanges, The rules for determining the SP in the UK are available here:
http://www.thesprc.org/rules-regulations/
When you place an SP bet, you won’t know in advance exactly what the odds will be when the starting price is set. You may place an SP bet because you believe that the starting prices will be better value than those on offer before the event. However, with the prevalence of "best odds guaranteed" amongst bookmakers this is made unnecessary. To encourage more early betting activity, bookmakers offer best odds guaranteed, which means the return will based on either the fixed odds agreed upon in advance or the SP, whichever is the higher of the two. So, if, for example, your horse wins at an SP of 5/1 having taken 5/2 earlier, you’ll get 5/1 instead.
The Starting Price Regulatory Commission (SPRC), which is the body responsible for preserving the integrity of the SP, is holding a consultation into the future of the SP system. This is in response to the outcry over the massive overround for the 2015 Grand National, where the starting prices of the 39 runners represented an overround of 165%. Public allegations were made that off-course bookies were manipulating the SP system to the detriment of their customers, and that unlawful behaviour was occurring in the on-course market. This comes against a backdrop of criticism, challenges and proposed alternatives to the SP system, on the basis that vast liabilities can be incurred by bookies on the off-course markets based on SPs calculated on the small by comparison on-course markets.
In addition, the number of SP bets is declining, partly down to the popularity of best odds guaranteed bets. However as these bets are guaranteed against the SP, they are therefore reliant on the continued existence of the SP to be guaranteed against.
The Betfair Starting Price
The Betfair Starting Price is an alternative to the industry SP system. It was launched in December 2007 as a way of generating early liquidity in their markets and attracting a new customer base to Betfair (i.e. less price conscious customers who bet in the traditional way by just taking the SP rather than chasing the best possible price).
Whilst in development, the Betfair SP project was codenamed "Loki", after the Norse God of mischief. This was in response to bookmakers’ chief Tom Kelly’s description of Betfair’s proposal to be involved in the industry SP mechanism as "mischief-making nonsense".
The Betfair SP is available on Betfair’s horse racing and greyhound racing markets. Betfair promote the SP as a convenient way to get a bet matched at a fair price for those who haven’t the time or patience to catch a market at the best price. Because the Betfair SP is still generated by backers and layers, it retains the advantage of not having a bookmaker’s margin built into it (there is still commission to pay though). Betfair claim that, on average, the Betfair SP is 40% higher than the industry SP.
Once you place a Betfair SP bet it can’t be cancelled (unlike a standard exchange bet, which can be cancelled at any point up until when it is matched). This is to prevent attempts to manipulate the Betfair SP. (You cannot accurately cancel out a Betfair SP bet by laying a contrary bet, because you won’t know the price until the race has started.) You can, however, place an SP limit bet if you want to ensure you’re only matched at a price that you’re happy to take. An SP limit bet is where you specify a minimum price at which you are willing to back, and a maximum price for lay bets.
You can choose what will happen to normal exchange bets when the race starts (cancel, keep or "Take SP") should they be unmatched at this point. If you choose "Take SP", your unmatched bet will be matched at the Betfair SP price when the race commences, ensuring that your bet will always be matched at a fair price.
When a market goes in-play, the Betfair SP price is calculated and no more bets can be placed at SP.
The Betfair SP price is calculated by matching SP backers and other Exchange backers against SP layers and other Exchange layers. The calculation determines the fairest price from these bets, which is the one that will match the largest amount of money risked by backers and layers against each other.
