Premium charges (Betfair)
A small number of Betfair customers who, in the long-term, generate very little commission compared to the amount they win may incur Premium Charges. These are the most successful players of the exchange, which, according to the company, account for less than 0.5 percent of the total number of clients.
Each week Betfair calculates gross profits made, and total charges generated over the lifetime of the account. The details of these calculations are explained below.
A punter will only be considered for the Premium Charge if his account is in profit and only if the total charges generated since signing up are less than 20 percent of the gross profits. The client will be warned beforehand.
These rules may also apply to new customers who have only placed bets in a few markets, or those whose accounts are in profit because of a significant big win. That’s why Betfair added two additional conditions for the Premium Charges: any single win that constitutes more than 50 percent of overall gross profits are to be excluded from the calculation, and customers will only be considered after making bets in more than 250 markets.
Each customer will also have a £1,000 allowance against the Premium Charge. Hence, every customer considered for the Premium Charge will be exempted from the first £1,000 of the charge incurred. That is, if you paid for a certain period of time a £1,000 commission, including subsidies, the Exchange will consider that you paid £2,000 pounds.
Each week the customers that meet all the conditions described above will be charged the lesser of:
- The difference between 20 percent of the previous week’s gross profits and the total charges generated during the week;
- The difference between 20 percent of gross profits and the total charges generated during the lifetime of the account.
The total amount of the generated commission is calculated by the following formula:
Commission generated = (Commission + Implied Commission) ÷ 2, where Implied Commission = market losses x 3 percent.
Betfair divides it by 2 because otherwise it would be counting each pound of commission twice.
Here’s an example.
You have a gross profit of £10,000 since joining Betfair having bet in 800 markets. You have paid total charges of £980; You have not been charged any Premium Charges although you have fully used up your allowance of £1,000.
During the previous week you won £500 and paid total charges of £80. So, after the formula is applied, you are charged £20 in Premium Charges ((£500 x 20 percent) – £80 = £20).
There is also an increased commission Premium Charge for particularly successful clients, the amount of which the company estimates at 0.1 percent of the total number of players. It is the customers who have the following statistics:
- Lifetime net profits exceed £250,000
- Commission generated less than 40 percent of lifetime gross profits
- Made bets in more than 1,000 markets
If lifetime commission generated to gross profits ratio is less than 5 percent, the applicable Premium Charge rate is 60 percent, if it is 5 to 10 percent, the Premium Charge is 50 percent, if 10 and more – 40 percent.
Other accounts that belong to a single person associated with one homeownership, master account with subaccounts, will be considered by the system as one account for the purpose of levying Premium Charge and avoiding fraud.
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