The lesson from the Matchbook meltdown

Arilou · 07-10-08, 08:52 AM

I did this extensively at one point, and while you can certainly be burned it is rare. Plus, when you are in fact burned you have essentially been assigned a bet that you could have hedged out of at a profit; to me, that's a good bet!

All this really means is that you shouldn't bet so much that being forced to keep the bet would be a tradegy. So yes, if you have a 20K bankroll don't go putting 10K on something to hedge it out later. But that's good policy in general - if you're making a bet that you MUST hedge out of later, that almost always means it's too big.

Dark Horse · 07-10-08, 10:32 AM

An exchange can go offline just like any book. So to plan on hedging at any one place without leaving yourself an out somewhere else is a mistake.

Originally posted by The HG

........ they may very well just decide to cancel your second hedge bet, but let your original bet stand, leaving you with a position you didn't think you had.

This happened to me today, for the first and last time, thankfully for only a very small amount.

Matchbook will honor wagers that are already in the book, but will take outstanding offers off the board in case of an outage. Are you saying that they canceled a wager that was already placed, or just an offer that was not yet met?

The HG · 07-10-08, 11:45 AM

Originally posted by Dark Horse

An exchange can go offline just like any book. So to plan on hedging at any one place without leaving yourself an out somewhere else is a mistake.

No, the difference is, at an exchange, if you make an offer, and the exchange goes down, you have no idea how much of your offer was matched. At a book you know how much you have on the table. At an exchange you don't if you are making offers and the site goes down. And planned hedging is something that is pretty much only something you would ever do at an exchange, not at a book, even one with low juice.

Originally posted by Dark Horse

Matchbook will honor wagers that are already in the book,

Not at all. Yesterday, all bets made after 11:34 were cancelled.

Originally posted by Dark Horse

Are you saying that they canceled a wager that was already placed, or just an offer that was not yet met?

They cancelled a wager that was placed. I had a bet on one side, and then hedged out of it later on for a profit with a second bet. They let the first bet (the losing one) stand, but they cancelled the second one, the hedge out (the winning one). They cancelled a wager that was already placed.

Dark Horse · 07-10-08, 11:54 AM

Matchbook canceled wagers that were already in the books?

Without explanation?

Santo · 07-10-08, 12:19 PM

The explanation was that the network problems started at 11:34, and whilst a few could access for another few minutes afterwards, the majority could not.

Thus they cancelled everything after 11:34 as you might have been betting against someone who had no ability to cancel or change their offer.

The HG · 07-10-08, 12:24 PM

Originally posted by Arilou

I did this extensively at one point, and while you can certainly be burned it is rare.

Not really, this same thing happened a few weeks ago if I recall, with cancelled wagers, cleared offers, etc etc. It seems like it happens every few weeks at Matchbook.

Originally posted by Arilou

Plus, when you are in fact burned you have essentially been assigned a bet that you could have hedged out of at a profit; to me, that's a good bet!

Sure maybe I got "stuck" with a "+EV" bet on my SD bet. I had it initially at -101 and my bet that got cancelled was a hedge on the other side for +104.

But I didn't want that bet. I made my initial bet because I thought the line would move in my favor, not because I necessarily liked the side. And I DEFINITELY wouldn't want 15% or 20% or whatever of my bankroll riding on it! I got stuck with it purely because of Matchbook's problems, not my own doing.

Sure you could say "well you could have hedged out at another book". Forget, for the moment, that I DID in fact hedge out at Matchbook and only found out that my (winning) hedge bet was cancelled AFTER the game - forget that for a moment. If you had told me beforehand I would have to do the hedge out bet at another book, I never would have made the initial bet in the first place.

Originally posted by Arilou

All this really means is that you shouldn't bet so much that being forced to keep the bet would be a tradegy. So yes, if you have a 20K bankroll don't go putting 10K on something to hedge it out later. But that's good policy in general - if you're making a bet that you MUST hedge out of later, that almost always means it's too big.

This is not true at all. A planned hedge is a completely different kind of bet than a straight bet. Say I bet $200 on a line at -130, because I think the line will move later and I will be able to hedge out at a profit? How much am I really "risking" here? Not $200. How much am I risking? It's not perfectly certain, but let's say I'm way wrong on that planned hedge, and instead of going up, the line goes way down, let's say to -110, which would be a huge move against me. And so then let's say I have to hedge out on the other side at +107. That would be an enormously bad loss. But I would still only actually lose $17 in that situation, nowhere near the original $200 I bet.

In the case of Matchbook though, I may in fact wind up risking $200 - not by my own doing, but because of Matchbook's policies and problems.

It's perfectly analogous to playing at Pinnacle vs a D book. If you bet at Pinnacle, and you win, you can factor in a 100% chance (or fine, maybe a 99.9999% chance) that you will get paid. But if you play at a D book, part of your added risk has to be a consideration of whether will you get paid or not. Sure losing the bet is one risk at a D book, but if you do win, not getting paid is a further risk you have to consider.

And what I'm saying is, if Matchbook were a "perfect" book, you could plan for hedges and not have to worry about not being able to execute your second hedge bet (except of course for catastrophic circumstances like the internet goes out in your whole city). But because of their problems and policies, not being able to "finish" a planned hedge is a further risk you have to take into consideration. And their weird "11:34" arbitrary timing policy is particularly difficult. You don't know what bets will stick until after the game! Why didn't I hedge out of my bet at another book? Because I had already hedged out of it at Matchbook!

Making big initial bets is the point of these bets, because the ultimate payoff (and risk) is so relatively small.

Let's say I have a bankroll of $1000, and I want to bet a line that I think will move. But because I don't want to risk the "tragedy" of getting "stuck" with the bet, I'll only bet let's say $30 on a line at -101. And then let's say, like I thought, it goes to +104 and I get to hedge out at a profit. I only make $.44 cents on that.

But if I could have bet $300 initially, then I'd make 10 times that. Still not a lot, but the point is that planned hedges take huge initial bets to kick off. But those huge initial bets aren't what you are actually "risking" - unless you have to worry about shenanigans later on that are out of your control.

Look my only point is, it can be an attractive thing to try to do on Matchbook, but the lesson from yesterday is - don't do it, it's not worth the risk. When they have their next outage and round of cancellations, you will be completely at the mercy of fate. And if you tell Matchbook what happened they will say "wow sucks to be you".

I don't mean to rag on Matchbook, it is what it is, it has some pluses and some minuses. But the lesson is - don't do planned hedging there where you plan to use any kind of a significant amount of money to do it with (which you basically have to use if you want to make even a little).

The HG · 07-10-08, 12:27 PM

Originally posted by Santo

The explanation was that the network problems started at 11:34, and whilst a few could access for another few minutes afterwards, the majority could not.

Thus they cancelled everything after 11:34 as you might have been betting against someone who had no ability to cancel or change their offer.

It was way more than a few minutes after 11:34. I had the same site being down problems as everyone else, but around 2 PM EST it was back up and you could log in.

The bet that I made that got cancelled I made between 2 and 3 PM, around 2:30 or so.

Santo · 07-10-08, 12:29 PM

Yes I made one later also that got voided, but it was very spotty at that time, I tried about 10 times to get a report and it only worked once, so I think they could fairly say only some were able to access then too (also I'm not sure if offers had been flushed).

Dark Horse · 07-10-08, 01:00 PM

HG, this is the risk that comes with exchanges. Matchbook protected the players. An exchange like Tradesports, in the past, has done the opposite in case of localized access problems. An exchange will always hurt one side of a canceled wager, but if I had to choose I would pick the exchange that protected its players. If there is doubt about wagers just call them, as with a regular book.

I agree that it would be very risky to hedge at an exchange if the lines are up for a limited amount of time. For football it should be a lot safer.

Frank · 07-10-08, 01:29 PM

Originally posted by Dark Horse

HG, this is the risk that comes with exchanges. Matchbook protected the players. An exchange like Tradesports, in the past, has done the opposite in case of localized access problems. An exchange will always hurt one side of a canceled wager, but if I had to choose I would pick the exchange that protected its players. If there is doubt about wagers just call them, as with a regular book.

I agree that it would be very risky to hedge at an exchange if the lines are up for a limited amount of time. For football it should be a lot safer.

Matchbook was called by numerous players and they could not access players accounts to tell them if offers were matched or not.

KC · 07-10-08, 01:34 PM

still the best book there is, give them a pass and move on

Dark Horse · 07-10-08, 02:49 PM

I'd like to know what the cause of the outage was.

magnavox · 07-11-08, 08:07 PM

I don't think this is acceptable. How many players with access problems does Matchbook need to void bets from a certain time stamp?! 10%? Or maybe 30%? This is all bull. Confirmation screen is sacred, especially dealing with an exchange. If Matchbook felt that more than a fair share of players with active offers were negatively affected they should have pulled the plug altogether. They didn't and they are now responsible financially for those "confirmed" wagers after 11:34.

Santo · 07-11-08, 09:14 PM

I asked that question, they say if the problem is on their end they void wagers (even if some can still access), if the problem is on the customer's end or intermediary routing, they will not. Of course the only way to differentiate between the two is to contact them by phone.

Dark Horse · 07-12-08, 01:34 AM

# If Matchbook becomes unavailable for trading during normal business hours, leaving clients unable to manage open offers, we will take action as follows:
Cause of delay Action
Unscheduled downtime: Cancel all offers on events starting that day.
DOS attack: Cancel all offers on event starting that day; markets then reopened under "trade at own risk" status.
Client connectivity: Client's responsibility; call for assistance w/trade cancellation during Matchbook office hours.
# Matchbook reserves the right to cancel - at its own discretion - any trades where fraudulent, market-manipulative or other prohibited activity is involved.
# Matchbook further reserves the right to suspend trading any market and to cancel any existing offers, if necessary.
# In the rare case that a market is loaded on the exchange using a pointspread or handicap value with a reversed sign or missing digit, Matchbook reserves the right to void the market and refund all trades. For example, if the prevailing market for Chicago vs. Washington is Chicago +9.0 and the Matchbook market is accidentally loaded at Chicago -9.0, Matchbook would void trades placed on this market. The purpose would be to protect players who wagered on the market assuming that the pointspread was Chicago +9.0.
# To further protect clients against "trap offers," malicious users, technical faults, and so forth, Matchbook reserves the right under extraordinary circumstances to break trades that are the result of an obvious and extreme input error. An example would be if a client is matched on a heavy underdog at 1-25 odds instead of 25-1 odds. Note that this rule protects against technical errors, not pricing errors, so while a match at odds of -150 vs. a prevailing market value of -115 may be regrettable, it could not be classed as an obvious and extreme input error. No claims will be considered after the start of an event.
# Except as noted above, all trades stand once matched. In the vast majority of cases, offers submitted in error and subsequently matched cannot be cancelled after the fact. If you have any doubts about a trade, read the confirmation screen carefully and/or call for clarification before submitting it to the market. This is particularly true for live markets, since the rapid pace of these markets makes it virtually impossible for wagers to be canceled after the fact.

Unless I'm overlooking something, Matchbook's rules only mention that offers can be canceled. The rules also state that, 'except as noted above', trades stand once matched. The rules do mention that Matchbook reserves the right to suspend trading, but nothing is mentioned about retroactively canceling trades.

The only circumstances that allow for the cancellation of trades fall under 'prohibited activity'. Was prohibited activity behind the outage?

If not, I would find it very strange that Matchbook would protect clients, simply because during the outage those clients might have changed their mind about an offer they'd already put up for others to accept. Doesn't it make sense to think that people enter offers because they want others to accept them?

Santo · 07-12-08, 08:41 AM

No, because they may have put up an offer of +103 in a -104/-104 market, and they wouldn't want it to be matched in a +105/-113 market.

Dark Horse · 07-12-08, 08:49 AM

Obviously one party, of two involved, is not going to be happy. So a few percentage points, in a situation not covered by their rules, should outweigh 100% of the bet for the side that accepted the offer?

MrX · 07-12-08, 01:20 PM

Hopefully, because of this, Matchbook will implement changes assuring that if a large number of clients get shut out of the system, that everyone gets shut out.

Once you shut out a majority of clients, but let a few on who are able to make trades, there is no longer going to be a solution that is fair to everyone, unless Matchbook itself is willing to pay out of pocket for off-market matched bets.

Santo · 07-12-08, 01:21 PM

I can't think of any technically feasible way to do that.

MrX · 07-12-08, 01:38 PM

Originally posted by Santo

I can't think of any technically feasible way to do that.

Why not suspend trading in the midst of a big meltdown? It sounded like well into this recent outage, a number of traders were able to get into the system and accept offers. You don't think that could have been prevented?

Dark Horse · 07-12-08, 01:42 PM

They could set up two independent sites with the same offers. Different servers, different locations.

Frank · 07-12-08, 02:09 PM

Originally posted by Dark Horse

They could set up two independent sites with the same offers. Different servers, different locations.

That is a possible solution

Another possible solution for the people who had offers up and did not know whether they were matched would be to send an automated email everytime something gets matched.

Vip/Gameday/Nine have this option.

It may be a pain to have 50 emails from them everyday but it is better than having 4 dimes on an offer and not knowing whether it was matched in the 6th inning.

MrX · 07-12-08, 02:13 PM

Originally posted by Frank

Another possible solution for the people who had offers up and did not know whether they were matched would be to send an automated email everytime something gets matched.

I think that's an excellent idea, especially as an option.

Most of us can receive emails on our phone, but can't use the Matchbook client on our phone, so this would be a good way to know if offers are matched when away from the computer.

Santo · 07-12-08, 02:35 PM

Originally posted by MrX

Why not suspend trading in the midst of a big meltdown? It sounded like well into this recent outage, a number of traders were able to get into the system and accept offers. You don't think that could have been prevented?

The problem is how you define the number of customers that need to be unable to reach it. I had this email exchange with them, if Australia can't reach it, is that enough? How about Cuba? Peru? Where do you draw the line..

Routers fail all the time, there's probably an ISP somewhere in the world that currently can't route to Matchbook. If everytime somebody complained they couldn't get to the site they had to suspend the exchange, it would be closed more than it's open. In many cases, the problems are beyond their control.

Dark Horse · 07-13-08, 12:14 PM

My feeling is that the line is drawn when a main market maker is cut off.

An exchange tends to be neutral across the board, except where it comes to its main bread winners. That's the one weak spot in the setup (and would also explain the lack of further explanation by MB).