Last week I found myself writing a very long SOTM post focused on platform mechanics. Much longer than usual.

A long analysis of the platform last week felt right – lots of people were worrying about this anyway and pro gambler Caan Berry’s video found fertile ground given the awful market conditions – angry people often want simple answers to complicated questions. But that video had a lot of misleading points that it was right to correct.

I had a lot of people message me with positive feedback – happy I’d set out such a detailed response which is nice to hear. Thanks for that! I also had a few saying I’d been too polite about that video. Having seen the latest video and corresponded with him directly too, I agree. I was too nice.

It is good that people who don’t use FI take interest in the platform and it’s interesting to hear their views from the outside looking in. I like having assumptions challenged – it’s healthy. But he should have stuck to this angle

When you start setting yourself up as an expert when you’ve barely used the platform at all – it’s not credible and it’s not helping people who watch.

FI has many smart and independant people who have been using and questioning the platform for years. Unsurprisingly, there is no fundamental flaw in FI’s business model that only Caan Berry was capable of spotting in his first week on the platform. 

His “shocking” revelation that FI need to make more money than they spend should have surprised nobody. Anyone who has run a business understands that – whether you are running Tesla or selling cookies door to door. And of course there are circumstances where you will lose your bet and be unable to cash out – this is not news.

But none of this is to say that FI is perfect or risk free and must be defended at all costs. Of course it shouldn’t. There are important problems that need solving to get FI back on the right path and readers will know I’m someone who frequently points them out over the years.

The issue with sloppy and ill informed content is that it highlights the wrong problems. This makes it harder to focus on the real things that need fixing. 

The patient is sick – pointing out that much is obvious – the hard bit is getting the diagnosis and treatment right. 

So I think it is important that we get the right ideas out there in a constructive way just in case FI towers are listening.

I’m going to briefly set out what I think needs fixing here, which are my own thoughts plus one or two I’ve seen doing the rounds on social media that I’ll credit as I go. 

But then I’m going to drag this article back to what it’s meant to be – discussion of the market, trading, what’s coming next and what we can actually do. Which is what this article is usually about!

In Brief: What to Fix

1. It’s too good to be bad.

FI’s current balance of incentives encourages destructive behaviour. We’re encouraged to “sell and rebuy” and “refresh” far too often – this is in a trader’s short term interest right now – some people even like it for this reason. 

But overall, this is bad for almost everyone when you game out what it incentivises people to do. It not only crashes prices but it makes it very difficult for them to gain momentum and rise. It cripples the USP of FI which has always been as a longer term, slower burning platform. 

They should reduce the power of IPD. IPD got a double boost that gave it too much muscle – one intentional from FI when dividends were doubled. And one that was out of their control due to the fixture calendar.

Other things like the recent extension of the dividend deadline until after most matches are completed that encourage kneejerk buying and selling should also be scaled back. A cheap opportunity to mug someone buying on the win is not worth the health of the market overall. 

A win for a player is often no longer seen as cause for a price rise – but rather as an opportunity to sell. And once everyone learns this – it does not work. This leads to absurd situations where a player is cheaper the day after a win. 

This is as much to do with wide spreads as anything. The dividend deadline is a minor example but it’s these sorts of incentives for destructive behaviour that need to be removed.

2. Give people reasons to buy and hold good players.

Traders are always going to be driven by self interest. There is no point just asking people to engage in positive behaviour for the good of the community. It has to be obviously in an individual’s interest to play ball. 

There is a massive incentive to buy and hold good players – dividends. They have never been bigger versus the prices. But we know even the best players aren’t going to win every week so why not just sell when they do win?

Currently nobody trusts a price to remain stable which is why they are not incentivised to hold and a price struggles to rise sustainably.

Fixing this is about tighter spreads in a lot of ways, but it also comes down to rebalancing incentives. With IPD reduced – that money could strengthen incentives for buying and holding players – the only thing that will lead to sustainable price rises and a return to general confidence in the market. 

Whether you boost Team of the Month – or introduce something new like an IPD size dividend for any big score (say over 200+ is 1p or 250 is 4p) there needs to be a very clear and obvious signal that it is in your interest to have the best FI players in your portfolio on a match day. This has been doing the rounds on Twitter and I saw it on a good thread from @TheFantasyGaffa (clickable). 

I quite like that – with one minor reservation that FI is complicated enough and perhaps we need to reduce ways to win rather than add another. But the principle is right – incentivise buys and holds, disincentivise cut throat sells. 

3. Fix the way prices are presented. 

We have zero confidence in the Average Offer Price. It’s too easily gamed. The Blue Button price is what still drives emotion/sentiment and this bares no relevance to real value or even general opinion. 

Take steps to increase confidence in Average Offer Price by preventing artifically high bids. And reduce the ability of one panicing trader to cause a crash. I covered this extensively last week.

4. Other Stuff

I would be very confident that the above three things would get this market going in the right direction again. Not all the way. But it’s the immediate changes that are needed. Stamp on the incentives to destroy and increase the incentives to build. Provide better price information. It’s not complicated. 

What’s needed is a package of measures over time though – there is no one magic bullet. Here are a few others:

– Market Makers –  An obvious one but a crucial element of killing off “sell and rebuy” behaviour. It is consistent tight spreads that prevent this more than anything. Not listed in my main three just because this is covered extensively already and FI know all about it – they just haven’t been able to implement it yet.

What’s crucial is that this is done correctly. If rumours are true and “LP001” the market maker was widely buying players on the Blue Button this is, frankly, moronic. They are just going to get dumped on for a “Sell and Rebuy” shenanigan. It burns their money AND makes things worse. Market Makers need to help build up the wall of bids. And if they need to be told that then they are not the person for that job I can’t be plainer on that.

– Allow multiple bids with cash balance – Another doing the rounds on Twitter. It’s a good way of improving liquidity if you can bid on 2 players with the same £10. Whichever gets matched first takes the money. Good – but needs a limit because otherwise we will lose trust in the bid walls – we’ll know real money doesn’t stand behind all of it. Use with caution.

– IPO’s and controlling “dilution”. Of course we need the best young players on the platform. But this is clearly causing a “dilution” effect. Drop 500-1000 useless spoiler players that are never likely to win anyway and establish a “One in, One out” policy.

This will soothe the annoyance about IPO’s distracting from the current crop of players. An easy PR win that will signal the right sort of intentions. 

– Apologise? – I add a question mark because this isn’t particularly important to me. But lots of people are angry and upset and feel misled. 

I don’t think FI have deliberately misled people – I think the crime they are guilty of is a lack of competence in execution of Order Books (you can sympathise a bit because of corona but it is their job to get difficult things right). And sometimes they have shown an inability to see the consequences of their actions in terms of what trader behaviour they are encouraging.

But apologies do mean something to a lot of people and we’ve seen positive reactions to this in the past. At minimum at least further acknowledgement of where things have not gone to plan might soothe some bad feeling. People tend to respond well to honesty like this and it won’t cost FI anything.

If this could be combined with a statement from the new CEO reaffirming their commitment to the original USP of FI with a few steps in the right direction it could be a genuine win rather than just cheap talk.

5. Distractions

These are things that are currently being discussed that in my opinion are actually distractions from what really needs fixing.

“Oversupply” – I did a lengthy explanation of this last week. There is no reason why having a large number of shares existing in one player is fundamentally unsound. There are difficult situations where a player suffers from their own popularity when lots of people want to sell as discussed last week. But if a player is good enough – they will support their own weight in normal market conditions. 

With prices this low and those shares existing already – there is little that can be done on this that would make a tangible difference to the current situation. There is already a natural limit on how many shares get minted because people will stop buying at a point. And FI may want to consider whether they have a limit on how many they mint in future to avoid over exposing themselves. 

But as holders it was always our risk to take that the player justified their price and if they do we can be confident they will recover. 

If they don’t – we may have to accept that we have lost our bet and we may never be able to sell that player. That’s the game – I don’t think anyone should have ever had the impression that this is a game they can never lose. We’ve always been aware of the risks, or we should have been.

Right now – blue button price is a poor indicator of which players are good or not as the market is in such a flap. If we take the Blue Button prices as our guide to our success our failure it would be an error at the moment – we’d be letting the most negative, most paniced, most pessimistic person judge what our portfolios are worth. It’s just not sensible. 

Our knowledge of the real quality of players and the underlying value has to be our guide to this. Players who are good enough over the long term will not struggle for interest as they will prove their quality. 

This is a complicated topic and basic supply/demand economics makes a lot of sense. But it’s not being correctly applied here and if you want a few thousand words on why and how on both the level of the overall pot of money FI have and for individual players – I have a post on that last week.

“Bring back Instant Sell” – We may as well ask for Adam Cole to come down our chimney and hand us £10,000 each whilst riding a unicorn, to be honest. Order Books was always the plan and FI backed Instant Sell was never the permanent state of affairs – FI were clear about that for years. And OB’s were a popular requested feature. Some people hate to hear this – but it’s just the truth. 

I could be wrong – but if FI did this I’d take that as a really desperate move and would not be encouraged by it. From FI’s perspective moving to Order Book’s was the holy grail for the business so to surrender this would be… no small thing. And they’d have to remove it again later and it would cause uproar all over again. I’m getting a headache just thinking about it. 

What we are asking them to do is take responsibility for buying unwanted bets. I see this solution often bandied around by people criticising the stability of the platform. 

The fundamental logic hole in this argument which came from Caan and others is that by asking FI to take responsibility for that you make them far less stable as a business – not more. 

It’s like accusing a man of being terrible with money and then suggesting he goes out and gambles to get himself back on level terms.

Because of Order Book’s – FI have never been less directly dependant on the rises and falls in the market to balance their books. This is a good thing, even for traders.

Where an argument might gain traction here, and perhaps what FI should have done in the first place is taper off IS, rather than removing it in one sweep. 

So FI could have said ok when OB’s is live we will provide a floor of FI Instant Sell for 50% of the Blue Button price for a while, reducing that as traders got more confident using the Matching Engine until they were eventually out of it. 

They could introduce that now but it would be a big risk. What if too many people actually used it? Right now, they might well do. You can bet FI would be left buying the garbage that won’t win anyway.

The thing about FI backed IS was it only worked when it was there but not many people wanted to use it. As we saw earlier in 2020 – in a situation where lots of people want to use it – like now – it will get turned off. FI can’t afford to buy all of those unwanted bets. It was always a bit of a reassurance measure rather than a mechanism for lots of people to withdraw money. It was a comfort blanket. And a thin one at that.

As a business it would be suicide to reintroduce that at a time when people actually want to sell. If lots of people did try to use it at once that would put the platform in real danger which is not good for the business or for traders. It may be a case of be careful what you wish for. Though I see why this has some instant appeal to many. 

I think they could/should have tapered off IS rather than removing it immediately when OB’s first came in when confidence was still there – I think reintroducing it now in a market bereft of confidence could be a disaster.

“3 year bet” – This is a popular requested change but I don’t see this one. If anything, the 3 year bet is too generous a time frame and FI need to incentivise active trading at some point. For their own profit as well as market liquidity too.

And FI cannot have a career liability to pay dividends based on just one transaction – you would have to be insane to promise to payout dividends for an entire career on a 16 year old, for example. That could cost them fortunes.

It does need more clarity on exactly when bets expire etc but this is not the area we need to be pushing on in my opinion. 

Market Analysis

Ok. Back to the actual market and what it’s doing, thankfully. I’ve been trying not to get too caught up in mechanics stuff but it’s hard at the moment being such a hot topic. 

It’s important but we want the bulk of our mental energy focused on things we can actually do something about. Much as we may wish – we aren’t the ones who call the shots at FI towers.

The market looks bad with further price falls in the last 7 days. And that’s a chase we’d better just cut to. But it’s not all gloom as we might expect given how negative the general atmosphere feels right now.

The single biggest thing the market needs to kick start growth is tight spreads in the most popular players. Tight spreads make shenangians like “buy back and sell cheaper” a waste of time. It makes holding good…

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