My curious liquidity poll
I recently asked on the bl0g poll, top right of the blog in case you hadn’t noticed, about what constitutes ‘good’ liquidity in a market. I think there are quite a few considerations you could take account of when assessing what ‘good’ liquidity is. But it was sparked by another poll which asked ‘What would make you move to Betdaq’. The answer came back ‘better liquidity’.
We are all aware of the chicken and egg syndrome that exists in the exchange market. People wont use other exchanges if liquidity is not high enough, but if people don’t use other exchanges then liquidty will not be high enough – Q.E.D.
Short term its OK to ignore this sort of issue but longer term, it will be an issue; as I discussed in depth way back in 2008. I think it’s a curious debate as well. When I started on Betfair way back in it’s formative days, there was no liquidity to speak of. But that didn’t stop enterprising souls like me from giving it a bash. As a consequence, I’m one of the longest serving customers of Betfair and learnt stuff that people can no longer learn about the market. The ground work I did way back then has stood me in good ground for the market now and any markets that pop up in the future.
I fully understand that it makes sense for people to do what is best short term, but long term it often makes sense not to follow the same path. But I also think one of the problems is that people are suck in a mode of operation that only suits the current look and feel of a market. If you expand your horizons a bit I think it will put you in a much better position for whatever happens in the future, even if we don’t know what that is.
I have a well qualified opinion on what ‘good’ liquidity is, but I am curious what others think, click on an answer on the poll to tell me!
Category: General
