iPredict Fees
July 7th, 2011 at 8:43 am by David FarrarHamish Rutherford at the Dom Post reports:
iPredict, the futures dealer owned by Victoria University is revising its fees structure following threats of a user exodus.
Last month iPredict announced a new structure to help cover its costs. The company admitted the fees would penalise small traders, with costs of at least $30 a year.
While iPredict has thousands of traders registered, and expects a pickup in the run up to this year’s election, only around 100 traders have more than $500 in the market at present.
Users with less than $100 in their accounts, believed to represent most iPredict traders, would quickly see their investment eroded under the proposals.
The announcement resulted in hundreds of complaints on its website, with even some of iPredict’s largest users threatening to quit the site because of the resulting fall in liquidity which the fee structure might cause.
This afternoon iPredict has announced that its board had decided to ditch a monthly $2.50 fee, as well as a $2.50 sign up fee.
There is no doubt iPredict had to change its fee structure. Their only fee had been a 2% withdrawal fee which meant traders like myself who have never withdrawn funds, have never paid a cent to iPredict.
However the proposed monthly flat fee would have been unfair to smaller traders.
“Our traders have suggested that the flat rate fees would deter small account holders who are important for market liquidity, so the board decided to eliminate those fees,” iPredict chief executive Matt Burgess said.
Instead of the monthly fees, iPredict will push ahead with a transaction fee of $0.0035 per share traded, capped at $5 a month, as well as a credit card fee on deposits, and a 2 per cent fee on all profits withdrawn from the site.
“The new fees structure is a better fit with how traders use iPredict, it encourages liquidity, and we anticipate the new structure will raise around the same revenue as the alternative,” Mr Burgess said.
A third of a cent fee per share traded seems fair to me, and I think the monthly cap could even be a bit higher.
The fees charged by iPredict compare favourably to equity trading, with most brokers charging at least $30 per trade for NZX and ASX listed securities, as well as requiring significant documentation.
Ouch.
July 7th, 2011 at 9:03 am
What a crazy society we have become. A university opens an online betting business and dresses it up as ‘trading’ in ‘stocks’ in future political and economic events. This smells of sick nu-speak bullshit to me and its no surprise that academia has become such a rotten useless fruit.
Vote:July 7th, 2011 at 9:09 am
…..”with most brokers charging at least $30 per trade for NZX and ASX listed securities, as well as requiring significant documentation.”
Not so, Interactive Brokers charge $A 6.00 per transaction ($12 for Buy + Sell), plus tax and some data feed cost for eighty (yes 80) exchanges world wide.
db..
Vote:July 7th, 2011 at 9:27 am
The comparison with the sharemarket is unfair. The average sharemarket trade is far, far greater than ipredict. In fact, the sharemarket would not be interested in trades of the typical ipredict size. With many companies if you own only a minimal number of shares they will be forcibly sold on your behalf. ipredict also gets under the regulatory (money laundering) radar by restricting the total amounts that can be punted. Sharebrokers have to have similar compliance regimes to banks so the sharemarket is not used as a money laundromat.
Vote:July 7th, 2011 at 9:29 am
The fee structure they had proposed was ridiculous, it was the complete opposite of the freemium model which works so well for other websites. The whole point is that you make it inexpensive and easy for people to join and do a little trading, and then start adding on the fees once they become more active, and can appreciate the value they are getting.
To do it the other way around – whack hefty fees on the casual users – results in all the casual users leaving instead of potentially upgrading to a premium membership. The casual accounts don’t cost anything to run, and ipredict gets to pocket the interest off their balance. The new approach sounds much more reasonable.
I have to agree with Dave though – how is ipredict not online gambling? You give them money, take a guess (being a mix of skill and luck) at something and then either win money or lose money on the outcome. How is that not exactly like Poker or horse racing?
Vote:July 7th, 2011 at 9:59 am
I would have to agree with Dave on this one.
Vote:Common sense is not one of Victoria University’s strong points.
July 7th, 2011 at 10:46 am
db “Not so, Interactive Brokers charge…”
Ummm you do realise that providing one exception does not disprove a “most” statement right?
Vote:July 7th, 2011 at 3:59 pm
db..
I use Interactive Brokers too, but to trade US listed stocks. Half a (US) cent per share traded. And the execution is first rate.
The DomPost story is right … most NZ brokers charge a base fee of around NZ$30 per trade, with higher fees as for larger orders. I think it’s a reflection of the low trading volumes and the lack of economic scale for both the brokers and the NZSX. Hard to know which is the chicken and which is the egg. I can’t help wondering that there’d be more liquidity on the NZSX if the brokerage rates were significantly lower.
Vote:July 7th, 2011 at 4:05 pm
Dave Mann,
It’s not an online betting business, it’s a prediction market. It operates just like other prediction markets. There are a number of universities that run prediction markets, just like VUW does.
But running that market is not cost free, and VUW has to find some way to cover those costs. How is it “sick nu-speak bullshit” for the user to pay for the cost of a service?
Vote:July 7th, 2011 at 6:40 pm
virtualmark, its absolutely sick nu-speak bullshit to call this thing a ‘market’ any more than you would call a casino or a lottery a ‘market’. They don’t trade anything tangible, useful, productive or indeed anything at all except the vain hope of making a buck on the odds.
I call this nu-speak bullshit because that is exactly what it is. For a ‘university’ to label this asinine waste of space a ‘market’ simply demonstrates the depths to which this particular branch of academia has become rotten.
This is what nu-speak is; the despicable practice of deliberately perverting language in order to lie blatantly about the true nature of something. Assholes. These people are worse than just liars…. they are dressing up a lie in the cloak of learning. Scum.
Vote:July 7th, 2011 at 7:11 pm
Well Dave, it’s obviously something you’re pretty heated about. You should feel free to sit in the corner and fume while the grown-ups refer to it as a “prediction market”, because that’s the term used for things like iPredict.
http://en.wikipedia.org/wiki/Prediction_market
Vote:July 7th, 2011 at 7:21 pm
But how is it any different to placing a bet on a horse? Which as far as I’m aware, is regulated to all hell, and can’t be done online. You gotta admit, this definitely seems to be a “workaround”.
Vote:July 7th, 2011 at 7:52 pm
Well, virtualmark, I am not really really really heated. I am simply responding to the obvious acceptance that this sort of lying is all normal and OK. What I object to is the fundamental intellectual dishonesty of this gambling scam which is even worse given that it is perpetrated by a university where, one would assume, honesty should be valued.
Vote:July 8th, 2011 at 9:30 am
A transaction fee…good.
And DPF thinks it’s fair…even better.
It sounds suspiciously like a Financial Transactions Tax to me, so I’m pleased to see DPF is in favour of it.
I wonder if he could get his Nat mates to accept the idea for the nation?
Of course, like the CGT, it’s a genuinely progressive tax – not the ideal for the “soak the poor” mob!
Vote:July 8th, 2011 at 12:45 pm
Dave Mann, panning iPredict as a “gambling scam” is hilarious, because iPredict in general, and the public website in particular, doesn’t make any money. It costs money to run the site.
The pace of trading on the site is also quite different to the TAB; the ‘bets’ typically take weeks or months to pay out (or not). It’s not really attractive to compulsive gamblers. In addition, it would be difficult to gamble away your life savings on iPredict, because you aren’t allowed to deposit more than a few grand into the site in a year.
Prediction markets are a trendy thing for universities to research these days, primarily because prediction markets provide more accurate political predictions than traditional phone polls and the like.
Vote: