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Screenshot of a breaking news alert e-mail from Q2 2017
At the end of last year we reported on the launch of Football INDEX, the first ‘tradeable market’ in football players developed by a group of entrepreneurs led by CEO Adam Cole alongside MT4 integration specialist Gold-i.
Well the dream is now a reality, as Football INDEX is operational with clients ‘trading’ on the value of stars such as Lionel Messi (the site’s top performer) and the company seeing activity of over £1 million traded per day.
We’re pleased to speak today with the man behind it all, Adam Cole, and see what lessons there might be to take to the financial trading world.
LR: Hi Adam, and thanks for joining us today. Please let us know a little more about Football INDEX, and how you got the idea to launch it.
Adam: It has long been an ambition of mine to turn sports and celebrities into tradeable markets. We started with football, which has a massive global following, with some £17bn wagered annually in the UK alone.
Football INDEX, the world’s first football stock market, launched in 2015 and enables traders to buy and sell real money shares in the world’s top footballers. We’re regulated by the UK Gambling Commission, which means that all profits are exempt from Capital Gains, and we have created a market by using what we call a ‘fixed odds bet derivative.’
The traded instrument is actually a ‘fixed odds bet’ on the ‘future performance’ of a player, which expires after three years. Traders may ‘cash out early’ (sell) at any time during that period at the published price. There is a spread of approximately 3.5% between bid and offer.
Instead of the ‘bet’ being on a single outcome (ManU vs Watford), with Football INDEX traders have the possibility of a micro win every day of the year for three years. We refer to these micro wins as ‘dividends’ and they provide a yield for the ‘instrument’. Some traders buy for capital appreciation, others for the yield.
Lionel Messi is our top performer and priced at over £7. This high price represents ‘short odds’ and reflects his high Dividend yield.
We offer £500 Risk Free for a week as most traders with some knowledge of football do well on the platform, so few redemptions.
Football INDEX is gaining traction, with over £1m traded in a single day.
LR: What type of traders are you seeing? Are they mostly experienced sports gamblers, or those from the online financial trading world?
Adam: We have an interesting mix – we are seeing increasing numbers of traders with a financial background and an interest in football, but we also have a large demographic of smart football fans who find our market much more intellectually satisfying than regular betting, and generally a lot more rewarding as well. Many now see themselves as ‘Football Traders’ and have built significant positions and portfolios.
LR: What is your business model? How does Football INDEX make money?
Adam: Our model is unique, in that we’re a hybrid between gambling operator and exchange. At the moment we provide all the liquidity for the market ourselves (as does an operator) but we are interested in talking to any market makers who might like to get involved. We make money from commission on all sales (2%) plus the bid/offer spread (3.5% generally but variable depending on market events).
LR: In FX trading, the main determinant of volumes is volatility. More currency volatility, more trading volumes for the brokers. What drives trading volumes for Football INDEX?
Adam: We try and strike a balance between yield and volatility. We want volume but don’t want to deter those that have a day job and can’t hover over our app 24/7, for whom volatility can be intimidating.
LR: What else can we expect to hear from Football INDEX in the coming months?
Adam: Whereas today only the top 200 footballers are tradeable, with our next release on 1st November nearly all players in the 5 European Leagues will be tradeable and eligible to win Dividends based on ‘on pitch performance’ driven by Opta stats which are very familiar to some 3m fantasy players in the UK. This performance data is already driving the market but not beyond the top 200. We will then have achieved 90% of our vision for this product and it will be just a process of constant refinement. Of course watch this space for other markets in the future!