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Right. I'm going to attempt a thread summarising what's happened over the last week with FI and where it leaves us in terms of next steps. Could take a while....
Last weekend we had, in retrospect, a "perfect storm" of three factors that led to a flash crash on Sunday night. 1) a new pricing mechanism was poorly understand, much more volatile than previously, wasn't transparent (no depth view) and lacking active market making.
2) a series of negative short-term events to premium players (Sancho transfer slowed; Trent corners; Mbappe got covid; Neymar got a red card) creating downward pressure on that group.
3) a highly distorting IPD offer which incentivises short term trading far more than normal.
3) a highly distorting IPD offer which incentivises short term trading far more than normal.
All three factors in combo created downward pressure on premiums as people looked to free up cash on suddenly less exciting and expensive players. Lack of market making and liquidity meant these drops happened fast and weren't bought into even though many of us could see value.
The crash on Sunday was very much a premiums crash. It was only the last few hours that the whole market was affected. The pricing mechanism had much less impact on cheaper holds with fewer traders to drive down prices.
Then in the early hours of Monday and during the day on Monday either FI or the *cough* "independent" market maker intervened to stabilise things and drive prices back up (this should give traders a lot of confidence btw even if it took too long to happen).
But during the week the same combo of things - pricing mechanism, bad news on premiums, IPD offer - created downward pressure and by Wedneday it was apparent that FI were going to need to make some changes to retain confidence and customers.
On Thursday we saw them radically change the pricing mechanism to introduce an artificial level of stability by preventing anyone offering more than 1p below buy price and averaging out buy price to lowest 900 shares rather than 300.
This came into force Friday night and during yesterday we saw a significant increase in most traders port value partly due to the artificial measures introduced but also as confidence came back and people started having fun again (which is v important!).
So where are we now? In the short term one of the three problems - the IPD offer - finishes next week. The second - premium narratives - will turn at some point as it always does. The third is within FI's control and requires a very carefully balancing act.
I suspect we will see them slowly loosen controls (possibly not till after the IPD offer finishes) to allow for a more gentle acclimatisation to a more open market. They can't do it fast because it risks crashing things again.
But if they don't loosen at all then, from a seller's point of view, the market is too constrained, albeit less so than it was under the old sell Q system. I suspect will see v minor tweaks until they find the volatility sweet spot that allows for selling without creating panic.
In the longer term we know the plan. We need NASDAQ integration that shows us the depth of the market and brings in serious market makers who will back up prices if they drop irrationally. There simply isn't enough trader money in the market to do this.
But I also wonder after this week if they will need a simple and advanced version of FI when we reach that point (a bit like betfair vs betfair exchange) because there is just such a gulf between different groups of traders in terms of how they want to play.
For market nerds like me the more complicated the better as it creates more opportunities. But if they want to market to the causal betting crowd they need an interface that allows them to trade simply. The last week must have been so confusing for so many traders.
Hope people find that a useful summary. I certainly found it a useful way to get my thoughts in order...
Just to add I have, as ever, enormous confidence in the long term future of the product for these reasons. I never even considered withdrawing cash last week. https://twitter.com/FiSamf/status/1306904312375803907?s=19
