For many years, before their painful demise that saw many customers lose considerable sums of money, Football Index provided an attractive alternative to bookmakers and betting exchanges. Rather than betting on specific football fixtures or competitions, customers could instead buy shares in players that would fluctuate in price depending on their real-life performance and media exposure.
You would not bag yourself huge wins in a short space of time but you could, with some smart choices, see the value of your portfolio increase over time. It was effectively a football stock market but unlike the actual stock market, it was doomed to fail as it was dependent on having a constant stream of new customers (much like a Ponzi scheme), with no inherent value in the product itself.
Football Index’s collapse, if nothing else, served as a reminder that punters need to be careful where they put their money. It would, therefore, only be natural to view the increasingly popular SportsBroker with some caution. Acting as another virtual football stock market, there are some definite parallels between itself and Football Index but also some major differences too.
How Did Football Index Work?
Without going into too much detail, at Football Index, customers would buy and sell shares in players. Unlike with normal shares, that have no expiry date, shares purchased at Football Index expired after three years, effectively making them three-year bets. There were two main ways of making money on the platform, one was to buy players on the cheap, wait for their price to increase, then sell them on.
The other option was to retain the shares and benefit from the dividends they paid out. Dividends would be paid out based on real-life performances and there was also a media dividend for players that received the most news coverage. It was these generous dividends that attracted many users to the Football Index platform and it is why there was such outraged when they were drastically slashed in 2021.
While there was much peer-to-peer activity, with users trading shares among themselves, the platform did have plenty of involvement from Football Index themselves too. Not only were they the ones paying out dividends but they would also buy back shares, at a reduced rate, though an ‘instant sell’ function. This effectively allowed users to ‘cash out’ their bet and it was one of the features that was removed when Football Index realised they were in grave financial trouble.
How Is SportsBroker Different?
Much like Football Index, SportsBroker is another virtual football stock market where users can buy and sell shares with prices linked to real-life results. No doubt there will be some alarm bells ringing here given the huge failure of Football Index. After all, both make money by minting new shares and charging some form of commission. Football Index did this on share sales/purchases while SportsBroker takes a small cut from profitable shares after each game. There are differences between the two platforms though, as we will now highlight.
Buying Shares in Teams Rather Than Players
One, rather more superficial difference, is that with SportsBroker you will buy shares in teams, rather than players. There is a large selection of teams to choose from, including those based in Europe and further afield in the likes of the USA, Korea and Japan. While ample, it does not compare to Football Index in terms of range of stock, largely for the obvious reason that there are far more players than teams.
No Dividends Paid Out
One indication that the SportsBroker may be more sustainable than Football Index is that no dividends are paid out. This means SportsBroker do not have a great expense that increases the more shares that are purchased. Without dividend payments, Football Index would not have been very popular at all, but it may well have survived.
Prices Only Change During Matches
Another difference between the two is how the value of shares fluctuate. With Football Index, prices would vary all day long depending on supply & demand. If a player suffered an injury or they fell out with their manager, you could expect their price to drop very quickly. With SportsBroker though prices only change during matches and this is solely dependent on team performance.
This huge in-play aspect is also one other major difference of SportsBroker. You are free to buy or sell shares outside of matches but many customers like to take advantage of fluctuations mid-game. Prices update live in real-time and transactions can be made after a 30-60 second approval period. If one team has endured a poor first-half but you think they will turn things around in the second, punters have the opportunity to capitalise on this.
The Price Change Algorithm
Now, SportsBroker do not disclose how they weight their algorithm as they claim doing so protects them against bots and cheaters. The general premise though is that price fluctuations are dependent on two factors, the first of which is team performance. This is more complicated than just looking at goals scored as SportsBroker, using OPTA stats, look at a wide range of in-game metrics to assess performance. These are not all weighted equally but all listed metrics will factor into the equation.
The image to the right in this sections shows you have defensive stats but there are also additional sections for attacking, 1v1, passing, discipline, shots and possession. Green lines are ‘positive factors’ while those in red are ‘negative factors’, with the latter being ones you want your team to score lowly on.
The other factor that is taken into account is league position. When Liverpool drew an enticing contest with Everton 0-0, the Reds share value dropped -9.91% while Everton’s went up 8.22%. This was because Liverpool were expected to be the stronger side on the day but they fell short of expectation, while the Toffees overperformed.
As for how much prices can change during one match, it can be very little or a lot depending on the performance and teams involved. Below is an example from a Europa League match between Lazio and Midtjylland, where the Italians were favourites yet the Danes shocked them during a hugely convincing 5-1 win.
In this one game alone, the Danish side saw their share price increase 28.6% while the more expensive Lazio shares dropped 7.25%. With lower share prices, there is always a greater potential for bigger swings. When Bournemouth lost 9-0 to Liverpool, this saw their price drop by 56%, such was the abysmal nature of their display. Liverpool’s, by contrast, went up just over 2%.
By this stage it is clear that SportsBroker does function in a different way to Football Index. However, just because it is very different, this is not to say that it necessarily makes for a relatively safe investment (no stocks ever come completely risk-fee).
Is SportsBroker Peer-to-Peer?
With an ordinary stock market, at a very fundamental level, prices fluctuate based on supply and demand. If people want to flock to a stock, the price will go up and if they all want to sell, the price will go down. The stock market performance is simply made up of the individual companies that form part of the market. While it can crash, with prices plummeting, it cannot go ‘bankrupt’ as a market does not exist in the same way a business does.
SportsBroker is not a market like the FTSE100 though, as they actively sell and buy shares on their platform. They themselves sell shares to customers and when you want to get rid of them, it is the company that buys them back. Unlike with Football Index, there is no possibility to trade between other customers, instead, to get rid of shares you must use what is effectively an ‘instant sell’ feature.
You may have read that SportsBroker is a peer-to-peer exchange but their game rules clearly state this is no longer the case. As per their own website, “to sell all or some of your shares, you click the sell button and SportsBroker buy them back from you within 1 minute”. So, what happens if SportsBroker run out of money and cannot buy your stocks from you? Well, then you are in a spot of bother.
Overall, SportsBroker are heavily involved in their own stock market, regularly intervening for a variety of reasons. They may, for instance ‘split shares’ to lower the value of them, so that new customers are not priced-out of purchases. Note that existing customers do not lose out when this occurs as they are simply issued with more shares, ensuring the total value is the same (for example 50 shares at £100 each might become 100 share at £50 each)
The SportsBroker algorithm can also see some clubs go ‘bankrupt’. This has nothing to do with real-life bankruptcy, rather it can occur (rarely) when a team is performing so badly that their value hits £0. Should this occur, any stocks owned in that team will be taken away, as they are worthless, and the price will be reset before they are added back to the market.
Is SportsBroker Licenced?
Even for those people who had some question marks over how sustainable, or even legitimate, Football Index was, they may have been reassured by the fact it was a fully licensed operation. The company had a licence issued by the UK Gambling Commission and this is not something that is given to any old company who asks for it. The Gambling Commission’s decision to issue a licence was later criticised, in the aftermath of Football Index’s collapse, but they remain one of the toughest regulators to acquire approval from.
In the case of Football Index, many sources indicate that the UKGC did not fully understand the product being offered and the risks customers faced. No doubt they will be more cautious about similar websites in future but this is not why they are yet to licence SportsBroker. The UKGC are fully aware of SportsBroker but believe it does not fall within their remit. Indeed, this is something SportsBroker themselves argue, claiming they are not offering a gambling product.
Not Regulated, But Should Be
Matt Zarb-Cousin, the founder of Clean Up Gambling, disagrees. In his view, SportsBroker should be classed as a gambling platform and therefore should be regulated by either the United Kingdom’s Gambling Commission or the Financial Conduct Authority (FCA).
In their defence, SportsBroker have attempted to gain a licence from the FCA but the response was that they do not meet the necessary criteria. This is despite the UKGC believing that SportsBroker may partially fall under the FCA’s remit. So, while you cannot blame them for not trying, they are left in this awkward grey area where they are free of regulatory oversight. To their credit though, SportsBroker have implemented ‘safer gambling’ type options on their website such as deposit limits, ordering limits and self-exclusion. This is good but it is only a very minor protection and, of course, is entirely optional.
Will SportsBroker Be the Next Football Index?
If you are someone who enjoyed the trading aspect of Football Index and managing your own portfolio, SportsBroker no doubt offers some appeal. At this stage though, it is difficult to make predictions over their future. The absence of dividend payments does suggest the company is not merely a glorified Ponzi scheme but personally, we would not risk it, at least at this stage. This is an unregulated enterprise that could, at any moment really, run into financial trouble and put customer funds at risk.
If it was a peer-to-peer network we would have more faith but SportsBroker are the ones buying your shares off you. If they suddenly lack the capacity to do so, you will have no means of getting your money out of the platform. There is also no market mechanism controlling prices, meaning instead that they can be set entirely by SportsBroker. It is easy to get enticed by the chance of having your investment increase by 5%, 10%, 15%, or even more, in the space of a week and for short-term investors it may work out (remember, net wins are far from a guarantee). Anyone planning on making long-term investments though should wait until this proves to be a sustainable and regulated business. Football Index only lasted six years before its collapse so do not assume SportsBroker will still be here in a decade’s time.