An Exciting Summer Ahead On Football Index! Dissecting Adam Cole's Market Update
Following this week's Market Update by Adam Cole, there is a renewed sense of optimism in the trader community. Whilst some concerns and uncertainties still remain, the market has in large responded positively and there are some very exciting times ahead. Here, I will look at what the update contained, what it means, what we can expect to see and the few uncertainties and concerns which remain.
Following weeks of market stagnation, the announcement sought to reassure traders that Football Index are listening to their concerns and there are plans in place to resolve the current lack of liquidity in the market. In brief, the announcement was successful in doing this with a number of topics addressed. Below, I will briefly look at each of them in turn and add some comments and thoughts.
First of all, the announcement itself. For the trader community, the key matters all needed addressing and a clear timeline and plan of action provided. So what was the response? The first thing to say is that it is quite lengthy with a lot of topics covered, the main of which are below.
Match Day Performance Matrix
Media Monitor (including survey results)
Market Liquidity, Offers & Nasday
What wasn't included?
Before we look closer at the announcement, it's worth mentioning what wasn't included. As the FOOTIE approaches 200,000 this will a huge landmark for Football Index, so can we expect to receive some news soon, as we have with previous milestones and what will it be?
The first point worth reiterating from the announcement is the schedule of football we have ahead. Due to the recent Coronavirus lockdown, we now have a packed schedule of football all the way through to the 2021/22 season, with the current seasons ending and straight into next season, the Euros and then the 20/21 season. An abundance of trading opportunities and match days meaning very exciting times for traders and potential for growth.
With the start of a new season, comes the expectation of a dividend review and on this matter, Football Index did not disappoint with the confirmed introduction of a new table and increase in payouts, which will not only be in place for the new season, but the remainder of the existing season. The table will be announced and come into force on Thursday 9th July 2020.
Also confirmed was that IPDs will remain in place for next season.
Both are excellent news for traders, with speculation now on how much the increase in dividends will be. As a benchmark, the previous Dividend Review in October 2019 saw dividends increase 57%. Whist we should some exercise caution when comparing these considering the current economic climate and forecast, growth over the past year has been huge with the FOOTIE doubling since this time last year (FOOTIE hit 100,000 on 23rd June 2019).
Match Day Matrix
The announcement addressed the uncertainty around whether or not the performance matrix points allocation will change with traders asking for clarity and confirmation in order to plan their portfolios and make any required changes. The announcement confirmed that this will not be changed and will be in place for the whole of next season and there will be a further review to weigh up any changes ahead of the 2021/22 season.
This is the biggest change announced with Adam Cole confirming the media monitor will be changed for next season.
A screenshot of the relevant paragraph is below, and is somewhat ambiguous in it's wording with my initial reading of this being the changes will be made to 'correct' or 'fix' the current system, rather than implementing or adding any new sources (foreign media for example). Having said that, with the inclusion of the survey results which show 85% support for the introduction of foreign media outlets, it is easy to see why there is a general consensus that these will now be introduced.
First, a couple of thoughts on the introduction of foreign media outlets. This will be a big change to the current system and whilst I support the idea (English language foreign media outlets only please), it would need to be introduced with enough notice to allow traders to make changes. For example, 3 - 6 months minimum with a market suspension following the announcement. The risk here being some existing media holds losing their value, and whilst the development will clearly be most welcome, any sharp drops do need to be offset and the impact minimised. A generous dividend increase on the media side will go some way to offsetting this, as will a phased introduction.
On the subject of fixing the current system which was what initially came to mind after reading, there are two primary objectives. Surnames should be included in article headlines and keywords revised and/ or filtered to ensure consistency and reduce controversy in relation to which articles are allowed to be included and which aren't.
Addressing these two issues comes with a lot of challenges but this is definitely a step in the right direction and for now, we'll just have to wait for the announcement to see what the exact changes will be. It's worth saying that the current media stars on Football Index are likely to remain so, and any impact may not be as severe as some fear. The top players still make up the majority of articles across Europe, but the immediate concern for me would be young English players who may not receive as much media exposure as they do under the current system, but this is of course speculation and at this stage, it's very difficult to predict what the changes may or may not be.
Market Liquidity, Offers & NASDAQ
A crucial part of the announcement. Since the Matching Engine was introduced, there has been a mixed reaction with initial positivity with regards to being able to place bids (and buy) players at a reduced value, to frustration at not being able to sell players to the market and a subsequent standoff between buyers and sellers.
First, the announcement acknowledged the current lack of liquidity and promised further insight and information in July in regards to the below
The second part of the announcement was focused on NASDAQ, Sell Offers and the introduction of new technology and confirmed the next step (phase 2 of the Matching Engine) will be to introduce Sell Offers, which will replace the current Sell Queue. This presumably will involve a similar process to Market selling, in setting a price at which you wish to sell. The main difference to market selling being that the lower the price at which you list, the faster it is sold, (essentially a reverse system of the bid process), as opposed to the current Market Sell system where you set a reserve price to remove your shares from sale if the price drops below that price.
Selling this way should have a number of advantages
Bridging the Gap - at present, it is difficult to gauge a suitable price at which sellers will sell and buyers will buy. This will essentially give buyers the opportunity to see the lowest sale price and form a judgement, increasing their bid or matching the sell price. Likewise, for sellers, the opposite will be true.
Tighten spreads - the above should mean spreads tighten as buy and sell prices are brought closer together
Restore confidence and move away from the current weighting towards buyers
The next step on from Sell Offers will be the implementation of NASDAQ order books which will see the platform reach a new level, with Adam Cole referring to it as an 'alternative asset class'. A clear pointer towards Football Index developing from a startup, or 'quirky bookmaker' to quote Adam Cole, into a professional market. Along with this, and the target of £1bn market cap, it's clear that Football Index are targeting not just those from gambling or Fantasy Football backgrounds but professional traders with the relevant technology and systems in place to support it. Combined with the marketing campaigns planned, this will attract a whole new user base to Football Index and with it, significant capital.
Very little was mentioned of the new IPO process other than that it will be revamped and powered by NASDAQ, presumably able to cope with much higher volume of trading, and a better pricing system.
On the topic of Instant Sell, there was acknowledgement that there are currently no bids on some players at the lower end of the market, and reassured traders that this will reduce over the next month, and only represents less than 0.3% of the market. The fact that Football Index are aware of the concerns in this area and have plans to address it are reassuring and will hopefully lead to more balanced market over the long term.
Finally, in relation to timestamping shares, Adam Cole confirmed this will happen, but reassured traders that no shares will expire before 2021 at the earliest. Again, it's very pleasing to see this reassurance as this has been the subject of some uncertainty recently, with traders who have held shares for a few years expressing concern that these could expire soon without notice.
In the last paragraph, Adam Cole refers to the target of £1bn market cap and Football Index being driven by passion rather than 'Forex pairs'. Further evidence that Football Index is developing in the right direction, understand our concerns as traders and are acting upon them. This is clearly a very exciting time to be involved with Football Index, with many new developments on the horizon and a genuine desire to retain it's core user base but expand into new markets.
Thoughts, comments and suggestions below please.
Screenshots taken from the Football Index website.