I am amazed at the action on the site today regarding McLeod and Jane Holmes' comments about online gambling. It is a hot story, especially to people who live this every day by betting, and frankly, think they are both way off base.
I got to thinking, how can we explain in terms racing understands, what racing-pricing puts us through, and why customers are heading to the door. Since both are smart people, and Mr. McLeod certainly understands the stock market, I thought I would try that.
So here goes.
Joe Trader decides he wants to play the stock market. He puts $1000 in his stocktrade account. He begins to play.
He buys 500 shares of ACME at $1 a share. He sells it later that day for $1.20 a share. Nice day, huh? He made 20% on his stock trade. I bet he likes stock trading.
So, he bought 500 shares at $1 a share for $500 and he sold his 500 shares for $1.20 and he realized $600. Profit is $100.
But hold on. To make the trade he is charged a takeout of 25%, just like a triactor.
Now he has to pay $125 (25% of the $500 he spent) so his $100 profit is now a $25 loss.
Then he decides to make another trade. He does the same thing. This time he buys a stock for $10 and sells it for $10.10. Not a very good trade but still profitable.
But he owes a 25% commission for making the trade. So he loses money again.
He says to himself "I made two solid trades where I made money and sold a stock for more than I bought it for, yet I am broke!"
Joe Trader: Welcome to Racing's Business Model. This is how we are charged every time we make a $1 bet.
Now Ms. Holmes and Mr McLeod, do you understand? How would you like to buy a stock for $10, sell it later that day for $12 and lose money? Does that explain well enough to you why people go offshore? Does that explain that if you shut out offshore (just like we have seen in the US) handle does not go up?
Etrade, and Ameritrade and all the rest have exploded stock trading by offering $9.99 trades. If I spend $100,000 on a stock, I get charged $10. If I spend $10,000 on a bet to show, you charge me $1600.
What would happen if the above was true and our stock exchanges worked like racing? You are correct, our economy would implode because no one would be stupid enough to pay 20% of everything in commission. They would never make money.
That racing has imploded should be no surprise to these people - no surprise at all. When will they change their business model and realize their prices are too high?