Smarkets profits down 50% on prop trading decline

Operator’s commission revenues climb 14% but prop trading revenues fall 33%

Smarkets has reported a 52% drop in profit to £6.6m for the 2017 calendar year, with the operator’s proprietary-trading subsidiary largely responsible for the decline.

Commission revenues from the exchange actually climbed 14% to £9.2m in the period, suggesting the firm’s proprietary trading division generated revenue of £11.4m, down significantly on last the £17.3m year.

The figures give credence to the idea Smarkets is “half exchange and half bookmaker” as previously suggested by Regulus Partners.

Overall revenue fell 17% to £20.6m, while yearly active traders ticked up 1.4% to 23,309.

“From a strategic standpoint we decided to streamline our affiliate network and withdrew from several jurisdictions,” said Smarkets CEO Jason Trost.

“Combined with adverse outcomes from sporting events in the second half of the year, revenues fell by 17.7%.

“Conversely, trading volume remained strong and is a good indicator of customer commitment to our platform,” Trost said.

More than £3.1bn was traded on the exchange, up 16% year-on-year, reflecting expectations, given the issues reported by Betfair thanks to increased competition from exchange rivals.

“We approach 2018 with the optimism and hunger to make a difference in the industry,” Trost added. “This will see us integrate more market-makers via our API bringing increased liquidity for trading and we will also launch a new sportsbook product which will bring exchange prices to the wider retail market.

Trost also pledged more investment in marketing, adding: “2018 will be a year of expansion for Smarkets as we aim to reach our goals of being the leading global betting operator and establishing ourselves as a top-tier technology company.”

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