What a composed market actually is
A book offers markets and the customer chooses between them. A composed market reverses that order: the customer says what should happen, the operator decides whether that is a market at all, and only then is there a price. The distinction sounds small and changes everything about the product, from who is allowed to ask to what the price means.
- legs, minimum
- 2
- legs, maximum
- 12
- priced by
- a joint model
- published after acceptance
- 89.0%
A composed market is one bet on a set of outcomes that the customer names, priced by the operator from the chance of all of them happening together. It is not a slip of separate bets and not a list the book published: 2 to 12 legs may be combined, the price is produced by a joint model rather than by multiplication, and 218 of 500 requests in the sample month became a market at all.
Three things that look alike and are not
An accumulator is several bets the book priced separately and the customer joined. A composed market is one instrument the book had to price from scratch, because the legs interact. A published market is a list anyone can take; a composed market is a question anyone can ask, and the answer is often no.
The sample month is built out of 500 requests for a market that did not exist. 218 were accepted, 96 were priced and refused, 131 could not be priced at all, 37 were never answered and 18 were withdrawn by the reader. That distribution is the product: on this desk's numbers, a customer is more likely to have a request refused, unanswered or withdrawn than to be the one who asked for something the operator would post.
Once accepted, the market stops being private. 194 of the 218 were published to every customer, and only 24 stayed with the reader who asked for them - usually because the request was for a stake large enough that the price was only ever meant for one account.
What the samples show
| Outcome | Requests | Share | What it means |
|---|---|---|---|
| Accepted and priced | 218 | 43.6% | A price was produced and offered |
| Refused on price | 96 | 19.2% | A price existed but was not offered |
| No market possible | 131 | 26.2% | No model covered the combination |
| Never answered | 37 | 7.4% | The queue ran out of time |
| Withdrawn by the reader | 18 | 3.6% | The request was taken back |
| Every request that became a market | 218 | 43.6% | Of those, 194 were published to everyone |
Who holds the other side
When a book prices a market it publishes, it is the counterparty to everyone who takes it, and it manages that position across the whole book. A composed market starts as a position of one: the operator prices a set of outcomes it may have no other takers for, and the price therefore has to carry the risk of holding it alone. That is the reason a composed price is not quoted by the same ladder as a published one, and the reason the request can be refused after it has been priced.
- Whether the operator publishes the fact that a composed price is produced by a joint model at all - 26 of 40 terms pages in sample F do.
- Whether the page says the price will not be the product of the legs - only 4 of the 40 say it.
- What the minimum and maximum number of legs is, and whether a single leg may be added to an existing combination later.
- What happens to the combination if one leg never happens: the re-pricing rule on /the-void-leg, which 9 of the 40 pages state.
- Whether the market will be published to other customers once it is priced, and whether that changes the price you are offered.