Betfair has revolutionised sports betting. Instead of being the bookmaker, or market maker, it made a transparent market for betting on sports such as horse racing and football. It already operates tradefair for spread betting, although this has not rocked the market.

So now Goldman Sachs is coming in. Goldman Sachs revolutionises everything it touches. It was Goldman Sachs that revolutionised the financial markets by essentially transforming itself into a day trading operation. Goldman Sachs helped to revolutionise mortgages by creating the securitised lending markets. Goldman Sachs should never be ignored.

Goldman Sachs and Betfair have announced that they want to set up an exchange for Contracts For Difference, called LMAX. The website is saying nothing yet, although the LinkedIn page for tradefair now says “LMAX (Formerly Tradefair)”, so it looks like spread betting is either going to be abandoned or incorporated into this. Goldman Sachs have bought a 12.5% stake.

Will this revolutionise CFD trading? Unlike sports betting there is an element of time that is needed, and so the need for a more active market maker may be necessary.

One interesting side to this all is that they are aiming at professionals, as they are setting up a City of London based management team for LMAX. To our eyes this does not seem to be playing to Betfair’s strength, which is their 2 million customer base. But they’re millionaires and we’re not, so they’ve got every right to try.

Betfair certainly have created a phenomenal betting exchange, and Goldman Sachs is not a charity. This could certainly shake things up. At least in the way that Tradefair never managed.

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