The STX server is a technological evolution in the implementation of the modern sportsbook. Current sportsbook business models are centered around the acquisition and lifetime value of bettors that are losing money to the book. In order to entice the bettors to a specific platform, bonuses are offered that are better than competitors but since an individual bettor represents only a finite value to the book, a careful balance between cost of acquisition and value must be considered. For this model to be effective, professional bettors who consistently win must be identified, limited, and at times outright banned to protect the book’s margin.
STX redefines the sportsbook business model by offering a bimodal solution in the same platform. The platform provides the best prices for the casual bettor, resulting in better retention, but also adds additional value by offering an exchange platform that welcomes professional bettors and financial traders who will compete with each other in an open market rather than with the book. The exchange draws an entirely new demographic into the model, which would never participate in a traditional book, and revenue stream to the legacy sportsbook model. The combination of traditional betting and exchange paves the way for the currently multi billion dollar industry to grow into a multi trillion dollar asset class. In addition, the exchange augments price discovery which results in better margins and customer retention for the traditional sportsbook.
STX supports a much wider variety of customers than would be supported by a traditional sportsbook. These customers can be categorized in the following groups:
A casual bettor who wants to bet small fixed amounts at predetermined odds. These bettors are more inclined to bet on their favorite teams and players rather than statistically driven decision making. The Retail Sports Bettor primarily uses the platform for entertainment rather than investment. These customers will find themselves more inclined to participate on the simple interface. These are the only desired customers of traditional books.
A casual trader who makes investment decisions on a daily basis in traditional asset classes such as stocks, commodities, and cryptocurrencies. Rather than for entertainment, these customers will look to capture edge in highly volatile marketplaces regardless of the underlying asset. Given the volatility and data driven nature of sports, a sports betting exchange presents an exciting opportunity for this demographic to enter the world of sports betting. These customers will find themselves more inclined to participate on the exchange interface.
A group of professional sports bettors who leverage advanced pricing models on the outcome of sporting events to make a profit. Typically this customer group has better data sources and quantitative analytics than a traditional sportsbook provider. To offset the risk posed by this demographic, traditional sportsbooks regularly limit their exposure to these customers. This customer will utilize the exchange’s high volume, low limit nature to generate more profit.
This group consists of market makers and hedge funds across the globe who are not currently participating in the sports betting ecosystem because of the limitations of traditional sportsbook offerings. Like Retail Day Traders, these trading firms can leverage their superior trading technology and knowledge base. However, they are able to do so at an institutional scale, akin to the Sports Betting Syndicates. Integrating these customers in the world of sports betting exponentially increases the money flowing through the ecosystem. Since day one, STX has been built to accommodate the needs of these customers.
The exchange server currently allows us to offer MLB, NHL, NBA, NCAAB, NFL, NCAAF, Golf, Tennis, and several soccer league games as well as season markets for many of these sports. New sports continue to be added as they are requested. To automate the schedules, game events and markets the platform consumes and manages automated feeds from our providers.
The STX exchange technology includes an extensive automated player account management (PAM) system that allows STX to manage player accounts as well as provide regulatory management such as anti-money-laundering (AML), know-your-customer (KYC), geo-location, self exclusion, cool off periods, player limits and a list of other features.
To support all of these features, the STX exchange has a state-of-the art reporting and admin platform that is flexible enough to be configured by each individual user to suit any admin role from event operator to compliance officer. The admin platform even includes an integrated alerts and task management system that allows us to track and manage issues that occur during daily operations.
The STX exchange was constructed with a focus on providing the tools for automated high frequency trading of the kind experienced in traditional financial and crypto exchanges. The volume of interaction on exchanges are often thousands of times the level of a traditional sportsbook at peak volume. The volume and velocity necessitates a different approach to the platform technology. Traditional sportsbook technology is simply not able to handle the kind of load generated by a trillion dollar asset class with reliability. In order to deal with thousands of orders per second you have to completely change the way you think about architecting a system. To illustrate, let’s consider a Model-View-Controller (MVC) architecture, which is very common in traditional sports books, and how it would handle a fairly trivial use case.
In our use case, the customer comes to the system and wants to know what markets and prices are available. The MVC platform receives the request, queries the database for markets that are active, retrieves their prices and then formats a response. In a standard sportsbook we could expect to get a few hundred of these requests per second and in Bitmex we could expect to get a million price queries a second. The gating factor in this use case is how fast the database can perform the multiple searches needed to process the request. The tech team on an MVC application will endeavor to increase the power of the database but there are certain limits within the laws of physics. When we add the further complexity of needing to perform activities such as locking records to process orders, the round trip time rises dramatically.
By contrast the STX technology has already anticipated that the customer will want a list of markets and prices and has already pre-built the response and stored the data in memory. As markets open and close the technology adjusts the information in memory and prepares it for consumption. Even without customers asking for it, the system is ready to answer the needs of the user. Since the data is in memory and potentially already rendered to a file, returning the data becomes an operation measured in micro or even nanoseconds. As the data on the market changes, the cache layers in our innovative “Multilateral Caching Architecture (MCA)” are updated with the information and potentially pre-rendered. Like a modern GPU holding the state of the world in a game, the STX tech holds the state of the system in memory. Since the data is accessed millions of times more often then it is updated, the system is much more efficient in processing requests.
When it comes to the matching engine, a lot of technical discussion in exchange platforms centers around the processing speed. The STX Engine is extremely fast, averaging 2 microseconds to match an order. However, the speed of the engine would be of little value if the rest of the infrastructure wasn’t able to keep up. In any real product the speed of persisting and transmitting data will be the real gate as to the capabilities of the platform. It does little good to match at 2 microseconds if the data persistence is in the 10s of milliseconds, which is 100,000 times slower. This is where the STX technology differs from other platforms.
Where the MVC platform will need tens of milliseconds to look up a dynamically changing market, determine if it is open, save the information to the database and so on, the Multilateral Caching Architecture of the STX platform makes almost all of that computation irrelevant. Instead of having to query the database for market information and prices, our Market Processes already know this information. The state of the market, the state of the order book, the current state of the event and so on are held in memory and can be accessed tens of thousands of times faster. Furthermore, since the STX platform sends the request to the data instead of having to bring the data to the request, the STX platform is able to perform thousands of times faster than an implementation using a technology like Redis would be able to achieve.
When we consider matching thousands of trades per second, keeping portfolios up to date, accumulating business intelligence and detecting fraud the use cases needed become dramatically more complex. However, since the STX tech takes a different approach than legacy architectures, it is prepared to handle all kinds of use cases with equally impressive response speed.
As a result of the stateful in-memory technology the STX platform spends less than 5% of its database resources reading data and thus has the ability to utilize the database to achieve much faster writes. This is in contrast to traditional MVC technology that can spend at least 70% of its database resources reading data. Furthemore, the underlying actor model technology and Multilateral Caching Architecture means that the STX platform need not worry about database locking to keep up with market states that can change per microsecond.
The STX engine technology enhances the analytics capabilities of the platform as well. First of all the STX platform keeps a record of all changes in the system and can reproduce, at any time with a bit of SQL magic, the entire state of the system at any moment in time. Furthermore, analytics are tracked and updated real time rather than having to be calculated in batch jobs on a daily basis. In addition to further enhancing our database performance, our operators can discover information such as the total revenue earned by a customer up to the second without any significant effort. Similarly a regulator has unmatched forensic capabilities if required.
Finally, since STX technology is based off of Erlang and Elixir which has run telephone exchanges with a 99.999% uptime since the 1980s and runs the Bet365 platform, we have unmatched stability, maturity and speed at our developer’s command. Elixir and Erlang have been built from the ground up to handle this type of architecture natively and with a fraction of the lines of code than would be necessary in other languages. Erlang has the maturity of being around for over 30 years and Elixir is basically the same as Erlang with some syntactic sugar and better library and tooling support. The actor model, which is native to Erlang, makes the creation of our in-memory state model extremely simple.
Our development process focused on delivering quality code. We have high documentation and testing standards. In fact there are far more lines of code in the test cases on the platform than actual core code. Our test suite allows us to have the confidence to add new features and terminate issues quickly. Over the three years we have been building this technology in stealth we have built up a massive test suite with more than 79% unit test coverage from nearly 6000 tests. Our stringent QA process has resulted in a super stable platform with immense capability and expandability. Our QA engineers are extremely adept and creative at finding the most obscure bugs and working with the software engineers to ticket and resolve them.
By using Elixir and Erlang we are able to offer all of the features of the platform with a codebase that is less than 90,000 lines of actual working code. In fact, our unit test code outpaces the core code with just short of 105,000 lines of code. The test code itself is a piece of carefully constructed software with focus on reusability. We are able to create a unit test in a few lines of code that would take thousands of lines of setup by using software developed specifically for testing. This allows us to add new tests in a few minutes that would normally take hours to develop. Building a comparable system in a language such as Java would result in 5 to 10 times the code volume and with a greater chance of security holes and bugs. We are able to leverage a lot of the built in functionality of Elixir to do things we would have to build by hand in other languages. The lower code volume also allows us to move faster and add more sports, market types, order types and other features easily with a smaller team and less chance of defects.
There are several interfaces to the STX platform. The primary interface is a collection of GraphQL queries and mutations for accessing data and placing orders paired with a web socket system for realtime notification. Since STX doesn’t believe that hiding our APIs either enhances security or is practical, we publish the API to the public and encourage its use. In fact we want customers to use our APIs to create automated trading clients and we provide extensive support to such customers. Instead of attempting a pointless exercise in hiding the exchange API we implement all of our security in that API, assuming the worst people on the planet have access to it and will do bad things.
The STX platform also has two professional bettor targeted software development kits (SDK) that overlay the GraphQL / Socket interface. Available in Python and C#, the STX SDKs rapidly accelerate the development of professional integrations into the STX platform.
In addition the professional can also utilize the Financial Information Exchange (FIX) standard to integrate with our server, opening up the possibilities of integration with traditional financial trading platforms.
The STX iOS application provides a beautiful user experience which is used primarily by the retail bettors. The app resembles common day trading applications and has many built in features.
With the acquisition of a license as a B2C operator in Ontario, STX has demonstrated that its platform meets the most stringent compliance requirements of the sports betting industry. The STX team spent over two years navigating the pitfalls of the compliance space and providing the requisite responsible gaming, anti-money-laundering and reporting needs of the industry. Not only did we work to meet compliance requirements, we worked with the regulators to develop a platform which will meet their needs in protecting vulnerable people and still providing a great product to the users.
Our administrative interface was designed from the ground up to allow almost endless configurability for every role in a sportsbook from compliance officers to sporting event monitoring staff. Rather than trying to build multiple different interfaces for roles, our staff can configure the interface as needed and leverage a built-in task system with automated alerts. For example a compliance officer will be notified in the alert system that a customer needs to provide documentation to pass KYC checks.
Furthermore, the admin interface is built to do real time monitoring of markets using an internally generated interface powered by Phoenix LiveView technology. This means that the interface does not have to publish and secure APIs and can still monitor thousands of trades and bets per second and display them in a readable format using filters and other real time monitoring tools. With this technology our administrators will not only be able to see the liquidity in the market, they will be able to detect fraud and collusion with the help of data science tooling.
When it comes to technology integration STX has integrated state of the art geo-location technology that allows us to know that the customer has placed orders within restricted jurisdictions. In addition, STX has integrated industry-leading payment provider technology and payment technology to move money in and out of the platform in a safe and secure manner. Finally, we have integrated leading KYC technologies so that we know who our customers are so we can manage them effectively. These integrations allow the STX platform to leverage all of the reporting and compliance capabilities of these providers as well.
The ability to bet on sports with automated tools in a high frequency environment incentivizes professional bettors to participate on the STX exchange. STX can generate revenue in a variety of ways on the exchange including, collecting fees on trading activity, offering subscriptions to the platform, and selling unique market data only available from STX. Given that the professional participants on the exchange are providing the pricing and liquidity, the risk associated with offering a traditional sportsbook is mitigated. Furthermore, the professional betting activity on the exchange will enhance the ability of the STX platform to accurately price traditional sportsbook offerings.
Casual bettors on the STX platform will have the advantage of competitive pricing on traditional markets thus they will come to the platform to get better odds than other platforms offer. Combined with other incentives like bonuses and discounted fees, the retail bettor will be far better off on the STX platform and less likely to go elsewhere. Not only will a competitor have to match the incentives, the competitor will have to beat the pricing of a large number of professional bettors which will be a difficult task to say the least.
For the day trader, the STX interface resembles a day trading application more than a betting application. It has been commonplace for years for individuals to “bet” on Tesla stock or the price movements of cryptocurrencies and STX offers that user experience. Replacing concepts like bet slips with trading terminology like market and limit orders expands the reach of the platform to a wider audience.
The STX platform is built to increase the total addressable market for sports betting by welcoming a broader user base than traditional sportsbooks. The goal of the platform is not to cannibalize the existing offerings at traditional sportsbooks, but to supplement the industry with a platform built on modern technology enabling a more expansive reach and unlocking trillions of dollars of untapped potential.
While the immediate use case for the STX platform is to revolutionize the sports betting industry, the architecture has been built in a way for it to be adaptable to any other supply and demand driven marketplace. Throughout the last decade there has been a surge of demand for trading venues in alternative asset classes. This demand has given rise to platforms like OpenSea for trading NFTs, StubHub for buying and selling tickets, and Artsy for investing in art pieces. The STX platform has the foundation to disrupt all of these industries and more with a faster, more scalable and resilient platform than the competition.