Who’s going to come second in the Labour race?

With Brown’s succession looking like a foregone conclusion there’s one issue that is still wide open – will there be a contest or will Gordon get his coronation? The challenge is to find a way of betting on this in the absence of a specific market on the issue.

This is where Cantor Spreadfair’s Labour leadership market comes in. It might look a little complicated but it does provide a range of interesting betting options that allow you to have a punt on whether, say, David Miliband will bow to the growing pressure for him to run.

Because this form of betting provides returns if you have bet on the runner-up then there might be the chance of a profit on the environment secretary.

The way it works is that 25pts awarded to the next Labour Party leader and 10pts to the runner up. All others will settle at 0pts. If there is no contest then 25pts are awarded to the next permanent leader and 0 pts to all remaining candidates.

So at current prices a £10 Miliband bet would cost you a maximum £10 multiplied by the BUY price = £42.50. If Miliband runs and, as would be likely, comes second then you would win £10 multiplied by the difference between your BUY price and 10 = £57.50. But if the Environment Secretary went on to win the contest then you would pocket the difference between your BUY price and 25 multiplied by your £10 stake = £207.50.

I think that there’s good value in a punt on John McDonnell – who declared his candidature last summer and, unlike the other person to declare, Michael Meacher, voted against the Iraq war. McDonnell, in my view, will find it easier to secure the 44 nominations than Meacher and you would make a nice profit if he was the only contender. A £10 bet at the current buy level of 1.25 would cost a maximum of £12.50. If he came second your profit would be £87.50. Given there must be a fair chance of this happening then that price looks quite tempting.

Like all betting on the exchanges and spread markets it is possible to trade so you can go in and out of positions and make money if you correctly forecast how other punters will react. My guess is that the Miliband price will edge forward and this might be a good trading position. I also sense that other punters will see value in the McDonnell position and his price might rise.

Cantor Spreadfair is a combination of spread betting and a betting exchange and has started to develop some interesting markets. What I like is that the rules of their markets are much better defined than Betfair.

Mike Smithson