Betting exchanges are fairly new, dating to the early 2000s. The concept of a betting exchange has become enormously popular, and for good reason. Once you get the hang of betting exchanges, you’ll find that they offer you more room to manoeuvre than traditional bookmaker sites.
Essentially, they cut out the middle man, letting you participate directly in betting markets and even set your own odds. They also offer some of the most competitive odds on sports events. However, they can be potentially confusing for new users.
Betting exchanges versus bookmakers
Traditional fixed-odds bookmakers offer odds, or ”prices”, on all possible outcomes for specific events. When you place a bet in this type of market, you’re essentially betting against the bookmaker. The bookmaker includes an “overround” in the odds it sets to secure a profit. This means that the odds are slightly lower than the true odds, or actual probabilities, that have been calculated for the possible outcomes of an event.
On a betting exchange, you can offer your own odds or accept odds set by another user. The betting exchange itself plays no part in setting the odds. All it does is display the odds set by its users. To make a profit, a betting exchange charges a commission on each winning bet.
How to use a betting exchange
To use a betting exchange, you start by signing up for an account. The top exchanges, like Betfair and BETDAQ, both offer new customers free bets. Once you have an account and you’ve placed a single bet above a specified value, you can log in at any time to access all the markets on the exchange and choose whether to back or lay specific outcomes, for just about any significant sporting event. Betting exchanges offer two options for every betting market:
- the back market, which allows you to bet that an event will produce particular outcomes, much like betting with a fixed odds bookmaker
- the lay market, which allows you to bet against particular outcomes occurring.
In each of the two markets, the three most competitive odds for each selection are listed, and the best of these odds are highlighted.
In the back market, the cash figure listed under the odds for a selection is the total amount of money you can stake on the selection at those odds. If you choose to bet more than this amount, the excess will be traded at the odds selected on the lay side of the market.
In the lay market, the figure listed under odds is the total stake you could win on bets at those odds. If you choose to lay more than this amount, the excess will be traded on the back market.
Backing a selection in a betting exchange
Say you think Brazil is going to win the 2014 World Cup. To back Brazil, you click the highest odds currently on offer in the “Back” column. This opens a screen you can use to specify the stake you want to bet. Suppose you decide to stake £10 on Brazil winning the World Cup.
Once you’ve placed the bet, the amount you could win displays in green below the entry for Brazil. This amount is your stake multiplied by the odds, minus a standard commission that the betting exchange charges for all winning bets. Usually the commission is between 5% and 10%. The amount you’ll lose if any other country wins the Cup is the amount you staked – in this case £10. This value will display in red below each of the other entries in the betting market for the World Cup.
Laying a selection in a betting exchange
Now say you want to bet against Germany winning the World Cup. If you click on the odds for Germany, you will be asked to input the value of the stake you are prepared to lay and also be given the option of selecting your own odds. The stake you enter is basically the stake you want to bet against, and the amount you will win if your lay bet wins.
The exchange then displays your liability. Your liability is the amount that will be deducted from your account once you place the lay bet, and the amount you will lose if your lay bet loses. The liability is calculated by multiplying the stake you are laying by the decimal odds at which you are placing the lay bet.
Say you lay a £10 stake on Germany winning the Cup. This means that if any country other than Germany wins the Cup, you’ll win £10, minus any commission charged by the betting exchange. If Germany wins the Cup, you’ll lose £10 multiplied by the odds at which you placed the bet.
Setting your own odds on a betting exchange
You can use the screen that opens when you click either a selection or existing odds to post your own odds, in both the back and lay markets. Say you want to place a back bet. You can try to secure more favourable odds than those displayed by setting the odds yourself. This is equivalent to asking if other users will bet against you (or place a “lay” bet on your selection) at the odds you specify. Accordingly, the new odds you set will appear in the “Lay” market, provided they’re lower than, or equal to, any of the three lay odds currently displayed for the selection.
If someone places a lay bet at those odds, it’s this person who’ll have to pay you if your back bet wins – and who’ll get your stake if your bet loses. If nobody chooses to place a lay bet at the odds you’ve proposed, your stake will eventually be refunded.
Trading on a betting exchange
Trading is a strategy that attempts to guarantee profits form a combination of back and lay bets before the event being bet on has produced a result. It is an effective method of ensuring that bets that are winning before the event is finished produce a profit, and can also be used to minimize losses on losing bets. Visit our page on trading for more information.
What are the best betting exchanges?
The biggest betting exchange by far, and the most popular, is Betfair. Second in line, with a 7% market share, is BETDAQ, which was acquired by Ladbrokes in February 2013. Both offer professional, reliable services and a huge range of markets. There are other betting exchanges. However, few have the volume or liquidity that’s needed to ensure attractive odds for a wide range of markets.