Betting Exchanges Explained

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Nowadays betting exchanges are becoming increasingly more popular among punters, as they seek an alternative to the traditional bookmaker-punter betting relationship. For those new to betting exchanges, there are some fundamental differences between these and traditional bookies.

The concept may be confusing at first but in actual fact it isn’t difficult to bet at an exchange and the payoffs are well worth the short time it takes to learn the basics. To start with, when you place a bet with a normal bookmaker, you are merely a customer to that business. In placing the bet, you are taking odds which have been priced in alignment with a calculated profit margin (bookies price up events with the specific aim of obtaining a profit regardless of the result).

I also recommend that while reading this article you open up an actual betting exchange to check them out. While Betfair is the most popular – they’ve been around for so long that they aren’t as “newbie friendly”.

Betting exchanges differ considerably because they operate on a person to person basis and make their money from a small commission fee which is applied to all winning bets. When you bet with a betting exchange, you are not betting against a business (bookie) but against another individual like yourself. Because of the person to person nature offered by betting exchanges, punters are exposed to the revolutionary opportunity to ‘lay’, previously a role carried out only by bookmakers. Offering both the option to back and lay opens up exciting new dimensions for punters and allows them to deviate from the norm of regular sportsbook betting.

Betting exchanges have also really lost their appeal lately and are tied down with regulations and rules that most online sportsbooks don’t have to adhere to. So you may want to bet with instead, or another traditional online sportsbook as they have longevity.

The concept of ‘Backing’ and ‘Laying’

For all punters, serious or casual, ‘backing’ or to ‘back’ is a fairly straightforward concept. To ‘back’ a selection is simply betting on a selection ‘to win’, unsurprisingly the most common type of bet.

To ‘lay’ or ‘laying’ a bet on the other hand, is something that until the relatively recent arrival of betting exchanges was unavailable to punters and is therefore a process that is perhaps less familiar to people. Laying a bet is exactly what regular bookmakers do every day, when you place a bet with a bookie, they are laying the bet. Essentially, all a ‘lay’ bet is, is betting on something to lose or to NOT win. This is carried out on a betting exchange such as Betfair by offering odds on a particular selection to someone else who wishes to bet on the same selection to win.

Betting against another person through a computer might seem a slightly difficult concept to grasp at first, but it really is very straightforward once you become accustomed to the processes of the exchange. For example, imagine that for logical reasons you’ve decided to back a particular horse in the 12:25 at Newbury. You take odds of 5.00 for a £10 stake. At this point it is important to note that when backing or laying a selection on the exchange, there must be a sufficient amount of money available for the bet to be matched. To clarify, when two people successfully bet against each other on the exchange (a backer and a layer) the bet has been ‘matched’, in other words the bet has been locked in by the two punters. As the layer, you are liable to pay out the bet at the accepted odds in the event of the horse winning. In this case at odds of 5.00 for a £10 stake the layer would be liable for £40. The layers liability = the stake (£10), multiplied by the laying odds (5.0), minus the stake (£10).

The liability of a lay bet, compared to the profit of a back bet:


Opportunity to Sports Trade

Due to the person to person nature of exchanges, they offer more than just simply backing or laying a bet. They offer punters a chance to digress from normal sports betting by utilising the exchange as a trading platform. Trading is rather dissimilar from the standard sports betting approach. A sports trader isn’t concerned with knowledge of the sport itself; but rather, the likely movement that will occur in the market. In principle, trading on a betting exchange is essentially no different from trading on the stock exchange. Instead of buying and selling, betting exchange traders are concerned with backing and laying. Backing becomes buying and laying replaces the sale. The majority of trading in this manner is conducted before the race (horse racing) and the trader will be looking to make a number of minor profits by backing and laying at a small difference, e.g. back a bet at 2.4 and lay a bet at 2.35, thus securing a small but guaranteed profit.

Commission & Which Exchanges to Use:

One thing to remember about betting exchanges is that because customers are betting against each other, all winning bets are subject to a small commission fee. The exact commission percentage varies depending on which site you use. WBX: World Betting Exchange charged 3%-5%, the rate varies on the number of entrants in a market. So for example sports like soccer, tennis, cricket and basketball which have 3 or less entrants is charged 3% commission, sports like horse racing and greyhound however that have 5 or more entrants is charged 5%. Additionally, WBX have no premium charges on winning accounts and winners are welcomed. WBX reward their loyal customers with a loyalty discount that can reduce commission by as much as 60%, making their rate 1.2% of wins which is the best value of all the major betting exchanges. New members get up to £/€25 in free bets as incentive to join. However WBX closed down so maybe that’s a sign that the commissions Betfair have set are correct!