Betting Exchanges Explained

Last updated April 7th, 2020

An Overview of How Betting Exchanges Work

A betting exchange is where bets placed and layed by individuals are matched against each other.

This means if one person wants to back a horse at 12/1 for £5 then they can place that ‘Back Bet’ order and wait for someone else to take the bet. The person who takes the bet is called a ‘layer’ because they ‘lay’ the bet in identical fashion to a bookmaker. The layer is in fact being the bookmaker.

Because betting exchanges allow this person-to-person betting, anyone using a betting exchange is able to either back a selection, in the usual way, or lay a bet. It lets you become a bookmaker for your chosen selections, yet you do not need to have a bookmaker’s licence to be allowed to do this.

Betting exchanges give you the facility to trade on sporting events and so lock-in a profit. It allows you to take advantage of arbitrage situations by say backing a horse at 10/1 and then laying it at 6/1 (assuming the price contracts) so as to ensure yourself a profit whether the selection wins or loses.

The biggest betting exchange in the world is the multi-award winning Betfair betting Exchange.

Detailed Guide: How Betting Exchanges Work

BetfairBetting exchanges have revolutionised gambling. The concept is simple and this ‘betting exchanges explained’ page tells you how they work.

Each gambler or “bettor” can lay (take bets) as well as back (bet on) events, so punters can now act as the bookie.

Back: When you back a selection (an individual, a team, horse, dog or other) you are betting that it will win. This is just like betting with normal bookies or sportsbooks.

Lay: When you ‘lay’ a selection, you are the bookmaker. You are taking the betting stake and hoping the selection loses.

Choose odds: There is always a choice of what odds to accept. If you want better odds than are currently available, you can place an order for a bigger price.

Take a look at the odds before a game or a horse race and you will see them change as betting exchange clients back and lay their bets. The odds often improve nearer to the off, as the volume of money being matched increases.

Privacy: Your privacy and the confidentiality is maintained as nobody ever knows who they are betting against.

Guarantee a profit whatever the outcome: Betting exchanges also give you the opportunity, in certain circumstances, to make a guaranteed profit. The concept is the same as an “arbitrage” in share trading or spread betting. The opportunity arises in two scenarios: 1. When you lay a selection and the price subsequently gets longer. 2. When you back a selection and the price subsequently contracts. The concept is best explained by an example:

A horse is layed at 1.67. You have taken a £500 bet to lose £335 if the horse wins. The horse subsequently drifts to evens (2.0 on Betfair). Now you can back him on Betfair at 2.0 staking £400 and you will guarantee a profit whatever happens. In this example you make £65 profit if he wins and £100 profit if he loses.

It is never wrong to take a guaranteed profit. After all, If you could do this on every transaction you would never lose.

Learn more about betting exchanges

Betting exchanges have changed the face of the bookmaking industry. You no longer have to place your bet with a bookmaker. You can now bet, person to person, with anyone who is prepared to take your bet via a betting exchange. It is now the leading betting exchange, rather than the bookmakers, who will dictate the initial prices offered in the betting on sports ranging from horse racing to ice hockey.

There are a few betting exchanges to choose from but Betfair Betting Exchange, for good reason, is the most popular and well known betting exchange in the UK. It was started in 1999 by Edward Wray and Andrew Black. They had already spent a year developing the system that now underpins this extremely successful betting exchange. The Hammersmith and Stevenage based company now employs over a thousand people and has well over a million customers across the globe. The betting volumes on this exchange are massive, and seemingly ever increasing as more and more punters are persuaded by the benefits of betting with this leading betting exchange.

All canny consumers, especially potential punters, want to check out the competition in any field so it is worth knowing that another live contender in the betting exchange market, although undoubtedly second to Betfair, is Betdaq Betting Exchange. Betdaq was founded by Dermot Desmond and started trading in 2001. Based in Ireland with its registered office in Dublin, Betdaq is just one of Desmond’s many business interests which extend from a famous, luxury resort in Barbados to a large shareholding in a Scottish football club.

What are the benefits of using a betting exchange rather than a bookmaker?

The most obvious benefit of using a betting exchange is that the odds on offer are consistently much better than those on offer at the bookmakers. On average, betting exchange odds tend to be 22% higher but, if you bet on outsiders in horse racing, you can sometimes get double the odds on offer elsewhere. Punters find that the significantly better odds that are available more than compensate for the commission the betting exchange charges on winnings.

Betting exchanges not only accept the usual range of positive bets ie backing to win, but also enable customers to place a bet on a horse or football team or golfer, for example, to lose. This is called a ‘lay’. Sophisticated punters can balance their financial exposure in any horse race or other contest by both backing (to win) and laying (to lose). You can back and lay the very same horse in a race and, if you are able to optimize starting price movements, you may even be able to ensure that you have a positive financial outcome whether the horse wins or loses.

Another major advantage of betting exchanges is that they allow you to bet in-play, after the race or football match for example has started. At a conventional bookmakers, your opportunity to bet ends with flag fall or kick off. Once the contest has started you can do nothing except watch to see how your bet performs. With a betting exchange, if your initial selection in, say the Grand National, falls at the first fence, there is nothing to stop you backing another horse at any time. You can even bet on a horse in the final twenty yards of the race if someone is willing to match your bet.

What can you bet on with betting exchanges?

In most cases, you can bet on everything that would be on offer at a conventional bookmakers, and often a lot more. Betting exchanges will take bets on a wide range of sports including boxing, football, motor racing, golf, tennis, athletics and darts as well as the more traditional betting sports such as horse racing and greyhound racing. Odds may be offered on many other events too that are totally unrelated to sport. You may be able to place a bet on who will triumph in the X Factor or even American Idol. More serious events like General Elections will also be covered.

So how do betting exchanges actually work?

Betting exchanges like Betfair differ from traditional bookmakers in the way that they approach taking bets. If a customer places a bet with Betfair or any other betting exchange, the bet will not be taken by the betting exchange directly, it will simply be taken by another customer with an opposing view. The technology means that bets appear to be matched instantaneously if there is a customer out there with the necessary view. If, on the other hand, no one is willing to take or match the bet, it will not be placed.

How much do I have to bet with a betting exchange?

You can have a bet of just £2 with Betfair. If you are a larger scale punter, there are no maximum bet limits so you need not experience the frustrations that can often be encountered with traditional bookmakers. On a betting exchange, if a customer wishes to place a large bet, then it is likely to be matched with a number of customers with the opposing view rather than just one.

How do betting exchanges make money?

Betting exchanges do not usually take bets or expose themselves to risk. They simply take a commission from the winner’s profits. The commission taken is usually five percent but may be as low as two percent for larger scale betting activity.

How do you place a bet with a betting exchange?

The vast majority of bets are placed with betting exchanges online but telephone betting is also possible for existing customers who have an account with the exchange. This means that if you choose to go racing and want better odds than are on offer with the on course bookmakers, you can simply ring the betting exchange and place your bet over the telephone if higher prices are available.

Is betting with a betting exchange safe?

Betting exchanges have had to develop rigorous systems to ensure the security of customers account details. They know that security is one of their customers key concerns. Betfair and Betdaq Betting Exchange, for example, encrypt your full credit or debit card details and sends them over the internet just once, when you first register a card. Your details are then kept in encrypted form on the company’s secure servers. Betfair is a fully regulated, licensed betting operator not just in the UK but in a number of other key jurisdictions too. They give full details of their secure server credentials online if you would like more detailed reassurance and name the Royal Bank of Scotland and DataCash as their secure payment providers. If you want to research the security measures in place for any reputable betting exchange, you can usually find full details on the About Us page of their websites.

So what is stopping you from becoming a betting exchange punter?

If you are now convinced of the merits of betting exchanges, you have probably discovered an additional benefit of joining one, that new customers are usually offered an initial free bet. With the prospects of better odds, opportunities to lay as well as bet, both ante post and in running, what is stopping you from having a bet with a betting exchange? If you are going to have a bet, it has to make sense to take the very best odds on offer, which will probably be with a betting exchange, if you want to maximize your profits.

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