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What is betting exchange?

An exchange is a betting website where punters bet against each other. Punters are able to assume the position of the bookmakers and offer odds on things not to happen as well as betting in the normal way.

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.

Betfair

The way bets are placed changes slightly from traditional bookmakers. You are able to request your own odds on markets as well as placing your bet at the offered odds immediately.

The closer you request your odds to the current trading price the more likely it is that your bet will be matched. If you

r bet is not matched before the beginning of the event the bet will be void and your stake will be returned to you.

Exchanges Example

You see the odds on Liverpool to beat Chelsea are 2.5 to back and 2.7 to lay

a) You could bet at 2.5 immediately

b) You could offer to bet at 2.6 or 2.7 or 2.8 say and hope that someone matches your bet.

Obvioulsy the higher odds you request the less likely your bet will be matched, and clearly people looking to Lay Liverpool will take the lowest odds requested first.

What Is Laying

Laying is betting on an outcome not to happen. The rise in popularity of exchanges has lead to many punters trying their luck at acting as the bookie and laying bets.

In order to lay a bet you have to see what price it is currently trading it and decide whether you want to lay at that price and have your bet matched straight away or you can offer your own odds in the hope that a backer will want to match your bet at those odds. If the bet is not matched then no bet takes place and the stake remains in your account.

Laying Example

In the Liverpool v Chelsea match, rather than betting on Liverpool you could lay Chelsea, that way if Liverpool won or drew then your bet would win.

Lets say Chelsea are 2.8 to back and 3 to Lay

You dont want to risk an unmatched bet so you lay £50 at the available price of 3 (2/1)

This means someone else is betting on Chelsea at 2/1 and if Chelsea win you have to pay them!

Hence if Chelsea win (and your bet loses) you have to pay out £100

But if Chelsea lose or Draw (and hence your bet wins) you get to keep their £50 stake.

So effectively you are risking 100 to win 50, in this example very much like betting £100 on "Liverpool or Draw" at odds of 1/2

Advantages Of Using Exchanges

Better Odds

Exchanges claim to offer on average 20% better odds than traditional bookmakers. This figure is somewhat skewed as most short priced selections will be more or less the same odds on an exchange as they will be in the bookmakers, sometimes they are even worse. However, bigger price selections, especially those over the odds of 10/1, you do often receive a much bigger price than the traditional bookmakers are offering but always check all bookmakers odds as well as exchanges as this isnt always the case.

Trading

Exchanges are unique in that they let you trade on events and lock in a profit whatever the outcome before the event takes place. With traditional bookmakers you can only win money if you correctly predict the outcome of an event but with exchanges you can win money simply by predicting market moves. It is a little like the stock market in that you want to back at big odds then lay at smaller odds or lay at smaller odds and back at bigger odds. If this is done successfully then the punter can create a situation where they win whatever happens or simply have a risk free bet on an event.

Trading Example

You bet £10 on a horse in an ante post market at 66/1 knowing it is a very likely runner. Lets call this bet A.

Weeks or even months later when other more fancied rivals have been ruled out of the race the horse is now trading at 10/1.

Currently your situation is you get £660 profit if the horse wins, and £10 loss if the horse loses.

Lets say you decide to lay the horse at 10/1 for £50. Call this Bet B

Now if the horse wins

=> Bet A wins £660

=> Bet B loses £500

=> You win £160

But if the horse loses

=> Bet A loses £10

=> Bet B wins £50

=> You win £40

By adjusting the stake of the second bet you can adjust your possible returns in each situation. Obvioulsy you win less on the winner this way, but you can gurantee a profit which is often useful.

This is known as 'greening out' as all of the potential wins on each horse will be shown in green, indicating that outcome is profitable.

You can apply this to any market on any sport both before the event starts and also during play if in-running betting is available.

Market Warning Signs

Exchanges are renowned for providing information about events that is not publicly available through market moves. For example horses that are very well backed on the exchanges are very likely to run well whilst those that drift alarmingly rarely perform well. In ante post markets, a major drift is often followed by announcement in the following days that a horse is not going to take part in the race.

Betting In Running

Exchanges also offer the option of in running betting on most televised events. This adds an extra dimension to the service they offer as it caters for the needs of even more punters. Betting in running requires different disciplines to regular betting.

Disadvantages Of Exchanges

Odds Are Not Always Better

Although exchanges advertise 20% better odds this is an average and is mostly made up of bigger price selections that are often available at much better odds. So dont presume that you will get better odds on exchanges. Always check all bookmakers prices as well as the different exchange prices. Frequently the bookmakers offer better odds on the favourites.

Liquidity

Unlike at a bookmaker where (within reason) you can bet what you want at the price they quote, with exchanges it depends on what the other punters are offering. Much of the time this isnt a problem but on some of the smaller events or less popular sports then there may be very little available at sensible prices.

Liquidity Example

You may see the odds for Liverpool at 2.5 but the amount of money available at that price (usually shown underneath) is only £4. The next best price might be 2.46 where there is £12,000 available. Hence if you wanted to bet £50 on Liverpool you could only match £4 at 2.5 and £46 at 2.46.

Unmatched Bets

If you are placing many bets it is not too uncommon to forget about some unmatched bets you may have put up. Due to changes in circumstances such as non runners in ante post horse racing markets or fallers on in running horse races, the odds you have put up may become very enticing for someone else and they may be taken before you have a chance to react and cancel your bets.

Bets are sometimes cancelled though to protect the punter from this. In particular any pre event market will be closed at the off and all bets cancelled and a new market potentially started for in-running betting.

Commission

Exchanges don't actually lay any bets themselves so they make their money by charging commission on each winning bet. The typical commission charge is 5% of winnings.

Commission rates will decrease the more you bet with exchanges but to make a significant decrease in the figure you will need to be a very serious punter placing several bets a day. It can sometimes be difficult to work out what the real odds you are getting once commission has been applied.

At ValueChecker this is taken care of as the prices for exchanges take commission into account. If you are on a lower commission rate than 5% you can adjust the settings easily to reflect that.

Commission Example

If you bet £10 at 6.0 your return is £60 before commission.

If you are on 5% commission this is applied to your winnings (£50) and hence £2.50 commission is detucted from your £60 return leaving £57.50

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