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Betting exchange explained

A Different Way to Bet: A Guide to the Exchanges

Trading at Betting Exchanges

Find your selection, inspect the odds, decide on your stake and place your bet: that’s how traditional bookmakers operate.

But for some punters, knowing that bookies build in a profit margin is enough to put them off. And others quite fancy the idea of turning the tables on their fellow bettors and playing the role of bookmaker themselves. And that’s where betting exchanges come in.

What is a Betting Exchange?

An exchange is a peer-to-peer betting network, enabling you to place bets and ‘match’ wagers placed by your fellow punters. The most widely-used exchange is the platform provided by Betfair, with millions of pounds wagered here every year.

So here players are betting against each other, with the odds taken those provided by the punters involved. The easiest way to understand it is via a working example:

Punter A thinks that Manchester United will beat Liverpool, and he is happy to put his money where his mouth is. Rather than backing the Red Devils with a bookmaker, he is instead going to ‘lay’ Liverpool. This basically means he doesn’t think Liverpool will win.

Elsewhere on the world wide web, Punter B is planning his next bet. He has a sneaky feeling that Liverpool might do the business against their old enemy, and he is willing to back them accordingly.

Punter B logs on to the exchange and finds Punter A’s lay price of 3.00. Hmm, that’s better than what the bookmakers are offering, he thinks. So he matches Punter A’s bet with a £10 stake.

So now Punter A’s liability is £30, while Punter B could net a return of £30 for himself (minus the exchange’s commission).

The Advantages of Betting Exchanges

  • Free Market Economy = Better Odds for Punters

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Quite simply, the most obvious advantage to placing your bets via an exchange is that you are not tied down to a bookmaker’s set odds. They employ a team of odds compilers that spend hours crunching the numbers to ensure the bookies’ profit margin is kept intact, while here you are betting against a fellow sports enthusiast: and that means the margin for error is greater.

This free market approach means that you can often back your selections at better prices; particularly where the ‘layer’ has undervalued a particular team/player/horse.

  • Rarely Profit Margins to Contend With

While some traders in betting exchanges are professional gamblers, for others it is merely a sideline for a bit of fun. They won’t spend time calculating profit margins and implementing these into the prices they set. Frankly, in many cases where a mainstream sporting event is about to begin, you will find better odds on an exchange than through a traditional bookmaker.

  • Lay Me Down

It can be frustrating when we have an informed opinion that we cannot support with our money. We might be adamant that Liverpool WILL NOT beat Manchester United, but what if the game ends in a draw? We may not have accounted for that in our bets.

In horse racing we may have noticed that the favourite doesn’t always fancy the kind of inclement conditions. But we still have the task of finding an alternative winner in a field of maybe seven or eight horses. In golf, we may well know that the favourite is lacking confidence – but for us to make money we then have to find a suitable winner amongst the 100+ entrants.

With laying, we are able to take advantage of our opinions and insights by making such grand statements. Don’t think Liverpool will beat Manchester United? Then let your fellow punters know via the exchange. This automatically gives you a 66% chance of winning (Man Utd or the draw).

  • No Fear of Closed Accounts

It’s a very rare occurrence, but there have been examples though the years of punters having their accounts closed by bookmakers – or at least stake limits put in place – by bookmakers; purely for having the cheek to win large amounts of money. The beauty of the exchange system is that you are betting against your peers with no market intervention.

The Disadvantages of Betting Exchanges

  • Percentage of Winnings Lost in Commission

Unfortunately in life, it is very rare to get something for nothing. Whenever you win via an exchange, you will see a small percentage (2-5%) of your payout disappear in the form of a ‘commission’. That’s the price you pay for the exchange acting as a middleman between you and your matched bet partner.

  • Lack of Prices for Non-Mainstream Events

Often with betting exchanges, it is the bigger and more popular sports that generate the most interest. More obscure sports, or even minor events within the more mainstream pastimes, tend to attract less investment from punters; as such you might find it hard to find a matched bet here.

Some Final Notes on Lay Betting

It is a new way to bet and often generates plenty of excitement for punters new to exchanges. Filling the shoes of a bookmaker feels like a great idea – you never meet a poor bookie, so the old saying goes – but remember you have to take on the liabilities that they do too.

Laying is basically betting on something NOT to happen, i.e. laying Chelsea not to win the Premier League title. That offers plenty of profit-making potential to explore.

But remember, should you lose your lay bet then you don’t just lose a stake: you must settle your fellow punter’s bet as well. If you have quoted them 10/1 and they have backed a selection at £10, then you will have to fork out £100 to cover their winnings. That’s known as your liability, and is something that is commonly forgotten by newcomers to the exchange.

And, like a bookmaker, you can only ever win your fellow punter’s stake; no more than that.

It’s also important to remember that if you are laying a bet then the exchange will take your maximum liability first – so you will see the punters’ potential payout disappear from your account, where it is held by the exchange until the bet has been settled. That’s off-putting for some as well.


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