Betting exchange, in a nutshell, is a platform where an average betting customer can bet against other punters. Launched back in 2000 when Betfair went online, this revolutionary idea changed online betting forever. It wasn’t easy though, as many punters tried to understand exactly how does Betfair work and how they could benefit from this new and innovative betting site. Nowadays almost every punter has heard about betting exchanges, but only a few get involved in backing, laying and trading bets. In this guide, we will try to explain the basics of betting exchanges and trading in our attempt to show you another way to profit from sports betting and answer a simple but yet frequently asked question. Betting exchange, how does it work?
Many bettors hesitate to open an account on a betting exchange as they have little understanding of how exchanges work. In fact trading is not that complex as it may sound. You may have heard that it’s like a stock market, but instead of stocks, options and derivatives, you exchange football prices. It’s really straightforward and far more profitable than conventional bookmakers. Similar to wagering at any betting website you need to know the sport or sports you are about to bet and of course expertise in some leagues. Betting exchange and how it works is a very simple question to be answered.
The most fundamental terms you need to understand before you make your first steps on a betting exchange are “Back” and “Lay”. In a few words, “Back” means that you are betting on something to happen and “Lay” means that you are expecting something to not happen. The real difference between a traditional bookmaker and an exchange is the “Lay” part. The “Back” option works just like placing a bet at your bookmaker – except with much higher odds. So no need for further discussion here. It is a fact that most punters who are looking to maximise their profits from a match, use their exchange accounts to benefit from the “Lay”. Let’s see how through an example. In the forthcoming Premier League clash, Arsenal are hosting Wolves. The average odds are 1.75-3.75-4.75.
With two offensive teams in the field you think that is quite possible to see quite a few goals. But the odds for over 2.5 or even 3.5 goals are far from satisfying. A quick look at the recent results of both teams show that the draw is not quite what you’d call a common outcome. So it’s either a home or away win. Let’s see your options. In a bookmaker you can take the home/away win (double chance) at odds 1.25. Even the Draw No Bet options (Arsenal at 1.28 and Wolves 3.50) to satisfy you. On the contrary you find the Lay the Draw at 4.00. So you make that choice and just wait and expect from the teams to confirm your inspiration.
The only thing to consider is that if you are about to place 100 euros ον your bet, then the exchange will withhold 400 euros as liability from your account. Remember that in “Lay” you act as the bookmaker and if you lose you have to pay your opponent.
Since we explained the very basics about betting exchanges, it is time to see how you place your bets. Acting like you were in the sportsbook of any traditional bookmaker you just seek the match of your interest. At first you might be surprised by the different odds options you have for the outcome, usually three. There are not all active, just the one that is in the blue or pink frame. Otherwise it is all the same as any sportsbook, with the exception of course of the “lay” option.
If you spend some time watching the odds on a betting exchange you might notice that they change a lot and fast. And for sure more often than you are used to a traditional bookmaker. This high volatility is not caused by any extraneous factor or in fact any other sports reason (such as injury or weather conditions etc). It is happening simply because many punters choose to either “back” or “lay” specific markets. So every time one punter acts like a bookmaker and offers new odds ( Arsenal to win Wolves was 2.23 and now is offered at 2.25 for example) something is stirring. But you have to always remember that these types of movements are caused by the estimation of others punters about what is a valued price or not.
As we already mentioned Betfair was the first betting website that allowed trading and laying. Of course many others followed the path of the pioneer, but somehow in the way they didn’t make the same bang. But there are still three alternatives at your disposal. But given that there aren’t many differences at what each one offers, the choice is usually based on the commision they charge or their liquidity. For example, Betdaq used to be Betfair’s main adversary. Until they faced liquidity issues and their applied technology was lacking. Lately they merged with Ladbrokes in an attempt for a come back.
Smarkets, on the other hand, made an impressive entrance at the field. They based their strategy in exploiting Betfair’s weak points. And commission was one of them. In that manner they managed to add big wallets to their client list. They are currently considered as industry’s number two with a lot of potential.
And there is always Matchbook. Another exchange betting website trying to make it through a tough and competitive environment. There is nothing wrong with them, but only their lack of a clear strategy that holds them at the fourth place.
As mentioned before, betfair is the first and till now the most punter frequented betting exchange. So let’s have a look at the questions many bettors ask about betfair.
If you multiply your net profit with what is called the Market Base Rate you get the commission Betfair will charge you with. The Market Base Rate varies and it can start from 5% (for UK new customers), but it can be reduced to 2% if you trade a lot and with large stakes. Quite a difference don’t you think? That’s why it’s smart to collect as many Betfair points you can get.
It simply indicates how much you money you have traded. The more you trade the more points you get thus improving your Discount Rate and adding more money to your wallet.
This Betfair function is used to help customers ensure they have sufficient funds when settlement time comes. This is required to accommodate functions unique to a Betting Exchange such as the placing and editing of unmatched bets, and the trading on markets by placing Back and Lay bets on opposing selections. At all times, a customer’s exposure is subtracted from their Account Balance to form a balance that is available for bet placement. The Cash Balance is viewable at the top of all customer interfaces and is an accurate representation of how much money the customer has available to spend. It’s not until market settlement that the Account Balance itself, is viewable in the Account Statement, is credited or debited with the final settlement value.
It is an additional tax that Betfair enforces on some of their clients. It only applies if your account is in profit over the course of its lifetime, the total charges generated by your account are less than 20% of the gross profits you have made and your account has been used to bet on 250 separate exchange markets. According to Betfair this influences less than 1% of their clients, so no need to worry. It is true though that many punters are finding this rather complicated.