Betting Exchanges Explained
Betting exchanges, such as Betfair, World Bet Exchange (WBX) and Betdaq, are different from standard bookmakers in that they allow members of the public to effectively act as bookmakers and accept bets from other people, as well as placing bets themselves. They aim to cut out the middle man and bring together two people who want to take different sides on a given event with the idea that by eliminating the bookmaker both parties will achieve more favourable odds.
Betting exchanges grew out of “peer-to-peer” betting, as it was then known, with the first site called flutter.com launching in 2000. Betfair, which was actually created in 1999, ultimately merged as the dominant partner with Flutter and since then has been the market leader in the betting exchange world, going from strength to strength.
How Do Betting Exchanges Work?
Betting exchanges work by facilitating a transaction between two people who want to back (bet on an outcome) and lay (bet against that same outcome) the same event. Assuming I think Gareth Bale will score first I can put a “bid” on an exchange requesting odds of 6/1 (7.00 in the decimal format that exchanges use) with my stake of £10. Somewhere else in the world someone else may feel Bale won’t score first and they can then take me up on my bet. They don’t have to match all £10 but whatever amount they decide to lay will have a liability of six times their “stake”, such that if they choose to lay all £10 they would need to entrust the exchange with £60 in order to cover that bet.
Exchanges such as the three we work with are highly reputable and trustworthy and because they hold the funds from both parties to a bet your money is never in danger. The exchange doesn’t actually risk any money of its own but instead takes a small fee as commission, either from the winner or from both sides of the wager.
Usually when you navigate to a market you will see a box on the left (often blue) and a box on the right (pink) and these represent the odds that currently have money available to back and lay respectively. If Liverpool are at home against Hull you may see odds of 1.51 (just over 1/2) to back and 1.52 to lay and underneath those figures you will see in smaller text the amount that is available, for example £4,765 to back and £8,090 to lay.
Both the odds and the amounts available can move very quickly, especially as kick-off approaches but this gives you a good idea as to how much you can bet – or lay – and whether your wager will get matched instantly and be confirmed or whether you will have to wait for someone to come along and take up the other half of the gamble.
Pros and Cons of Betting at an Exchange
- Better Odds – Bookies take a cut of around 20% (sometimes more) as a profit margin whilst exchanges take a commission of 5% at the most and so the odds, especially on outsiders, are often considerably better at the exchanges.
- No Risk of Being Banned or Limited – Get lucky and have a good winning streak at a bookmaker and you may have your account limited (to small stakes) or even closed altogether. Because your bets are not against one person and the exchange doesn’t care whether you win or lose (they get their commission either way) this will never happen at an exchange.
- You Can Lay Bets – The chance to be a bookie gives you a lot more flexibility and options and laying bets – betting against a given outcome – can be a great way to profit from football.
- Great In-Play Betting – Because exchange markets are self-regulating an exchange can offer far better odds and more markets on in-play betting.
- No Limits – For high-rollers an exchange is great as there are no theoretical limits to the size of bet you can place (see liquidity below).
- Trading and Hedging – Exchanges, because they allow you to bet and lay and because they have great in-play options are perfect for trading and hedging. You can cut your losses, lock in a guaranteed profit or aim to bet high and then lay at a lower price later on.
- Liquidity Problems – Whilst there is no theoretical maximum bet, you need to have someone willing to accept, to lay, your bet (or back your lay if you are acting as bookie). At the smaller exchanges and in some of the more obscure markets a lack of liquidity can mean bookies offer higher odds and/or bigger stakes. Note that this is rarely a problem for Premier League games and other big matches or tournaments.
- Minimum Bet – Most exchanges have a £2 minimum bet so may not be suitable for smaller players.
- Multiples Betting – Due to the nature of exchanges they do not cater for multiple betting and whilst the top exchanges do offer multiples the range of options is nowhere near as good as at bookies and the odds are often far behind the individual prices for each selection.
- Fewer Markets – Exchanges need liquidity and so aim to concentrate on fewer markets, meaning less choice for those who like “special” or unusual bets.
- Odds Change Quickly – Odds change at bookies too but because betting exchanges react quickest to team news, on-field events and other developments, odds at exchanges move very quickly, sometimes meaning you miss out on the price you want to take.
List of Betting Exchanges
As mentioned above there are three main betting exchanges currently – Betfair, Betdaq and WBX. In this next section we’ll take a quick look at each of them, but for a more detailed review just click the relevant heading.
Betfair is undoubtedly the biggest and best betting exchange around, with superb software, a huge choice of markets and the best liquidity – by far – of any exchange. They have around one million active customers, have won numerous industry and Queen’s Enterprise awards and they are a massive, reputable and trustworthy brand.
They have deep pockets and this has allowed them to expand into other gaming areas – including a fixed odds sportsbook – as well as offering improved software, an excellent mobile platform and a wider and better range of betting offers.
Betdaq were purchased by Ladbrokes in 2013 and since then Ladbrokes have been slowly improving this previously Irish-owned exchange, increasing liquidity and offering better promotions. There is still a lot of work to do and whether they can ever become serious rivals to Betfair remains to be seen but they occasionally have better odds and have a lower commission rate so are certainly well worth checking out.
Betdaq was founded by an Irish businessman in 2000 and, like their rivals, it is a brand that can be trusted, even more so now they are part of the Ladbrokes empire. Their site doesn’t function quite as well as Betfair’s but they do offer an excellent mobile platform and great in-play betting and are certainly worthy of consideration as an alternative to the market leader.
WBX is the smallest and newest of the three main betting exchanges and whilst they offer more competitive rates of commission – claiming customers will pay 35% less than at Betfair – they have a lot to do before they can be considered a major exchange player. The full site launch took place in 2006 but the London-based company needs major investment in order to attract more customers and improve liquidity. That said, they do the basics right and their commission levels and free bets and offers make them a worthy addition to your exchange portfolio.