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Betting Exchanges

A betting exchange is a website where peer to peer betting takes place. The best example of a betting exchange is one of the world’s largest gambling sites, Betfair.

Here bettors can log-in and wager on any team of their choice which is referred to as a “back” or they can bet that a team will lose which is called a “lay”. The odds at betting exchanges are set by the punters themselves; no bookmaker is involved.

So, for this reason, you can only lay so much as peers on the other side are looking to back, and can only back as much as peers on the other side are looking to lay. This makes smaller exchanges tough to use, but when betting at Betfair it is a breeze. At Betfair the liquidity is amazing; you won’t have much trouble getting backs or lays matched.

How Do These Services Work?

The idea of a betting exchange is to allow punters to have the option of either backing or laying on any specific market, technically allowing them to become their own bookmaker.

Using Betfair as an example, the money you use to place or lay bets on their exchange actually has nothing to do with them in terms of bookmaking. The software is merely a ‘middle ground’ where punters bet at odds set or requested by other punters, rather than Betfair itself.

Benefits

A huge plus to betting at exchange sites is their massive selection of in-play markets. Regular bookmakers have trouble setting live betting odds on simultaneous markets, and likewise will generally offer 1-3 matches at a time that.

At exchanges, the odds are set by the punters themselves, and therefore a massive selection of in-play is available covering a wide variety of sporting events.

They allow punters to set their own line on each market. Whereas a bookmaker sets odds that offer good value to them (the bookmaker), an exchange often brings about much fairer odds at a much higher value. As there is zero ‘house edge’ and only commission, it’s common to find sites like Betfair offering 25% better value than traditional bookmakers.

Many users of these services take an advantage of the laying aspect that is offered, and technically become their own bookmaker. This offers easy routes for many to set odds that they feel are fair on any market, whilst still being able to make a profit.

Where Do the Exchanges Make Their Money?

Each of them charges a commission on net market win. To clarify, if through a series of back and lays you lose $1500 on one team and win $1800 on their opponent, your net win is $300.00. This is the amount you pay commission on. The commission rates vary from one service to another. Betfair charges a flat rate of 5% “of net market win”. However, high volume bettors can have their account upgraded and in return only get charged a 2% commission fee.

Matchbook, a smaller competitor to Betfair, charges 2% commission for all bets. Whilst a much lower amount than the standard Betfair deal, they unfortunately offer fewer markets to bet on and their lower liquidity leaves lay bettors checking back frequently hoping their wagers were matched. One benefit though is, even with already the lowest rates in the betting exchange industry, Matchbook claims they are willing to negotiate commission rebates for high volume bettors.

BetDaq is another example who charges their customers just a 2.5% commission. Although relatively small compared to Betfair, in the next section of this article we will look at why one shouldn’t automatically discount smaller betting sites.

Should I Always Use Betfair?

If you’re wagering in-play then YES! The other exchanges do not have enough liquidity to support lay bets; you’ll find most of your lays go unmatched at the competitors.

Outside of live betting, there is no doubt that Betfair is as big as they come. They have spent a lot of time and money in becoming the number one sports betting marketplace, however there are times where other sites may be of more value.

Odds Shopping

Shopping for the best odds whilst using one of these services should be a practice commonly put in to use if you truly want to find the best odds on that market. Most bookmakers’ odds vary and it’s highly likely that most odds on exchanges will also vary. A short amount of time invested into finding the best odds could reap massive rewards in the long run.

Diverse Mix of Markets

Whilst it’s true that Betfair offers a market on a host of sports around the world, they don’t cover each and every sporting event. Smaller exchanges can be a great way to find a few more niche markets that may interest your betting requirements. For example if you’re looking to wager on the number of entrants in the World Series of Poker (WSOP) Main Event then you would have to look past Betfair (as they don’t offer a market on this event) and to a smaller exchange such as Matchbook.com.

Betting Offers

Similarly to traditional online bookmakers, sports betting exchanges offer a host of incentives to entice customers to sign up with their exchange. Spending a little time shopping for the best offers can prove to be a lucrative lure, especially for the part time sports bettor.

Disadvantages

These sites notoriously offer fewer proposition betting markets than that of a bookmaker. Markets such as betting on which team scores first in a football match or how many runs are going to be scored in a cricket match can be tough to find and more often than not, simply aren’t available.

Similarly to proposition betting, they offer very few exotic bets such as accumulators, tricast and forecast markets. The limited availability of these popular betting forms can be a major disadvantage in comparison to what regular bookmakers offer.