How Does Exchange Betting Work

Nov 12, 2020 A betting exchange is where traders can place bets against other sports fans, rather than against the bookmaker, as in traditional betting. Very simply, a betting exchange allows a user to bet on or against something happening (usually in the context of a sports event). How does this work on a betting exchange? There are a number of ways a bet can be matched on an exchange. But firstly, let's look at a typical betting exchange market interface. Above we can see the Win-Draw-Win odds for an upcoming Premier League match between Tottenham and Chelsea. So what exactly are we looking at here?

• How does a Betting Exchange work? The big difference with exchanges compared to bookmakers is they allow lay betting. This means backing a selection to lose rather than win. Every bet placed on a betting exchange involves two bets really - one bet backing the selection to win, and a second bet backing the same selection to lose.
• How does and exchange work In an exchange bet, the bookie plays no part, and the odds are determined by the punters themselves which can work for and against you in this scenario. Your bet only becomes active if an opposing punter takes the odds you have set and if the odds are poor or not worth the risk of taking the bet on, it’s unlikely.

A betting exchange is a platform for peer to peer gambling, that means punter-to-punter and not punter-to-bookie. The best betting exchange by far is Betfair. Now they have two platforms: a sportsbook and an exchange, both for staking bets – it’s just betting, so don’t get put off by the thought of it being complicated, it’s just another form of gambling.

What is exchange betting and how does it work?

Exchange betting is a punter-to-punter process where, instead of betting with a bookie, your bet is actually taken on by another members of the exchange community. Therefore, theoretically you can have a bet with your friend, where he or she puts up the cash that you can win should your bet be successful. In this scenario you are backing a bet and your friend is laying the bet.

The betting exchange is the portal in which these bets take place, so on one side of this process you have all the punters who chose to ‘back’ the bet and on the other side are punters who refute the bet and chose to ‘lay’ it.

Here’s an example: Man Utd play Luton in the FA Cup. They are so likely to win, that the market suggests they are 1/10 odds. If you’re not familiar with odds, that means you will need to deposit £10 into a pot in order to bet on Man Utd winning to get only £1 back (plus your tenner, minus commission).

If you think Man Utd may lose or draw, you can lay that win market. That means that you can put £1 into the pot in order to claim the other person’s £10 if United do not win. An exchange process is available on most markets and Man Utd to win is a single market. To lay that market you are simply suggesting that Man Utd will not win that match, so it may be a draw or they lose and you will have successfully laid that bet. A betting exchange is imperative if your arbitrage betting, so you’re looking for a range of odds and frequent changes to create your arb betting scenario and lay your bet.

Why use a betting exchange?

Betting exchanges tend to attract sharper players looking for an advantage but even for the casual punter, there’s one big plus point – the odds are almost always better than sportsbooks. This is because, a bit like a stock exchange, a betting exchange like Betfair features punters competing with the prices and, the more volume there is, the more fierce the competition, and the better it is for the punters.

Betting exchange vs Sportsbook

First up, let’s establish if you are betting or laying. Betting you are backing the result, laying you are refuting the result. Let’s assume you are betting, the difference in sportsbook betting is that your bet is taken on by the bookie and in 99.99% of the time it is accepted and placed.

On an exchange you are betting with members of the public who are not linked to the main operator. So on the Betfair exchange for example, you are NOT betting with Betfair. For a bet to be placed on an exchange, enough people need to have laid your chosen result for there to be money in the pot available should you win. Once there is enough money in the lay pot to cover your bet, it is placed. This is called matched, therefore your wager is placed and your bet is matched.

On Betfair, your bet can sometimes stay in a state of pending until the pot builds up enough to match your bet. They have alerts, options & settings available for you to decide how the matching system works for you, how long to leave it pending etc. This is not ‘Matched Betting’ which is scheme cooked up by savvy gamblers using the exchange to profit from bonus promotions.

You can’t lay bets on a sportsbook, so you can’t pick a horse to lose a win bet, or you can’t pick Man Utd to lose against Luton from our earlier example. There are ways of achieving a similar circumstance like a Luton Draw or Win bet, but that is still considered a win bet… you have not laid Man Utd in this scenario.

What’s the difference between an exchange and a bookmaker?

A bookmaker is a single person or company willing to take your 1 bet, providing you odds and paying you out if your bet wins. On exchange as it happens you may actually have hundreds of bookies and/or members of the public contributing to the pot. So in principle the exchange is simply providing the software for bookies to operate if they choose on mass, without having to set up their own service. You don’t actually know who’s paid the money in, when you win through an exchange, it’s simply a big pot of money.

Owing to the fact that lost of bookies turned to exchanges to run parts of their bookmaking businesses, the gambling commission created a new digital gambling license for those profiting from operating on an exchange to a professional capacity. So be prepared, if you intend to make your millions laying other people’s bets on the Betfair exchange (effectively being a bookie) the gambling commission might chose to investigate your activity. If you start making a steady & regular income (in the thousands), you could be seen to be running as a business.

Which betting exchange is the best?

How Does Exchange Betting Work

The best betting exchange? Quite simply, it’s Betfair. While there are some Betfair alternatives, the principle relies on the community of punters willing to back and lay bets that contribute towards the pots of cash available as winnings. Without that massive community, you might struggle to get your bets matched. So with that in mind Betfair being by fair the biggest community is our recommendation – don’t even bother looking elsewhere!

Whats the best betting exchange app?

Betfair has the best exchange app and can be downloaded from their website, from the Apple App Store and via Google Play for Android devices. You can also check compare betting apps in our review article.

Does it cost money to use an exchange?

Yes it does, you’re not betting with the operator so they need to make a fee for the luxury of you using their software. They normally take a commission upon the completion of a wager. So if your bet wins and pays out, they normally take a small cut as a commission.

What does trading on the exchange mean?

Trading on the exchange is simply a term used to highlight how a market is doing on the exchange as opposed to trackside with bookies or an online sportsbook. If you ever watch ITV horse racing (or Channel 4 racing before that), you might hear a presenter suggest that the price (odds) of a horse are trading better on the exchanges than with the touts. That’s mainly because information travels differently online and often the exchange is the first to react in moving prices. So much so that nowadays, the exchange like Betfair is the focal point for all other bookies when pricing up their own markets.

How does a betting exchange work?

How does a betting exchange work? Understanding how exchanges work is key to successful Matched Betting. It is normally the concept of lay bets that people have difficulty grasping and it is at a betting exchange like Betfair that you place lay bets.

How does a betting exchange work?

How does a betting exchange work? Understanding how exchanges work is key to successful Matched Betting. It is normally the concept of lay bets that people have difficulty grasping and it is at a betting exchange like Betfair that you place lay bets.

“Let me be clear, you can still make great money by matched betting without fully understanding how an exchange works but I find it helps, so read on…”

“Let me be clear, you can still make great money by matched betting without fully understanding how an exchange works but I find it helps, so read on…”

I thought I’d make a short video on how an exchange works, feel free to read the text below also if you prefer a text version.

I thought I’d make a short video on how an exchange works, feel free to read the text below also if you prefer a text version.

When laying bets you stand to win your stake whilst you stand to lose your liability. For instance, if you lay £10 and your lay bet wins you will win £10, if your lay bet loses you will lose your liability. The liability amount is dependent on the odds.

OPPOSITES ATTRACT

A betting exchange connects people who have opposing views. Peter and Jane are both horse racing enthusiasts. Peter thinks that Red Rum will win the 14:00 at Ascot whilst Susan is undecided on who will win the race, however, she knows Red Rum is tired from a previous race and so thinks Red Rum will not win.

Peter believes the exact opposite of Susan. A betting exchange lets Peter bet against Susan, albeit anonymously.

At an exchange, Peter can back Red Rum and Susan has the opportunity to accept that bet and thus effectively become the bookmaker by saying Red Rum will not win. When a bet is accepted we say it is matched. We say that Susan is laying Red Rum.

If Red Rum wins it is Susan who must pay Peter his winnings, the amount Susan would have to pay Peter is known as Susan’s liability.

If Red Rum doesn’t win then Susan’s wins and she takes Peters stake minus the exchange commission.

Peter is backing Red Rum

Susan is laying Red Rum. i.e…. Susan believes Red Rum will not win.

So, let me say it another way, when you walk into a bookmaker and place a bet on Liverpool to win (obviously), the bookie is by definition saying Liverpool will not win, the bookie is laying Liverpool to win! For the bookie to be successful Liverpool need to draw or lose. For your bet to be successful Liverpool need to win, any other outcome will not do.

When laying bets you stand to win your stake whilst you stand to lose your liability. For instance, if you lay £10 and your lay bet wins you will win £10, if your lay bet loses you will lose your liability. The liability amount is dependent on the odds.

OPPOSITES ATTRACT

A betting exchange connects people who have opposing views. Peter and Jane are both horse racing enthusiasts. Peter thinks that Red Rum will win the 14:00 at Ascot whilst Susan is undecided on who will win the race, however, she knows Red Rum is tired from a previous race and so thinks Red Rum will not win.

Peter believes the exact opposite of Susan. A betting exchange lets Peter bet against Susan, albeit anonymously.

At an exchange, Peter can back Red Rum and Susan has the opportunity to accept that bet and thus effectively become the bookmaker by saying Red Rum will not win. When a bet is accepted we say it is matched. We say that Susan is laying Red Rum.

If Red Rum wins it is Susan who must pay Peter his winnings, the amount Susan would have to pay Peter is known as Susan’s liability.

If Red Rum doesn’t win then Susan’s wins and she takes Peters stake minus the exchange commission.

Peter is backing Red Rum

Susan is laying Red Rum. i.e…. Susan believes Red Rum will not win.

So, let me say it another way, when you walk into a bookmaker and place a bet on Liverpool to win (obviously), the bookie is by definition saying Liverpool will not win, the bookie is laying Liverpool to win! For the bookie to be successful Liverpool need to draw or lose. For your bet to be successful Liverpool need to win, any other outcome will not do.

“A lay bet flips a back bet on its head. It’s the exact opposite.”

“A lay bet flips a back bet on its head. It’s the exact opposite.”

If Liverpool win, the bookmaker must pay you your winnings, right? Of course they do! Your winnings ARE the bookies liability. So at an exchange you can BE THE bookmaker, it is the key ingredient to matched betting. The ability to bet that something will not happen. By combining a back bet with a lay bet it is possible to cover every possible outcome of an event.

If Liverpool win, the bookmaker must pay you your winnings, right? Of course they do! Your winnings ARE the bookies liability. So at an exchange you can BE THE bookmaker, it is the key ingredient to matched betting. The ability to bet that something will not happen. By combining a back bet with a lay bet it is possible to cover every possible outcome of an event.

E.g

If we back Liverpool to win in the win-draw-win market and also lay Liverpool in the win-draw-win market then all outcomes are covered.

Every possible outcome is listed below along with which bet would win and which would lose:

Liverpool Win – Back bet wins, Lay bet Loses

Liverpool Draw – Lay bet wins, Back bet loses

Liverpool Lose – Lay bet wins, Back bet loses

Note: A draw is not a win so is covered by your lay bet.

Whatever happens, one of your bets will win, ensuring you don’t lose money.

E.g

If we back Liverpool to win in the win-draw-win market and also lay Liverpool in the win-draw-win market then all outcomes are covered.

Every possible outcome is listed below along with which bet would win and which would lose:

Liverpool Win – Back bet wins, Lay bet Loses

Liverpool Draw – Lay bet wins, Back bet loses

Liverpool Lose – Lay bet wins, Back bet loses

Note: A draw is not a win so is covered by your lay bet.

Whatever happens, one of your bets will win, ensuring you don’t lose money.

Market Liquidity – Sounds complicated but isn’t.

Here you can see the back and lay odds for the Liverpool Vs Man City match taken from Betfair. The best available back odds are shown in blue and the best available lay odds are shown in pink. The other white blocks show other possible odds you could go for, however, none are as good as those in blue/pink. Remember, the blue and pink columns show the best available odds at the current time.

As someone backing, you want high odds.

As a laying, you want low odds.

In the image above, to back Man City the best odds are 1.72 and to lay Man City the best odds are 1.73

Notice the other smaller numbers under the Man City back and lay odds (£8 and £176). These numbers represent the amount of money waiting to be matched at those odds, this is known as market liquidity.

E.g in the Man City back odds section (blue) there is £8 waiting to be matched. This means that someone has placed a lay bet on Man City at odds of 1.72 and £8 of it is unmatched. So the £8 is an invitation to back Man City at 1.72 and thus, match the lay bet someone has placed.

The same goes for the lay market liquidity. See the lay odds for Man City (1.73) has a liquidity of £176. This means that there is £176 worth of unmatched back bets that require matching at odds of 1.73.

Let’s go deeper…

How Does Exchange Betting Work In Stock Market

If I was to place a back bet on Man City at odds of 1.72 I could confidently place a £8 bet and all £8 would match instantly. That is because there is £8 worth of liquidity at 1.72. If I was to place a £10 bet, £8 would match instantly and £2 would be unmatched. The unmatched £2 would become part of the liquidity, you can’t see it in the image but the liquidity value for the lay at odds of 1.72 would have increased by £2

Market Liquidity – Sounds complicated but isn’t.

Here you can see the back and lay odds for the Liverpool Vs Man City match taken from Betfair. The best available back odds are shown in blue and the best available lay odds are shown in pink. The other white blocks show other possible odds you could go for, however, none are as good as those in blue/pink. Remember, the blue and pink columns show the best available odds at the current time.

As someone backing, you want high odds.

As a laying, you want low odds.

In the image above, to back Man City the best odds are 1.72 and to lay Man City the best odds are 1.73

Notice the other smaller numbers under the Man City back and lay odds (£8 and £176). These numbers represent the amount of money waiting to be matched at those odds, this is known as market liquidity.

E.g in the Man City back odds section (blue) there is £8 waiting to be matched. This means that someone has placed a lay bet on Man City at odds of 1.72 and £8 of it is unmatched. So the £8 is an invitation to back Man City at 1.72 and thus, match the lay bet someone has placed.

The same goes for the lay market liquidity. See the lay odds for Man City (1.73) has a liquidity of £176. This means that there is £176 worth of unmatched back bets that require matching at odds of 1.73.

Let’s go deeper…

If I was to place a back bet on Man City at odds of 1.72 I could confidently place a £8 bet and all £8 would match instantly. That is because there is £8 worth of liquidity at 1.72. If I was to place a £10 bet, £8 would match instantly and £2 would be unmatched. The unmatched £2 would become part of the liquidity, you can’t see it in the image but the liquidity value for the lay at odds of 1.72 would have increased by £2