Exchange Betting Guide

Flutter.com were the first company to offer exchange betting when they were formed in May 2000. Betfair appeared on the market in June of that year. Betfair developed a business model for exchange betting and soon took over Flutter. Betfair are now the clear market leaders in this sphere and controls over 90% of exchange business worldwide.

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Introduction to Exchange Betting

The key to providing a successful betting exchange is market liquidity. This means that there must be sufficient business to allow bets to be matched and the peer to peer element of the activity is available to backers and layers. The traditional fractional odds have been replaced by decimal odds as these are used more widely around the world.

The exchange operators have no interest in the outcome of an event. It is the commission on transactions that allows them to make profits. The traditional bookmaker was a middle man but that role is no longer required with exchange betting. Another key element of exchange betting is that the size of a bet is only limited by the availability of a matching bet.

Backing

Customers who want to use the exchanges to back their selections have this facility. It’s possible to limit betting activity to backing on the exchanges and use them like traditional bookmakers. There is a wide selection of sports and markets available and now customers can take a price at the time of betting or the starting price.

Laying

The major difference between traditional bookmakers and the betting exchanges is the opportunity to lay, which is to bet that an event will not occur. This is the position bookmakers or layers take when offering a bet to a customer that the outcome will win.

Every transaction requires a backer and a layer and the exchanges don’t get involved or take a view. They provide the technology for backers to meet layers and earn their money through the commission. A layer is betting that something will not occur. A backer is betting that an outcome will occur.

Live Betting

Another attraction of exchange betting is that it allows for live-betting. This activity was initially restricted by events shown live on television. The exchanges now offer live betting on events streamed live on bookmaker’s websites and any event where there is an accurate and real time scoreboard. 

There is a slight time delay on in-running bets so that bettors with an advantage in terms of events taking place can’t be unscrupulous in using this advantage. Betting markets are briefly suspended after each occurrence likely to cause a substantial change in the odds. 

Trading

Betting exchanges have now given rise to a form of gambler called an arbitrager. This type of trader looks for marginal discrepancies in odds and takes advantage to guarantee a profit. There is just a small window of opportunity to do this as the odds on offer are quickly adjusted to prevent this form of betting.

The principle behind successful trading is to place a bet on an event and then place a counter a bet later so that he cannot lose. For example, he may back Australia to win a test match at 1.8. After the opposition have bee n bowled out cheaply he can lay Australia at 1.2. Stakes can be set to guarantee a profit whatever the outcome.

This type of bettor can combine use of the exchanges with traditional bookmakers. He may lay an event with the exchange bookmaker and then back ay a bigger price with one of the old style operators.

Exchange betting and increased trading opportunities have not been met with universal approval. The old style bookmakers claim that this form of betting is susceptible to corrupt practices. The exchange operators question the motives behind these claims and counter that the bookmakers are driven by commercial reasons rather than protecting the integrity of sport and racing.

Markets

The sporting event that really boosted the exchange format was the 2002 World Cup. All the matches were shown live and backers and layers relished the opportunity to bet in this unique way. Soccer is still the most popular sport for exchange betting. Televised matches see huge amounts traded on the exchanges and the markets available are countless.

A glance at the sports menu on Betfair reveals the scope of opportunities. You can now trade on all the popular sports and the markets available are widespread. Tennis is very popular as prices can change substantially on the outcome of one point. Cricket layers can make profits when a wicket falls. The price for a player to win a golf tournament will change as the result of a birdie or conversely as a result of a bogey. 

There are some interesting anecdotes with respects to trading. As the final of the men’s 100 metres at the 2011 World Athletics Championships was about to begin Usain Bolt was trading at 1.03 (1/33) to win a medal. This meant backers were risking one hundred pounds to make three. The thinking was that how else could you make 3% (less commission) on an investment in less than 10 seconds. Bolt made a false start and was eliminated, to the horror of backers and delight of layers.

Despite the conflicting opinions of stake holders with vested interests exchange betting will continue to grow. The scope of sports and markets is customer friendly. However much the traditional bookmakers complain bettors are sending a clear message to the operators. This form of betting is here to stay because it has been met with approval from the betting public.