betting
Betting Exchange
By Thomas, BettingExpert.com | Edited
As you may have noticed, a sports betting exchange is in many ways unlike a classic bookmaker. On a betting exchange like Betfair and Betdaq you don't bet against the bookmaker – you bet against other people just like you, that put their bets up at the sports betting exchange. A betting exchange such as the market leader Betfair doesn't itself act in any way on the sports betting exchange, apart from providing the platform – in a lot ways similar to an online poker room.
How betting works on a sports betting exchange
Usually betting works like this: You go to a bookmaker, who names a price for a certain bet. You then decide whether you take or leave the price. If you decide to take the price, the bookmaker is “laying” your bet – in essence the bookmaker now bets on the opposite outcome by taking your bet, as he has to pay you out if your bet wins.
But on a betting exchange there is no bookmaker – so the whole concept only can work if normal users start to act as a bookmaker. And this is exactly what the “lay” option does on a sports betting exchange, it allows you to act as a bookmaker as well and lay other people's bets, just like a bookmaker would. Since the leading two betting exchanges, Betfair and Betdaq, usually have lots of activity, especially on their bigger markets like soccer and horse racing, you have plenty of options to back and lay. When you back an outcome, your bet wins if the outcome materializes – if you lay a bet, you subsequently win your bet if the outcome doesn't happen, since you are betting against it. Once a backer and a layer on the sports betting exchange agree on a price, their bets are “matched”, and the bet is on. This is the basic principle of every betting exchange. But let's take a closer look on the process of a bet getting matched.
Matching a bet on a betting exchange
Matching a bet on a sports betting exchange always happens in two steps, one of which you are involved in. First one user puts up the bet at a certain price. Then someone likes that price and decides to take the odds on offer: The bet is matched. Let's look at a practical example, the Champions League Final between Inter and Bayern.
Inter Mailand to win in regular playing time is currently being traded (“matched”) around the 2.34 mark at several betting exchanges UK. You can immediately back Inter at odds of 2.32, and you can immediately lay them at odds of 2.36. Why did I say “immediately”? What you are seeing are the bets of other people that wait to get their bets matched. Someone has put up a lay bet – wanting to lay Inter Mailand at odds of 2.32, but the bet hasn't yet been matched. Since a layer always gets matched with a backer, you see those bets showing up on the “back” side, because it is immediately available for you to back. This money can “disappear” at any time – either because the layer decides it's not smart to lay Inter, and pulls the money off of the sports betting exchange. This can be done with any bet that hasn't been matched yet. Or, far more likely, the money disappears because someone else liked the price, and backed Inter at 2.32. Thus the bet got matched, and isn't available any more for anyone else. You can try this out yourself – once you bet 10€ on Inter, that amount will disappear from the available “to back” amount.
Demanding a higher price than is available
Now you could say you want to back Inter, but that 2.32 is too low of a price for you. So you decide to put in a back bet at the price of 2.36 (or whatever you fancy). Since no layer's money is waiting at that amount to match your bet, your bet will now appear on the lay side for a potential layer, waiting to be matched. Note that you can also do this if there's already back money waiting at 2.36 to get matched – but you have to get in the queue. Betting exchanges work on first come first serve basis, so money that's in front of you in the queue will get matched first. Obviously there's no limit for the prices that you can request, but if you set it too high, you very likely won't get matched.
Nonetheless this is another fundamental advantage an exchange has over a bookmaker: You can request prices and hope to be matched if the market moves in your direction. With a bookmaker you can't do that, you can only take it or leave it. Your only option of obtaining a higher price at a bookie would be to check back for changes regularly and see if the odds are better now – with sports betting exchanges you just put your bet up, leave it be and hope for the best. No need to come back in 15 minute intervals. I regularly take advantage of this by placing bets at the prices I fancy, and then leave for work.
By now it should be pretty clear why it is called a sports betting exchange – indeed the whole concept has far reaching consequences, and even created entire new breeds of punters: Traders and arbers, who both take advantage of price swings in one way or the other – much like on an actual stock exchange.
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