How To Calculate Betting Commission
You pay commission every time you bet with a betting exchange such as Matchbook and Betfair. In this article we'll show you how to calculate commission before you bet. Are the odds being offered to you on a betting exchange really offering value?
Understanding commission rates and how they impact betting odds is crucial to betting and trading on a betting exchange such as Matchbook, or Betfair. While the odds being offered to you may appear tremendous value at first glance, once you calculate the commission you will pay on that wager, the odds on offer may not be the great bet you initially assumed.
How Is Betting Commission Calculated?
It's really not that difficult.
Let's say you are being offered odds of 1.95 on a betting exchange in an Asian Handicap market. Traditional bookmakers such as Ladbrokes typically offer odds of around 1.91 on most Asian Handicaps. At first glance, the odds being offered to you on your chosen betting exchange of 1.95 seem far better value.
But let's calculate the commission you will be charged. Let's say the commission rate for your Asian Handicap market is 5%. Your chosen bet stake is £100. What will your profit be? We may assume that our profit will simply be £95 (£100 * 1.95). But what will our profit be once we take the commission into consideration?
It's calculated as:
Commission charged = ((Stake * Odds Offered) - Stake) * Commission Rate
So in our example:
Commission charged = ((£100 * 1.95) - £100) * 5%
Commission charged = (£195 - £100) * 5%
Commission charged = £95 * 5%
Commission charged = £4.75
So in our example you will be charged a total commission on your bet of £4.75, meaning our profit will be £90.25.
Calculating Our True Odds
So are our odds of 1.95 being offered on the exchange better value than the odds of 1.91 being offered by a traditional bookmaker? What are our true odds?
Once we've calculated the betting exchange commission we will be charged, it's very easy to calculate our true odds. It can be calculated as:
((Stake * Odds Offered) - Commission Charged) / Stake
So in our example:
True Odds = (£195 - £4.75) / £100
True Odds = £190.25 / £100
True Odds = 1.9025
Given the 5% commission we will be charged on this bet, our true odds are 1.9025. If we made the same bet at a traditional bookmaker at odds of 1.91, we would have made a profit of £91 as opposed to £90.25 on the exchange. It may seem only a slight difference, but over the course of hundreds or even thousands of bets, this slight difference will begin to add up to be a considerable amount of money.
The importance of considering and calculating betting exchange commission rates should be clear. While odds offered on an exchange may initially appear attractive, once commission charges are taken into account, the odds being offered may not be the value you are looking for.
Combining Our Two Calculations
Taking our odds offered and commission rate into account, our true odds after commission charges can be calculated as:
1 + (1 - commission rate / 100) * (odds offered - 1)
Let's consider our odds of 1.95 on the exchange:
True odds = 1 + (1 - 5/100) * (1.95 - 1)
True odds = 1 + (1 - 0.05) * (0.95)
True odds = 1 + (0.95) * (0.95)
True odds = 1 + (0.9025)
True odds = 1.9025
Betting Exchange Commission Calculator
If you're not keen on doing the maths yourself, fear not. We've created the bettingexpert Commission Calculator. It's easy to use.
Simply enter your bet stake (or lay stake), the odds your are being offered, the commission rate (and discount rate if applicable). Click the Calculate button and the bettingexpert Commission Calculator will return the commission you will pay, your profit minus commission charged and the true odds you are being offered. It's that easy.
How Exchanges Charge Commissions
As discussed in our detailed guide to betting exchanges, betting exchanges make money by charging a 'commission' rate on matched bets with varying commission rates charged depending upon the market. How is this different to a traditional bookmaker? Well while a more traditional bookmaker will make money the more you lose, betting exchanges make money the more that you either bet or trade. The way commissions work varies from exchange to exchange and from market to market. For full details, go to the betting exchange of your choice, whether it be Matchbook or Betfair.
How Betfair Charges Commission
Let's start with the most popular and longest serving betting exchange Betfair charges commission. Firslty Betfair charges commission on your net winnings in a given betting market. This means that if you make a loss in a given market, Betfair will not charge you any commission.
So what if you are making a profit in a given betting market? How does Betfair calculate the commission you will pay? Betfair does this by multiplying your net winnings by their 'Market Base Rate' minus your 'Discount Rate.' What is the Betfair Discount Rate? Well, the more that you bet or trade with Betfair, the more Betfair Points you earn. The more Betfair Points that you earn, the higher your Discount Rate will be.
For example, if the Betfair Market Base Rate is 5% and your Discount Rate is 20%, how much commission will you pay on net winnings of £500? This is how it is calculated:
Commission = Net Winnings x Market Base Rate x (100%-Discount Rate)
Commission = £500 x 5% x (100%-20%)
Commission = £500 x 5% x 80%
Commission = £20.
Further, you will earn 200 Betfair Points on this transaction (£20 x 10).
How Matchbook Charges Commission
Matchbook charges commission on each bet placed. The Matchbook commission rate may vary depending on sport, market or promotion. At Matchbook, if you win your bet, the commission is charged on your profit. If on the other hand, you lose your bet, the commission is then charged on the lesser of either your bet stake or the potential profit of the bet.
Let's look at an example. You backed Chelsea to win a Premier Legaue match, a stake of £100 at odds of 2.50. If Chelsea should win the match, you win the bet. You will then pay commission on your winnings. If we are hypothetically paying 2% commission, it would be 2% of £150, a total commission payable of £3.0.
What if Chelsea lose and you lose your bet? In our current example you would pay 2% of £100 as your bet stake of £100 on Chelsea to win is the lesser of your stake and your potential profit of £150. So if Chelsea failed to get the victory, you would pay £1 in commission. But let's say your stake was £200. Then your commission of 2% would be charged on your potential winnings of £150, a total commission payable of £3.0.
How Betdaq Charges Commission
Betdaq will charge commission on each of your winning bets. However, as opposed to Betfair and Matchbook, the Betdaq charge structure depends on how your bet was matched on the exchange. So for all winnings bets that come from offers that you made on the exchange, you will be charged commission of 2%. On the other hand, for all winning bets that came from you matching an offer from another exchange user, you will be charged the regular Betdaq commission rate of 5%. Why do Betdaq do this? Well it's simple. This is an attempt from Betdaq to encourage exchange users to initiate betting and trading activity.
So let's consider an example. Let's say you request odds of 3.00 for West Ham to win a Premier League match. If your offer is matched, you will pay 2% on winnings if West Ham wins the match. If on the other hand, you took odds of 2.90 that were being offered by another Betdaq user, if West Ham wins the match you would pay the regular Betdaq commission rate of 5%.
How Smarkets Charges Commission
Smarkets charges a flat 2% commission on net market winnings. It's also worth noting that Smarkets make the claim that this commission rate of 2% will never increase.
You might also want to read more about: