Explaining Betting Exchanges

For those of us who grew up in the days before the internet, we only had to grasp a very simple concept of betting. We looked at the bookies’ coupon, selected our bet and placed our money based on the published odds.

The advent of the digital age has, however, brought in new innovations and one of these is the betting exchange. A lot of punters have embraced it but many keep clear, feeling that it’s a confusing concept but in reality it’s actually very simple.

Genesis

An exchange is actually taking the notion of betting right back to the very start. Think of when two people would have a personal wager centuries ago. One would say I bet this horse wins while the other would, in fact, be betting on it to lose.

At an exchange that is essentially what is happening via a series of back (bets to win) and lay (bets to lose) markets.

The odds at Betting Exchanges are set by the customers but in the early stages of a market, professional traders may step in to build up the liquidity. At that point, the figures declared are very conservative and may well be lower than those offered by a standard sportsbook.

From that point, regular customers get involved by backing or laying a particular event and the prices then start to fluctuate. In turn, those customers start to set their own prices and this is where things can really start to get interesting.

When it Gets Busy

Serious price changes can then be found in the two to three hours before an event takes place. Price setters react to news and updates over a horse, a football team or an individual sportsman and declare their odds accordingly.

This is the point when the higher prices kick in as the bookmakers’ margin, known as the overround, starts to disappear. Punters are setting their own odds and while many follow the market, others will set a higher figure in an attempt to snare some money.

With customers free to set and accept their own prices, back and lay odds will rise and in the vast majority of cases they will exceed those declared by a traditional bookmaker. The only exceptions to this rule tend to be in less popular events where there is relatively little interest and subsequently there is low liquidity.

Securing a Profit

While there are no guarantees, it is possible to use a betting exchange to set up an arb bet: You can find a back price and a lay price and stake in such a way that you are sure to get a profit at the end of the event.

Prices can change very quickly so you have to be fast in order to secure the arb or alternatively, there are some software programmes in place that can do it for you. Once again, there are no guarantees that you will make a profit but clearly this is one of the reasons why a betting exchange is so popular with some areas of the community.

Other Options

If you’re looking to bet away from the straight result then your options will vary greatly between exchanges. Some are similar to straight odds bookmakers in that they will declare lots of sides but it all depends on whether their customers / traders want to get involved and put up any liquidity.

A larger, more established exchange such as Betfair may have a much wider selection while others such as Bodog and Matchbook may only offer the straight result betting.

But don’t be put off by that lack of side options because the serious punters are here for the result only and they can do very well at it. So if you’re into trading and are hoping to find an arb amidst all of the back and lay bets, then joining a betting exchange is something to seriously consider.