Betting on Exchanges

A relative newcomer (is 10 years new?) to the betting scene, the exchange concept allows for users to act as the bookmaker and set their own odds. In other words, when placing a standard bet (that is, a ‘back’ bet) on an exchange, you are not actually making a bet with the company but rather with another user who is prepared to offer those odds. The exchange merely marries the two up.

The main advantage in placing a bet on an exchange compared to a standard fixed odds bookmaker is that it is usually possible to get better odds. A fixed odds bookmaker needs to arrange for their running costs and profit to be covered by offering lower odds; an exchange takes a commission from winning bets and therefore the odds can be better.

The 2013 US Open in men’s tennis provides an example of this. Comparing the fixed odds from Bet365 and Ladbrokes on Andy Murray to win with those on the Betfair exchange shows the following (as of 27/07/13):

  • Bet365: 2.50 (6/4)
  • Ladbrokes: 2.75 (7/4)
  • Betfair exchange: 3.25 (9/4)

A major difference seen straight away is that exchanges display their odds in decimal format which includes the stake. Therefore, the standard 2/1 which returns £3 to a £1 stake is represented as 3.00 (3x£1). This allows for a very simple and straightforward comparison of the odds which is essential for trading purpose.

Exchanges also offer the option to place ‘lay’ bets. In this case, rather than placing a bet on the assumption that an event will happen, the bet is that an event won’t happen. This is dealt with in a separate page.