How Betting Exchanges Work (Back & Lay Betting)
Traditional bookmakers set their own odds and punters have a simple choice – take it or leave it.
With a betting exchange, punters (rather than bookmakers) can set their own odds and match bets with other users. In this way, more variety is available on odds, allowing punters to set their own agendas.
The betting exchange takes a small commission on winning bets to cover costs.
Unlike traditional bookmakers, a betting exchange allows punters to both back (to win) and lay (to lose) in sporting events. With lay betting, you are backing something 'not to happen' – essentially taking the role of bookmaker.
What is a Betting Exchange?
A betting exchange is a platform that allows punters to bet against each other, rather than against a traditional bookmaker, offering an open market where punters can set their own odds and take or make bets to win or lose certain amounts.
The key difference is that with a betting exchange punters are betting against fellow punters, not traditional bookmakers. The odds are driven by the users, not the bookmakers.
To facilitate this service, the betting exchange charges a small percentage commission on winnings. This is typically up to 5%.
Betting exchanges are popular with horse racing punters, where the SP (starting price) often is more rewarding than with traditional bookmakers.
What is Back Betting?
Back betting is the simplest form of betting. You are putting your money on the outcome you expect to happen, or backing something to happen.
This is widely available with high-street bookmakers, where you can back a horse at stated odds to win or be placed in a race and your returns are based on the odds.
It's the same on a betting exchange. If you put £10 on a horse to win at odds of 5.0 (4/1) and it wins, your return is £50 (£40 profit + £10 stake).
What is Lay Betting?
Lay betting is different, in that you are backing against something happening. To lay a horse is to bet that it will not win/be placed. Here, the punter is becoming the bookmaker.
In this scenario, if you lay a horse at odds of 5.0 (4/1) with a liability of £40, your bet wins if the horse doesn't win the race. If that happens you win £10. If the horse wins the race, you lose £40 – not £10.
The key difference is that in back betting, your stake is the most you can lose. In lay betting, the liability is the most you can lose.
How Do Odds Work on Betting Exchanges?
Odds on betting exchanges are typically driven by market activity, meaning supply and demand.
The more people wanting to back an outcome, the shorter the odds will become. If more punters are laying the outcome, odds will drift.
Liquidity refers to the amount of money available to be matched at particular odds on a betting exchange. High liquidity means there is lots of money available to back and lay, low liquidity means less money. This is demonstrated in the market as the money waiting to be matched at each odds level.
Advantages of Betting Exchanges
Some of the advantages of using a betting exchange instead of a traditional bookmaker include:
- Better odds compared to traditional bookmakers
- Ability to both back and lay
- In-play betting opportunities
- Trading potential (back high, lay low)
- Transparency of market prices
Risks and Considerations of Betting Exchanges
Punters also need to be aware of the pitfalls of using betting exchanges, which include:
- Liability risks with lay bets are greater
- Commission charges reducing profits
- Liquidity issues in less popular markets may make it difficult to get a bet on
- Complexity for beginners vs fixed-odds betting
Strategies for Back & Lay Betting on Exchanges
Some good strategies to deploy when using betting exchanges include:
- Trading strategies: backing early and laying off when the odds change to guarantee profit
- Scalping small odds movements for quick profits by exploiting tiny odds movements
- Hedging positions across markets to eliminate risks and lock in a profit or minimize a loss
- Value hunting in less competitive races
- Risk management to control liabilities
FAQs about Betting Exchanges
Do betting exchanges charge commission on losing bets?
No, you only pay commission on your net winnings in a market.
Can you use betting exchanges for sports other than horse racing?
Yes, almost every conceivable market and sport is available on the major betting exchanges.
What happens if no one matches my bet on an exchange?
If no one matches it, the bet is not placed.
Are betting exchanges legal in the UK?
Yes, betting exchanges are legal and regulated in the UK.
Can I cash out bets on a betting exchange?
Cashing out is different on a betting exchange. Here, you would typically trade out by backing/laying the opposite bet to what you have already got.
How does liquidity affect my chances of getting matched?
Lower liquidity on a market will restrict the amount of money you can bet on that market.
Are betting exchanges better for professional punters?
It is generally held that professional punters will use betting exchanges, as there are less restrictions compared with traditional bookmakers.
Do all exchanges offer in-play horse racing markets?
Betfair, the main betting exchange, offers extensive in-play horse racing betting. Most exchanges now offer some level of in-play betting on racing, though not all of them.
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#AD 18+ New customers online only. Eligibility restrictions apply. Only valid with code B10G40 on registration. £10 min qualifying bet at 1/1 (2.0) odds or greater across sports or racing (if EW then min £10 Win + £10 Place). Receive £20 Tote Credit, £10 Free Sports Bet and 50 Free Spins on a selected game within 48 hours of qualifying bet settlement. 7-day expiry on free bets & Tote Credit. Your first bet will be your qualifying bet. One per customer. UK & ROI customers only. 18+. Full T&Cs apply Gambleaware.org. Full T&Cs apply.