Lay Betting Explained: The Punter as the Bookmaker

In the modern era of betting, punters have the opportunity of becoming a bookmaker, in a small way, by using betting exchanges, where as well as backing sporting outcomes, you can lay them, too.

This means offering odds to a betting community via an exchange, as well as the amount of money you are prepared to take on that bet, and laying it through a 'matched bet'. By laying, you are essentially betting against the outcome, so will profit if it fails to happen.

The most popular betting exchange is the Betfair Exchange, which was launched in June, 2000. Other exchanges, like Smarkets, Matchbook, Betdaq and Easybet, are available, offering punter against punter markets. Traditional betting involved punters merely backing eventualities with bookmakers, but since 2000 and the introduction of exchanges, there has been an option to both back and lay.

The Crucial Concept of Liability and Exposure

When laying on an exchange, the layer must set both the odds and the liability he or she is prepared to take. For example, if a punter does not think Rory McIlroy will win the DP World Tour Championship, he could offer decimal odds of 5 (4/1) on Betfair Exchange for £100.

The £100 available to bet on McIlroy at 5 will go into the Back column on Betfair Exchange. If another punter on the exchange clicks on the blue back button to have that bet in full, the layer's liability will be £400 (lay odds of 5 x backer's stake of £100). The layer must have at least £400 in his betting account to fund the potential losses.

A backer does not need to accept the full amount of the bet. In this example, a backer may choose to have only £25 of the McIlroy bet at 5, which would leave £75 still available to back for any other Betfair Exchange punter (or punters) who wanted to back McIlroy at 5.

If only £25 was backed before the start of play, the layer's liability would be only £100, and the 'unmatched' £75 would be cancelled. If this was the only bet the layer had on the market, he or she would have an exposure (the total amount of money they could potentially lose) of £100. The exposure of the backer (if it was their only bet) would be £25.

The Exchange's Role and Commission

Exchanges charge for facilitating the bets, taking commission on winning backs or lays. Betfair Exchange's commission rate is between 2% and 8%. The basic rate is 5%, so 5% of a punter's net winnings will be deducted from their payout and will go to Betfair. Losing backs or lays do not pay any commission.

To reduce your commission rate, you must earn Betfair Points based on your turnover, but you will need to be turning over significant sums of money to do so. The higher rate of 8% is for punters who are happy to concede a poorer Exchange commission rate in return for various Betfair Sportsbook (traditional bookmaker) perks and promotions through the Betfair Rewards Scheme.

Advanced Strategy: Back-to-Lay Trading

A punter can back or lay as many times as he or she wishes on the same market. If a punter backed McIlroy at 5 for the DP World Tour Championship with a £100 stake in the pre-tournament Betfair Exchange market, then McIlroy carded a ten-under-par first round, shortening in odds to 2 (even money), the punter could then lay McIlroy at 2 to guarantee a profit.

If the punter laid £100 of McIlroy at 2, his exposure would be zero (because, if McIlroy lost, he would recoup the £100 he lost on the back at 5 with the £100 he won on the lay at 2). If McIlroy won, the punter would win £400 from his £100 back at 5, but would lose £100 from his £100 lay at 2, so would make a profit of £300.

Back-to-lay trading is when you back an eventuality in the expectation that the odds will shorten, planning to lay the same eventuality at a later time, strategically looking to guarantee a profit whatever happens.

Lay Betting vs. Back Betting: A Final Contrast 

Many punters prefer to keep their betting simple by just backing, setting their stake and knowing the amount they can potentially win. Punters who like both backing and laying, often referred to as 'traders', can see their potential winnings and losses change regularly and markedly.

Layers will typically require a large betting balance to cover potential losses, unless only laying odds-on chances. Traders will often attempt to eliminate any losses. It is typically more difficult to achieve a no-lose book if just backing, although possible. For example, if you back a football team to win, they go three goals ahead, then you back the other team and the draw in-running, you may get into a position where it is impossible to lose.

Quick Guide to Placing a Lay Bet

To place a lay bet on the Betfair Exchange, you click on the pink box lay section, then enter the amount of money you are prepared to lay at certain odds. If another punter (or group of punters) has already requested to back at those odds, you can lay at those odds immediately, but if nobody has requested to back at the odds you want to lay, your offer will appear in the back section (the blue back box if it is the highest odds on offer on the exchange), waiting for a backer to accept.