Betting exchanges are incredibly popular platforms for many bettors out there. However, in 2019 there are still a large number of individuals who aren’t sure what betting exchanges are and how they work.
In this article, we’ll look at some of the most common questions regarding betting exchanges and of course we’ll add our answers.
To kick things off, let’s start right at the beginning. If you already know what a betting exchange is, you can go ahead and skip this one.
What is a betting exchange?
Arguably one of the most common questions we get asked is; what is a betting exchange?
Considering the exchange platform has been around for a while, there are still a lot of individuals (including current bettors) that aren’t sure what they are and how they work.
So here’s a simple definition.
A betting exchange is an online marketplace where punters bet against each other rather than against the bookie.
An exchange simply provides the technology to match gamblers together. They don’t take on any bets as traditional bookmakers do.
Instead, they charge a commission on players net winnings. It’s a very simple, yet clever method that Betfair created back in 1999.
How is a betting exchange different from traditional bookmakers?
Another popular question that individuals often ask is how betting exchanges differ from traditional bookmakers?
At first glance, most betting companies may appear to be very similar. However, this couldn’t be more from the truth when you dig a little deeper. This is especially true when it comes to betting exchanges.
So what’s the difference?
As I mentioned in the previous section, betting exchanges don’t place any bets as bookmakers do. They simply match gamblers looking to place opposite bets.
There is little risk with their business model, unlike traditional bookmakers. For that reason, bookies often build a house advantage into their odds, to ensure they win and make money. This is something that betting exchanges can’t and don’t need to do.
Exchanges simply charge a commission on the winning punters’ net profit. This commission ranges from 2% – 5% (more on this later).
As you can see, from a bettors point of view, it’s a much more efficient way of placing your bets.
What are back and lay bets?
Don’t worry if you’re unsure what back and lay bets are, we’re going to look at them next.
People are often confused about the two different types of bet you can place at a betting exchange – those being back and lay bets.
Here’s the thing, for a bet to be matched on an exchange, there need to be two parties. One looking to back an outcome and the other looking to bet against the same outcome.
So if one bettor thinks Leicester City will beat Man Utd in their next game, there needs to be another bettor who thinks Leicester City will NOT beat Man Utd.
When this is the case, the betting exchange can match the two gamblers and create the bet. The two gamblers each put down a stake and the winning punter takes both stakes. As simple as that.
Obviously, there’s a bit more happening behind the scenes, but you don’t need to know about that right now.
So coming back to back and lay betting again, here’s another example.
Back bet – Bet England will beat Germany
Lay bet – Bet England will NOT beat Germany
Note: In the event of a draw, the lay bet would win as England did NOT beat Germany.
With a back bet, you’re backing a certain team or player to win. With a lay bet, you’re doing the opposite.
For more information on back and lay betting and how you can use this process to make a guaranteed profit, check out this article.
What are the benefits of using a betting exchange?
Another common question regarding betting exchanges is what are the benefits of using one over a traditional bookmaker.
It’s fair to say there are many reasons to use a betting exchange instead of a traditional bookmaker. This is what makes the exchange model so popular with such a wide range of bettors.
Here are the key benefits of using a betting exchange instead of a bookmaker.
- Flexibility of betting
- Access to the true market price
Let’s look at each of these in more detail.
Flexibility of betting
As I mentioned above, bettors have a range of options when it comes to placing bets at a betting exchange.
You can either place back bets or lay bets, something that isn’t possible at a bookmaker.
In general, betting exchanges are far more flexible in terms of your betting. They’re also more accepting of traders and matched bettors.
Access to the true market price
Unlike bookmakers, bettors have access to the true market price when it comes to betting on an exchange platform.
The price is set by the customers, meaning you’ll get the most out of your bets.
Smarkets, one of the leading betting exchanges, worked out that you would be 32% more profitable by placing your bets on their platform compared to named bookmakers during a week of betting at the Cheltenham Festival.
With any bias aside, placing your bets at Smarkets is still a more profitable solution as you have access to the true market value.
As I mentioned earlier, bookmakers have to build their own margin into the odds meaning less efficient odds for the bettor and ultimately less money in your pocket.
Which is the best betting exchange?
This is a difficult question and one that will have different answers depending on who you ask.
There’s a lot of debate in the betting industry as to which is the best betting exchange and it all comes down to what your requirements are.
Different bettors require alternative functions etc. Some are looking for great commission rates whereas others are after a huge range of different betting markets. Some want access to plenty of free bets whereas others just want great value odds.
Whatever it is, there are a number of options out there.
The most common betting exchanges are:
- Smarkets
- Betfair
- Betdaq
- Matchbook
Obviously, there are other options out there but these are the most common and most popular in the betting exchange world.
Betfair
Betfair is the oldest and most well regarded betting exchange, with their roots dating back to 1999. They’ve been in the industry for the longest and they know exactly what their customers are after. Here are some of the benefits of using Betfair.
- Huge range of markets
- Great liquidity no matter what the event
- Access to brilliant promotions
Betfair certainly has the largest range of markets when it comes to betting exchanges. You can find a complete list of their markets on offer in our Betfair review.
Due to their age and popularity, Betfair always has great liquidity meaning there are plenty of bettors looking to place bets. This is essential for your bet to be matched successfully. We won’t go into the details in this article, we’ll save it for another one.
Smarkets
Smarkets are the new kids on the block in betting industry terms. Founded in just 2008, they’re significantly younger than their competitors.
However, that has not held them back. Smarkets offer an industry leading commission rate of just 2% and they offer some great features that are not available at other betting exchanges.
Smarkets are my favourite betting exchange and I use them on a daily basis to place my bets.
Betdaq
Founded a year later than Betfair, Betdaq aimed to close the gap and gain some market share. However, it didn’t play out as Betdaq would have liked.
They’ve always struggled to gain any kind of traction compared to Betfair. Having said that, they’re still the 2nd largest betting exchange.
They offer a commission rate of 2% and provide plenty of free bets and promotions so they’re definitely worth opening an account with.
Matchbook
Matchbook is also relatively young in the betting world, founded in 2004. They provide a great platform for bettors and their technology is incredibly reliable.
Matchbook also offers a great commission rate of 1.5% although this commission applies to both winning and losing bets.
All in all, Smarkets are my favourite betting exchange. They provide a great platform which is incredibly flexible to many different types of gamblers and their commission rate is second to none.
If you have any questions regarding betting exchanges, please leave a comment in the section below and we’ll update the article.