Betting Exchange Analysis – What Is It and What Are Its Benefits?

July 2021

The industry built around betting on sports has several similar characteristics to investing in the stock market. Sports betting exchange works a bit more like equity futures since they both have an expiration. For sports, the bets expire once the event happens. Also, some of the same infrastructures exist in both worlds. In equity investing, most people deal with a broker. The broker facilitates the exchange of money and equities for a small fee and does this several thousand times a day or more. In return, the broker will provide investors with a platform built from the ground up that makes the transaction as easy as possible for the investor. This is similar to using a sports betting broker or a site to place wagers on events. Equities also have exchanges where investors can trade directly, and sports betting has recently introduced the world to the same idea. This article will explain all the details about betting exchange and how it all works.

What Is a Betting Exchange?

In equity investing, investors can meet in person at one of the exchanges and trade directly with other parties to complete their trades. This is typically quite expensive, though some exchanges are now going online as well. A betting exchange is similar in that it is a marketplace where sports fans can gather to both place bets and take bets directly with other parties. Effectively they act as an equity market maker who takes trades and places trades at the same time.

How Does Betting Exchange Work?

In any betting transaction, there are two types of bets that are placed: • Back Bet: On a normal betting site, you, the customer, typically take the “back” bet.  This is when you decide on an outcome and stake and then place your bet with the bookmaker. Which is usually the betting site or app you’re using. • Lay Bet: The “Lay Bet” is the opposite side of every bet and is usually taken up by the bookmaker.  By taking the lay bet, you are betting against the outcome taking place at the same stake as the player you placed the back bet. At a betting exchange, you have the option of taking either side of the bet. This makes it far more complicated than simply taking the back bet with a betting website or bookmaker. Lay bets are not always backed, but the platforms allow you to do so with relative ease as well as to see what the market price is for a particular bet. You can lay a bet at a stake you prefer, but it may be easier to stick to the market value to have a better chance of getting your bet backed.

Are There Any Betting Exchanges in the UK?

Betfair is perhaps the most famous betting exchange. Established in 2001 when two smaller betting exchanges merged, it has quickly become the largest betting exchange in the UK. BETDAQ is another betting exchange and is the second-largest platform. Since most of the betting exchange sites UK are still in their infancy, there are not too many other reliable options. However, the industry is developing rapidly and we will be seeing more options soon.

How Does It Compare to a Bookmaker?

When we say “bookmaker,” this should mean any standard bookie or a betting site that effectively acts as the bookie. When placing a bet with a betting site, you’re locked into only one side of the bet. While you can know the odds going into any bet, you’re still restricted.                 Pros of Betting Exchanges: o   You have the option to back lay bets as well as lay bets for other players to back. o   You can use complicated betting strategies, excepting accumulator bets o   Lower fees than betting with a bookmaker or betting site o   No bans for consistent success – exchanges make commissions either way               Cons of Betting Exchanges: o   Lack of liquidity – you may not find a player to back your lay bet, and vice versa. o   No bonuses o   Spotty network at high-traffic times

Are Betting Exchanges Safe to Use?

Betting exchanges have been improving gradually over the years. Betfair has had some reliability issues with their website including outages. While it seems to be improving, there is still a lack of communication regarding these outages. It could be due to higher traffic to the site than normal. Since exchanges offer customers access to more complicated ways of betting, it’s important to note that this comes with an added level of risk. That being said, Betfair promotes gambleaware.co.uk to help customers understand the importance of betting being a fun experience rather than a distressing one. The exchanges have also been improving some of the features on their sites and adding transparency to make sure prospective customers feel the betting is fair. Despite several questions being raised as to the fairness of particular bets, Betfair has been open to providing any information to help make sure those who ask can better understand when certain results seem questionable.

How Do Betting Exchange Providers Make Their Money?

Both Betfair and BETDAQ charge a commission on each bet to make their money. Betfair commissions range from 2% to 5% depending on the amount of turnover a customer accumulates. The commissions start at 5%, though with enough turnover, customers can bring them down to 2%. BETDAQ has a flat 2% commission on all transactions that take place on the site. This makes it a bit more attractive for larger players. However, bear in mind that liquidity is a hindrance to making this a clear and effective advantage.

Summary

Betting exchanges are a recent addition to the world of sports betting. Started in the 2000s when the internet was still growing, betting exchanges have become extremely popular among sports fans due to the added benefit of being able to lay bets as well as back the bets of others.  Also, the benefit of dealing directly with other participants allows for more transparency in the marketplace.