What are Betting Exchanges and How Do They Work?

The betting world can be fairly intimidating to a newcomer. Understanding all the terms, concepts and platforms available can be a daunting task. That’s where we hope this article will shed some light on an exciting and relatively new concept.

The concept in question is the betting exchange platform. We will cover what betting exchanges are and how they work. In conclusion, we will summarise some of the advantages and disadvantages of betting on such a platform. Hopefully, this will help you grasp another aspect of the gambling world and, potentially, enhance your gambling experience – and profits!

What Are Betting Exchanges?

A betting exchange is essentially a betting platform. Relatively speaking, they are the new kids on the block, with the first exchange opening in 2001. The platform does not use bookmakers, but allows punters to bet against each other!

Similar to a bookmaker, a betting exchange is a platform where you can make bets. The method and types of bets, however, differ significantly between the two. There are two types of bets you can place on a betting exchange, a back bet and a lay bet. How the process differs is that you can also place real-time, in-play bets, and even cash out before the event completes!

In traditional betting via a bookmaker, the bookmaker takes on a risk going against the gambler. A betting exchange, on the other hand, takes on no risk at all. A betting exchange provides the infrastructure for members to match bets against each other. It then takes a small commission on all the winnings.

Flexibility is not a strong point of betting exchanges when it comes to accumulators – in fact, this type of bet is extremely limited. Also, while the odds are normally superior across the board, on certain markets liquidity can be sparse on betting exchanges. This means that you may not be able to get a sizeable bet on what appears to be preferential odds.

Betting exchanges are a growing part of the worldwide gambling scene. In many instances, they offer members better odds and a greater degree of transparency. The process also gives the player a much greater sense of fair play than traditional gambling via a bookmaker.

One of the revolutionary ideas that betting exchanges have brought to the international betting world is in-play betting and cash out, which we will discuss later.

These platforms are particularly popular among gamblers that have been banned by bookmakers, usually for winning too much! These players can still operate by participating on a betting exchange.

How Does A Betting Exchange Work?

One of the biggest differences between bookmakers and a betting exchange is that the betting exchange offers the opportunity to not only bet on who will win, but also allows you to bet on who will lose!

Betting exchanges, therefore, have two tracks of bets on an event. Those betting on a participant to win, and those betting on the same participant to lose.

So, for example, if you want to place a bet of $100 on a team with the odds of 10 to 1 to win which will return $1000 (the back bet), you will need someone else to place a bet of $1000 at the odds of 1 to 10 to win $100 (the lay bet), to complete the second track of the bet.

The gambler placing the bet an opposing bet, or the “lay” bet, for the team to lose, is in effect performing the role of the bookmaker.

As mentioned previously, betting exchanges introduced the concept of in-play betting. This is one of the significant differences between an exchange and other more traditional betting platforms. Sometimes, in-play betting is referred to as live betting and in the past has been termed in-running betting.

This strategy on a betting exchange allows you to place bets at any time during the match or event.

It is possible to place a bet at any time before the game ends, even in extra time, or injury time. In traditional betting, many bets have to be in before the start of the event.

While it is possible to make a handsome profit on in-play betting, this strategy requires significant experience and knowledge of these markets. It is therefore not a recommended strategy for a beginner on the platform.

Another benefit that betting exchanges offer is the cash-out option. Cash-out is another option that is available during the event you are betting on. If you see your team is not performing as expected, you can opt to cash out before the end of the game so that you don’t lose your entire bet.

You can even opt for a partial cash out, where you cash out the majority of your bet but leave a small stake in the game.

Cash-out is a great feature that allows you to minimize your losses, which is a great advantage, particularly for beginners.

Finally, trading on price movements is a massive money-spinner for many experienced gamblers. For example, you can back a team at 3-1 and lay it back after it shortens to be “over-round” (this term simply means that you have balanced your bets to win irrespective of the result). This is a fantastic strategy for long term profits IF you have a deep knowledge of betting markets. It is particularly useful in volatile markets such as horseracing. If you are keen to learn about the market moves and trade, tread carefully. Learn and play small, or even ‘hypothetically” to test any methods you develop.

Why Should You Use A Betting Exchange?

Betting exchanges are great for many reasons, some of which were alluded to earlier. These reasons continue to be compelling for the growing number of people who prefer using this type of platform for their betting activities rather than traditional bookmakers.

Here is a summary of the advantages:

  • It is a more transparent operation than traditional bookmakers
  • The odds are usually much better
  • Access to in-play betting
  • Cash-out options
  • The risk is much lower for novice gamblers
  • You can place back as well as lay bets
  • The option to trade bets, similar to a stock market, which is essentially betting on the betting price fluctuations.

Having covered the advantages of the betting exchange, it is only fair to include some drawbacks of the platform.

Since the platform requires bets to be matched, in other words, a lay bet for a back bet, this may cause a problem if nobody takes up a bet to counter yours. Your bet may remain unmatched. In effect, you need someone to bet against or someone to bet against you!

You could run into this issue if you bet on less popular markets or the more obscure events where there is a smaller fan base.

Sticking to the more popular sporting events will make this issue to be less likely a problem you will encounter.

Another minor disadvantage is the bonuses offered and rewards available in these markets. Although some exchanges still offer these options, they are generally not as high in value as those offered by more traditional sports betting sites.