In recent years, more and more bettors have taken an interest in betting exchanges. As you’ve seen this rise, you’re probably furiously searching the web, with 17 different tabs open, trying to learn all about betting exchanges and whether they’re worth your time. Don’t worry, you’re in the right place. Today, you’re going to what a betting exchange is, how they work, the pros and cons of using them, and so much more.
For the longest time, betting on sports has meant using a bookmaker and backing an outcome to occur. Although many players don’t realise it, what they’re essentially doing is stepping onto the other side of the see-saw. While bettors back, it’s the bookmaker who lays. Now, betting exchanges are allowing bettors to control both sides. Therefore, you can back selections as normal or you can do the job of the bookmaker and lay (betting against an outcome).
At this point, we should note that the platform plays no role in the betting experience. For example, Betdaq doesn’t take on gamblers. Instead, they simply provide the website for players to back and lay; there is absolutely no risk for the platform itself. Since it doesn’t take on gamblers, it needs to take a small percentage in commission to make money instead.
If you’re still scratching your head, allow us to explain. Just like eBay is a marketplace for people to buy and sell goods, Betfair and others are marketplaces for people to back and lay on sporting events. With the platform as the middleman, players can take the prices of others or set prices themselves. With no input from the exchange, they have no motivation for either side to win (either way, they get commission for the transaction).
With ‘lay’ betting, you’re choosing an outcome to LOSE – this is normally the job of the bookmaker. When you back Arsenal to win on a traditional platform, for example, the bookmaker is laying (in other words, they keep your money if Arsenal fail to win). Rather than a bookmaker taking this role, betting exchanges allow players to lay bets. For a selection to go ahead, there needs to be somebody backing and somebody laying. If nobody takes your price, nothing happens.
Let’s say that you’re watching a horse meeting and fancy a horse at 5/1; you go ahead and place £5 on the selection. For the bet to work, you need somebody on the other side risking £25 at 1/5. If somebody takes the lay, the bet is active, and you could win. If you lay, you’re hoping that any other horse wins.
Betting exchanges are amazing websites for fun and a new betting experience, but you always need to use them with caution. Just as with a traditional bookmaker, you won’t make millions overnight and there are hurdles to overcome. As long as you join a betting exchange with the right motivation, there’s no reason why you can’t have some fun backing and laying with others.
We understand that some players have only ever used a traditional bookmaker for betting, so you might wonder how exchanges ensure a fair environment for all. When the practice was first introduced, many companies were opposed to the idea because it took control away from the bookmaker itself. Bookmakers had a monopoly on making markets, and now players had a chance to join in. Thankfully, Betfair and other betting exchanges have remained transparent with their practices.
With all betting exchanges, fairness for players is a key component of the service. Since we don’t know who is on the other end of our bets, many were concerned that people involved in the event itself would use the exchange. Now, exchanges work with sporting organisations to investigate contentious results and improve the information available to all.
Normally, a betting exchange will only charge commission for a winning bet. However, the way in which an exchange calculates commission can differ. As an example, we’re going to look at one of the biggest exchanges in Betfair.
With this platform, you will only pay commission through net profits. If you back a horse to win and it does, you’ll lose a small percentage of these winnings. On the face of it, both traditional bookmakers and exchanges make money from customers. As you’ve just seen, though, they collect it in different ways. While bookmakers build the profit into the odds, exchanges take money from winnings. For those who lose the bet, they don’t have to pay anything to the exchange.
How does Betfair calculate the commission? They multiply the Market Base Rate by your net profit. Depending on how much money you put into the exchange, a discount of some level is then applied. For all those who have played on Betfair, you’ll know that the Market Base Rate is normally set to 5%. Whenever a new customer joins the exchange, this is the percentage applied to all commission calculations. If you plan to trade frequently on the platform, you can expect this number to drop severely. In fact, many high rollers are now working with a 2% Market Base Rate (which means they keep more of their winnings!).
Betfair Exchange Points – To enjoy a better discount rate, you’ll need to accumulate Betfair Exchange Points. Ultimately, this comes with time and experience. The more time you spend trading on the website, the more points you earn. Betfair is open with the discount rates and it’s set between 0% and 36% in increments of two percentage points.
As an example, having between 11,000 and 12,999 points earns a 14% discount. Meanwhile, having between 26,000 and 28,999 points leads to a 28% discount. Based on the points in your account, you get a discount of up to 36%.
For every 10p you spend on commission, this earns one point. Fortunately, this works for implied commission too (in other words, the amount you would have paid if the bet was successful). To get a better discount rate, all you need to do is keep playing.
If you’re feeling a little confused and lost, we understand. When first learning about betting exchanges, it’s quite a bit of information to take on board. With this in mind, we’re finishing with some top tips for beginners!
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