Betting exchanges allow you to bet on events in the usual way but importantly they also provide the opportunity to bet against a certain result effectively allowing you to be the bookmaker, this is called ’laying’ a bet. They are peer to peer so you could taking or giving a bet to anyone. Betting exchanges allow you to hedge your risk are a rquirement for matched betting.
Betfair is the biggest, most liquid and the easiest to use but there are also others including Betdaq, Smarkets, Matchbook and the Ladbrokes Exchange.
They all work in roughly the same way, charging commission on your wins. Commission rates vary from 0% for special events up to 5% for new users of Betfair.
A beginner’s guide to matched betting
A Matched Bet at a Betting Exchange is confusing for EVERYBODY the first time they get their head round it. It was confusing for me, it was confusing for BasherDuncan, and if I was a betting man I would wager it is confusing for you, as a beginner.
Don’t despair. Once the penny drops it becomes routine very quickly.
The video below introduces a betting exchange, what it does and all the different options we have of seeing our bets. The concepts are broken down into their constituent parts and taken very slowly. However they're a bit to take in, so you may need to find a quiet Sunday morning and watch it a couple of times before it sinks in.
What is an exchange?
A betting exchange is a platform where users can place bets against each other, instead of the traditional format of placing a bet with a bookmaker. I can go on there and place a bet with you. I can offer any odds I like (up to 999/1), any amount I like (over £2) on any market I like. You can see the bets I and others are offering, and can decide for yourself if you want to take that bet. If you agree to take my bet then the exchange acts as escrow; an escrow is a middle man who holds on to money from two parties until it is time for one to be paid. Betfair will take the money from you and me and wait for the event to settle before paying out to the winner. The exchange will take some commission from the winner; this is how they make their money. The commission they take will vary between 2 and 5%.
There are a number of different exchanges in the UK: Betfair is by far the largest, with the most amount of markets, users and liquidity (money available). Other exchanges include Betdaq, Ladbrokes Exchange, Smarkets and Matchbook.
We should change the settings on Betfair to make our lives easier. Open the settings drop down list by clicking here:
In the Settings button, we see the following options:
Make sure the following are ticked:
(1) Lay odds, so that we can lay our bets
(2) Market depth, so that we can see how much money is available at different odds, and
(3) Profit & loss (net of commission) so that we can understand what our position will be on an event.