What Is Exchange Wagering
A stock exchange is a place or electronic market where owners of businesses get together to buy and sell their shares of stock.
The biggest and most well known exchange is Betfair, and after a 7 year long battle to break into the US market they finally launched the first US betting exchange in May 2016. Betfair US have been providing the service to American punters at the New Jersey Monmouth Part racetrack from May, in partnership with Paddy Power and Darby Development.Initial exchange operations are focused on horseracing, though it won't be lost on US punters that exchanges cover the full range of sportsbetting options.
Up to now Betfair have been running a betting operation using 4NJBets - a sportsbetting site who's Customers have got first try at the new exchange in a closed beta trial. Betfair also runs an online casino in New Jersey in conjunction with Atlantic City’s Golden Nugget casino.
Although initial results have reportedly been strong, it may take US punters some time to catch on to the big value that can be obtained. To help, Betfair are setting up an exchange simulator to help punters learn about the offer.
The full list of tracks which have made agreements to offer Exchange betting include Monmouth Park, Woodbine, and the tracks running live in Louisiana and West Virginia. In Canada, Woodbine racegoers can also use the service.
One element that might disturb prospective Customers is the 12% commission which will be charged on the win that comes out of any positive return exchange bet. In the UK, this figure is significantly lower, though we need to recognise that the liquidity in the US market may initially be low. Betfair need to cover their costs.
- Wha is a Betting Exchange? Betting exchanges are very similar to bookmakers, there’s just one key difference. Instead of betting against a bookmaker, we bet against other people. That’s why it’s called a betting exchange; people are exchanging bets.
- A betting exchange is an online platform in which punters who want to back a particular outcome are matched with others who are happy to lay them the bet. If you want to place “lay bets”, you can’t do this with a traditional bookmaker. You can only lay on a betting exchange which is effectively a free marketplace for trading bets.
Liquidity In The Exchange Markets? What's That?
Clearly the understanding of how exchanges work needs to be built up in the heads of US bettors. Unfortunately this presents somewhat of a chicken and egg situation. To be successful an exchange needs to have plenty of cash being wagered - plenty in the pools to build up the chances of higher odds being available.
If there are not enough takers of the odds on offer (the exchanges Customers), then the layers will be prevented from offering higher odds. Everyone's out to make a profit, right? This is what's known as liquidity - essentially the volumes of money that make the betting markets viable.
Betfair obviously have a task on their hands to build up solidly and hopefully quickly - get as many US punters on to the Exchange as they can and show everyone the value.
So Really - What Value Do Betting Exchanges Give?
All of this talk about extra betting value for US sportsbetting fans is great of course, but it's worth knowing exactly how betting exchanges deliver that value. It's a big subject, and one which is already covered in many online articles so let's take a look at a few of the best:
The most obvious place to start is on the Betfair US exchange site itself, where you'll find plenty of info that'll help you get started.
Another option is to visit Wikipedia, the online encyclopedia which covers pretty much everything. The Wikipedia betting exchange article offers a great introduction.
Next up is a short BBC article on exchange betting which gives a clear description of how it all works. It's nearly ten years old but still worth a look.
Lastly this lengthy write up on betting exchanges at BettingMarket.com will take you deeper into the intricacies of the subject, explaining in specific terms how exchanges work and more importantly, how they deliver great value to betting fans.
For some more visual explanations there are dozens of useful betting exchange videos on Youtube channels.
These below specifically give a good - although basic - visual introduction. The first is Betfair's first promotional video for the new US exchange, the second comes from BetAngel and gives an introduction to exchange betting in general.
If you are thinking about trying your hand at exchange betting on horse racing then don’t be put off if you don’t know the difference between a regular bookmaker and a betting exchange.
It is true, at a betting exchange you might very well find the same betting opportunities as you would with a bookmaker, but there are a few distinct differences.
For instance…
What Is A Betting Exchange
When you place a bet with a bookmaker, you are in competition with that company. If you win, they payout, but if they win, they keep your money. That is the contract that both you and the bookie entered into after all.
Betting exchanges, on the other hand, allow punters to partake in matched betting and rely on other customers to both back and lay the bets against each other. Exchanges make their money by charging a small commission fee on every bet placed on their platform. This fee is a percentage of the estimated winnings.
When bettors are going up against each other, the betting exchange will match them either if they are backing, which is to bet to win as with a bookie, or laying, which is to lose or bet against an outcome occurring.
On the other hand, bookmakers allow customers to place a bet on any outcome of their chosen event. Because they are not risking their own money, you will often find better odds on an exchange platform than with bookmakers who will also factor in their overround (margin).
Why Does Liquidity Matter
Liquidity is the pool of maximum money that a bettor can put down on a given betting exchange market. No bet can exceed this amount. A bet can only be matched as long as there is enough to cover its opposing outcome.
The current liquidity of a market is usually shown below the odds and is constantly changing. As the start of an event draws closer, so too will the liquidity rise as last minute money pours in, making it easier to place matched bets.
Liquidity is important because whatever you wish to lay or back needs as bigger money pool as possible so that everything can be matched even at specific odds.
Naturally then, big markets like the Cheltenham Festival or Royal Ascot will have more people betting on it than a lesser known event such as a class 5 handicap on a Monday afternoon for which you might struggle for the required liquidity hence why it matters.
Why Use An Exchange To Bet On Racing?
It is well know that, on average, you can get better odds with an exchange compared to fixed odds bookmakers. With people betting with each other there are no margins, as a fixed odds book would have. Rather odds are set by the person who lays the bet and they will have different motivations to fixed-odds sportsbooks.
Conventional bookies do not really care what the odds are as long as they can balance their books to make sure they make a profit. The odds from punters who lay bets in exchanges are specific to that one bet and so the odds are more reflective of the true probabilities. Other factors play a role too, in exchanges people are more likely to set better odds because they are using their own instincts rather than just stats and algorithms.
While exchanges offer better value in general you are most likely to get the best of this in bigger races, where there are more people offering odds and competing with each other for people to back them. This means better value and higher liquidity.
Exchanges will not always be better, especially on more minor races where there is less interest. Even in these cases exchanges still often provide better prices.
What Is Exchange Betting
Of course the other major advantage is you can lay bets for other people to back. Say you are sure the favourite will not win but you don’t have a strong feeling what horse will win you could lay the favourite on the exchange and if it loses you win.