Betting Exchange

By Wagercomms

Exchange Betting

Exchange betting is equal to sports betting in most ways as it is placing wagers on sports events and predicting the outcome and results. Sports betting, as commonly known, is however long-standing while exchange betting or betting exchanges was first brought to the public market in 2000, with the launch of a few websites that introduced peer-to-peer betting, also referred to as "open market" betting but shortly changed by the associated industry to betting exchanges. 

As with other types of exchanges, betting exchanges require liquidity, customers that focus on the exchange and where they are confident that their bet can be paired up with a matching counter bet. As with sports betting the exchange industry also use decimal odds, fractional and moneyline odds, but where decimal odds tend to be more popular. Understanding sports betting, odds and betting types please read the document Sports Betting, as this is the novice's introduction to Betting Exchanges. 

Betting Exchange

A betting exchange is a form of bookmaking in where the operator has eliminated its risk through technology, and where the operator manage system and interface for players to become their own market makers, operators however also ensures that winnings are distributed among bettors, and for their broker services they hold a certain percentage of amounts wagered, a commission which is calculated as a percentage of net winnings for each customer on each event, or market.

Market Makers 

As customers, bettors, are seen to bet among themselves they are also the market makers of a specific sports event, creating the betting market and odds for specific event and hence determining bets and odds in a back and lay structure. As market makers sets odds on a specific events, other market makers can do the same at odds more advantageous, in where the odds given on betting exchanges are said to be regulated by the market, hence why originally referred to as "open market" betting.

Managing a successful betting exchange commonly requires a substantial number of markets makers, as one group may focus on football, another on horse racing, ice hockey, basketball etc. and a solid betting exchange wish to have multiple back and lay odds on each sport event to attract bets. 

Types of Bets

Commonly there are three types of bets, Back bet where you bet on something to happen and Lay bet where you bet on something not to happen. The third is referred to as Trading and this is when you have more than one bet on the market and are seeking to improve your position, or lock a profit on all possible outcomes.

Back Bet

Backing a bet is a bet on something to happen, may it be a horse to win a race, a football team to win, or a person winning an election etc. It’s just like the bet you regularly place with a traditional bookmaker.

Lay Bet

Laying a bet means you are betting on something not to happen, may it be a match not to end in a draw, a horse not to come in first or football team not to win by two goals, and sometimes it is easier to pick a horse that won’t win, than one that will win, and some lay a bet because they think the price is too short.

Trading

Trading is having more than one bet in a market; seeking to improve your position or lock in a profit on all possible outcomes. When placing a lay bet first and analysing the same market later in play, and then backing the same position with a back bet at a higher price guarantees a profit whichever result occurs, also known as a green book among players, as the betting slip is showing green numbers, i.e. profit.

When trading, you want to lay at a low price and back at a higher price, and most operators offers trading tools such predictive profit and loss functions to do calculations for you.

Running Bets

The advantage to the exchange model is that bets are allowed once the match or race is in progress, as it means no risk to the operator. Hence in exchange betting one have the the ability (trading) to allow bets to be made in-running or in-play. Often however this feature is generally restricted to the most popular events for which widespread, live television coverage is available.

Whereas back and lay bets (non in-running and non in-play) are entered into the system immediately after being placed, in-running and in-play bets might have a time delay in order to make it more difficult for unscrupulous customers to accept offers for bets that for whatever reason have suddenly become highly favorable. Markets may also be actively managed by the operator, in this case betting will be briefly halted after each occurrence that is likely to cause a substantial change of the odds.

In some jurisdictions in-running or in-play betting may however be prohibited due to local regulations.

Controversy

Taking a look at history the launch of Betting Exchanges was not completely without controversy, one being that since it is only the exchange operator who holds a bookmaker's licence, and not the punters, the legal and licencing requirements invariably dictates that the legal contract for all bets be with the operator itself and not between customers.

Traditional bookmaker also raised concerns that punters placing bets on events not to happen could cause corruption in sports such as horse racing, as it is easier to ensure a horse will lose a race than win. Betting Exchanges countered with that traditional bookmakers arguments were not by concern for the integrity of sport but by commercial interests. Exchanges also assert they are well aware of who their customers are and keep a complete record of all betting activity in case of enquiries.