betting exchanges
The phrase ‘betting exchanges’ is not just a swanky new name for betting shops, it’s not a wine bar – pub situation. Betting exchanges are a relatively new phenomena and the way they work is rather akin to Stock exchanges, hence the use of the word exchanges. The way it works is that there is a market for bets, just like the market for shares. Instead of prices we are dealing with odds (which are actually sometimes called prices, e.g. starting price = starting odds). If the price is not where the consensus feels it should be, then it moves to balance, that is how an exchange works. So odds from betting exchanges can differ from betting shops but usually not by a great deal. What moves the prices is that people can bet from both sides, just like the stock exchange system where people can be long – bet on the upside, or short, bet on something going down. Betting exchanges then are an intermediary company or interface, which allows you to trade on this market, just like a stock broking company with shares. Also just like a stock broker or market maker, they charge a little commission for the service. That’s not bad, since the overall odds + commission can usually be better value than from a standard bookmaker. Exchange market prices can be said to be fairer as no bookmaker profit is calculated into them.
The whole idea and working technology of betting exchanges was invented by a UK company called Flutter.com They are no longer around despite being the first mover in the market, they were merged into Betfair which now takes approximately 90% of all betting exchanges business! This is why it’s so easy to place lay bets on the Betfair betting site, because in an exchange market you can bet against winning. As more people bet on win or lose the market prices change to balance that.
Betting exchanges, limitations
Because betting exchanges require large pools of players on either side and liquidity it’s sometimes hard to find someone to match a more unusual bet. For similar reasons the accumulator bets are limited too. Another consideration is that traditional bookmakers are more willing to extend credit to their customers where a betting exchange would not. But if you’re looking for good world cup odds or mainstream racing/gaming there would be no problem at all.
Betting exchanges, a new game
The advent of betting exchanges has brought people who seek to make money not from the gambling on the sports themselves but from trading. They trade odds by buying and selling bets at various times before the race/event. To make money, which they can more reliably than just by gambling on the sport, a trader must have quite a lot of capital. Traders can actually help the betting exchanges operation by providing capital/liquidity which allows more regular users to place a bet that is matched/accepted.
There is one matter about laying bets with exchanges, just like shorting shares. People don’t often like the idea of ‘betting on failure’. It has been argued that if someone would want to fix a result, it’s a lot easier to make something lose rather than make a winner, so it’s more open to corruption. This is an extreme circumstance and is not believed to be a common occurrence in the UK.
