Betting exchange are online platforms that allow gamblers to bet on sporting events against each other using stock market principles. The betting exchanges earn a percentage from the winnings of the players, but not the margins, because when first looking at them, they have the highest odds anywhere in the market.
On the other hand, the commission taken by the betting firm, reduces the potential winnings of a player because the potential gain on the betting exchanges corresponds to the stake, which in turn, corresponds with the rate set by betting companies.
After finding a partner on the exchange, gamblers play against each other. One of the players offers the amount he or she would like to bet and the odds that he or she wants to make a bet on a certain aspect of the market. The other player can take these odds fully, or in part, or, can make a counter offer.
Liquidity in the exchange (the maximum odds)
In theory the stakes made are unlimited on a betting exchange, however in actual fact, the maximum odds that can be placed depends on the market liquidity. Liquidity is the amount of money in the market. Early in the morning the prices won’t be as competitive as later on, and the money you can get on will be less too. That is if you take the available price though. In markets with a big gap between the back and lay price you should normally try getting a bigger price than the best available.
Unlike the vast majority of bookmakers, which reduce the size of the maximum odds for professional players, betting exchanges do not look to do this, thus making them more attractive for full time gamblers.
Backing and laying
Traditionally betting has occurred between a customer and a bookmaker where the customer ‘backs’ (bets that an outcome will occur) and the bookmaker ‘lays’ (bets that the outcome will not occur). Betting exchanges offer the opportunity for anyone to both back and lay.
For example, if someone thinks Team A will win a competition, he may wish to back that selection. A bookmaker offering the punter that bet would be laying that selection. The two parties will agree the backer’s stake and the odds. If the team loses, the layer/bookmaker keeps the backer’s stake. If the team wins, the layer will pay the backer the winnings based on the odds agreed.
As every bet transacted requires a backer and a layer, and the betting exchange is not a party to the bets transacted on it, any betting exchange requires both backers and layers.
Usually commission rates for those opening a new account are at around 5 percent. However, practically all betting exchanges give commission discounts for those who are particularly active. The maximum possible discount is 60 percent of the initial 5 percent that the betting exchange takes, so there the total commission is a mere 2 percent. Sometimes, the betting exchanges will make exceptions and lower the rates of commission even further for certain events.
However the betting exchange Betfair implements a premium commission for the most successful professional gamblers.
Automated trading on betting exchanges
Some professional players, who use bots to help them place bets, carry out automated trading on betting exchanges. This is because they are more efficient as they can place bets automatically. However, it is questionable how successful they actually are, as all automated bots have been known to leave the punters who use them in the red.
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