Introduction of betting exchanges.

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More and more players are focusing on betting exchange platforms and leaving the traditional bookmakers to concentrate solely on these entities. Are they right? This guide aims to clarify the subject. It will present this method of betting in its totality, highlighting examples of figures and the benefits and drawbacks of playing on these platforms instead of the classic sportsbooks. 

             What is a betting exchange ?

Betting exchange platforms are entities that bring together two types of bettors: Buying bettors who want to place traditional bets as they would on sportsbooks (called back bets) and selling bettors who want to bet against an event and play the role of a sportsbook (called lay bets). 

Unlike bookies, betting exchange platforms do not take a margin on bets but charge commissions on net winnings. These commissions vary from company to company. You can find out which platform offers the lowest commissions by looking at my rating of all serious betting exchange platforms by clicking here. 

Let's take an example so that everyone understands the logic of a back bet and a lay bet.

Exemple.

Let's take the example of the match between Paris SG and Lille and the odds associated with the 1x2 market that can be seen in the image below.

exemple back lay.PNG

The back bet (the classic bet) is represented by the odds in the blue box which are 1.41 for someone betting on Paris. The odds on the left of this box also represent back bets on the same event but with less interesting odds. Below the odds is the maximum amount you can bet for the odds in question, i.e. 281€ if you want to bet on Paris SG at 1.41. If you wanted to bet 300€, the optimal solution would have been to bet the 281€ on the odds at 1.41 and the remaining 19€ on the odds at 1.4. 

The lay bet is represented by the odds in the pink box, i.e. 1.42 for someone who would bet against Paris, i.e. for Lille and the draw. In the same logic as for the back bet, the odds on the right of this box also represent lay bets on the same event but with less interesting odds. The liquidity is also displayed below the odds each time to show you the maximum amount you can bet.  

Let's calculate the winnings and losses for two bettors who would have taken an opposite position on the same market for each scenario to fully explain the logic of this betting mode.

Let's say a bettor named "bettor 1" thinks Paris will win by placing a 100€ bet on the odds at 1.41 and a bettor named "bettor 2" thinks the exact opposite and therefore places 100€ on the lay odds at 1.42. 

What does each player win and lose based on the outcome for a standard 5% commission on Betfair:

Bettor's name
Paris wins
Paris loses
Bettor 1
41*(1-0.05)=38.95€
-100€
Bettor 2
-42€
100*(1-0.05)=95€

The term 0.05 represents the commission applied on the net winnings and the term -42 represents the net loss of bettor 2 on his lay bet. The lay odds of 1.42 are higher than 1.41 which removes the arbitrage opportunities and the commission taken by the betting exchange platform acts as a margin for a traditional bookmaker which lowers the net winnings of bettor 1 by 41-38.95=2.05€ if Paris wins. 

Benefits and drawbacks of betting exchange. 

Using betting exchange platforms has more benefits than drawbacks.

- The first benefit is that it is possible to make lay bets that directly represent the opposite outcome of the event rather than covering all outcomes by dutching on a sportsbook (if you don't know what dutching means the term is explained in the glossary). Lay betting also allows the execution of certain strategies, in addition to trading which is often the method used on these platforms, such as matched betting or also arbitrage (it is possible to do arbitrage by replacing one of the sportsbooks with a betting exchange platform). Winning strategies in sports and casino betting will be introduced in a future guide and to a greater extent explained in detail in a book that will be released soon. 

- The second benefit is that you will find higher odds on betting exchange platforms if you live in countries where the odds are lower than normal. On the other hand, contrary to what is sometimes stated, you will not find a difference in odds between Pinnacle or bookies that offer small margins and the betting exchange platforms. 

- Another benefit is that unlike most sportsbooks, your account will never be restricted on betting exchange platforms. The betting exchange platforms are paid by a commission on winning bets and therefore do not risk any money. Players play against each other.

- The main drawback is liquidity. A player must have taken the opposite position for the bet to be executed and the amount must be as high as possible for you to place your entire bet at a given odds. Otherwise, the bet will be partially executed unless you decide to bet the excess on less interesting odds.

Conclusion.

I think every serious bettors should sign up to a betting exchange platform. You won't be limited on your trading strategies which means it's a great way to make money in the long run. Some software allows you to automate strategies by connecting them to Betfair, turning winnings (if the strategies are successful) into passive income. Betting exchange platforms are also essential tools for players who would use arbitraging or matched betting techniques. 

For those interested in joining one of them, I suggest you visit the betting exchanges page where I rate all the serious platforms by weighting all the relevant criteria (interface, number of markets, liquidity, withdrawal limits, payment methods, commissions, promotions, security and customer service) to calculate the general rating.