A betting exchange is a facility that allows customers not only to place bets but also to lay bets. With most bookmakers, the customer only has the option to back (betting on an outcome to occur) and the exchange also has this facility. However, betting exchanges give a customer the option of laying a bet (taking a bet on an outcome occurring). Some customers use the service to effectively become bookmakers while others use it to lay off potential winnings in order to guarantee profit. This is also known as “greening up” or having a “green book”. Attaining a green book means that regardless of the outcome of an event the customer still makes profit.
<>As the name “betting exchange” suggests, when a price is taken, someone somewhere else has laid the bet at that price and vice versa. If you want to place a bet at a certain price, someone has to lay that price. The bets are displayed in decimal format rather than fractional. Exchange customers can range from a normal punter who occasionally has a bet to professional gamblers and even bookmakers.
Betfair Exchange launched at the start of 2000 when merging with flutter.com. They are currently the country’s largest betting exchange company, but BETDAQ also hold a market share. These companies make their margin by either charging commission or a transaction fee. Even with these charges taken into account, a betting exchange can often offer better prices than a bookmaker due to the percentage being smaller than a bookmaker’s over-round. Betfair also have their own bookmaking service known as the Betfair Sportsbook, offering all the normal bets a bookie will offer. This allows Betfair to enable customers to place multiples and tote bets, something the betting exchange isn’t designed for.
The Betfair Exchange has revolutionised the way bookmakers price-up horse racing. A horse’s starting price is now guided by the price available on the betting exchange. If a horse is a drifter (larger price available than the opening showing) on the exchange, then the horse’s price will mirror that with a bookmaker’s price. If the horse is a steamer (shorter price available than the opening showing) then the horse will shorten in the betting.
There was more wagered in the UK’s recent EU referendum on the Betfair exchange than any other non-sports market in history, with the successful Brexit vote being available to back at 10.0 (9/1 equivalent) after the polls closed. The betting exchanges offer a vast array of markets away from sports including telephone voting polls (Eurovision Song Contest, Strictly Come Dancing etc.), elections and even the weather on Christmas day!