What Is A Betting Exchange?
A betting exchange is a marketplace that allows people to exchange bets with each other. It’s the stock exchange of sports betting and is vital to betting strategies like Matched Betting.
In this article, you’ll be guided through how a Betting Exchange works, how to profit from it and which Betting Exchanges are available.
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How Does A Betting Exchange Work?
A Betting Exchange allows customers to buy (known as a back bet) and sell (known as a lay bet) on the outcome of sporting events. In simple terms, it’s a platform where bettors are able to place bets against each other.
We have mentioned sporting events but the exchange isn’t limited to just sporting events and can offer odds on things like who will win the next general election.
For the purposes of Matched Betting, having the option to lay against the outcome of an event makes it possible to lock in profits.
With standard bookmakers you’re limited to the odds the bookies offer and can only place back bets. This means that traditional bookmakers such as Paddy Power and Coral effectively accept any liability and lay the bet themselves, betting exchanges are a different beast.
You’ll often find that the odds at a betting exchange are higher than a bookies. This is in part due to bookies wanting to give themselves the upper hand and make larger profits. The other element to this is the fact that betting exchange odds are determined by customers betting against each other in a free market with odds at 100% and no margin needed.
When you first use any exchange, it can seem very overwhelming with new terminology and a different layout to what a traditional bookmakers might look like. However, it’s not as intimidating as you might think and will soon become second nature once you’re accustomed to Matched Betting.
One thing to keep in mind is that by default, the betting exchange will display odds in a decimal format rather than the usual fractional odds. This won’t cause any problems though, as each bookmaker also provides an option to display odds as decimals.
What Is A Back Bet?
When placing a back bet at an exchange, you are doing the same as you would at a normal bookies. You are betting on a specific outcome happening.
In this example, let’s place a back bet on Scotland to beat Croatia in a UEFA Nations League match at the Matchbook Betting Exchange.
Here, you are placing a £10 bet on Scotland to beat Croatia at odds of 5.8. You just need to click on the blue box and the betslip will open allowing you to place your stake. Once you have entered your stake, you just click the green tick box and you bet is complete.
If Scotland win, you will be paid £38 from other exchange users who placed a lay bet against Scotland winning, plus you will get your stake of £30 returned to you.
Of course, if you think the odds on offer are a little low, you are able to use the + option in the bet slip to request higher odds. If you do this, you will probably have to wait to see if any other exchange users are willing to lay at those odds. If they do, you’re good to go and your bet is placed. However, this might not always happen which would result in your bet not matching and your stake is returned to you.
Note - You will normally have to pay a small percentage of a winning bet to the exchange. However, Outplayed have teamed up with Matchbook to offer customers 0% commission charges on any winning bets.
What Is A Lay Bet?
This is the opposite of the back bet we just covered in that you’re betting on an outcome not happening this time. Using the above example, this would mean placing a bet that Scotland don’t win the match.
Here, you are placing a £10 bet on Scotland not to beat Croatia at odds of 7.2. This time you need to click on the pink box and the betslip will open allowing you to place your stake. Once you have entered your stake, you just click the green tick box and you bet is complete.
If Scotland win the match, you will lose £62 at the exchange and those funds will be used to pay other exchange users who placed a back bet on Scotland winning. However, if Scotland lose the match, you are refunded your £10 stake back.
As with the back bet, you have an option to increase or reduce the odds you’d like using the + and - options in the bet slip. Again, you may have to wait to see if any other exchange users are willing to back at those odds.
What Is Liability On The Betting Exchange?
When you are laying bets, you will frequently see the term liability and money associated with it. So, what is liability and how does it work?
In simple terms, it’s how much you stand to lose if your lay bet loses on the exchange.
With back bets at a normal bookmakers, the bookie takes on the liability of a customer's bet winning. However, on the exchange those placing back and lay bets are effectively the bookmakers. By placing a lay bet, you are basically taking on the liability of paying another exchange user if their bet wins and yours loses.
How is liability calculated?
The equation is the lay stake multiplied by the lay odds, minus the lay stake. So, using our free bet example from earlier (England v Estonia), let’s say Stephen (a normal punter) backs Estonia to win on the betting exchange and Sophie (Matched Bettor) lays the Estonia win. Estonia played really well and managed to beat England. Stephen is over the moon as he put £20 on at odds of 6 which means he gets £120 back which includes his £20 stake. That leaves Sophie with a liability to pay which would be used to pay some of the winnings to Stephen. Sophie’s liability would be calculated like this:
£16.67 (lay stake) x 6 (lay odds) - £16.67 (lay stake) = £83.35 liability
Sophie (Matched Bettor) is also very happy as she backed £20 on Estonia to win at Coral but she also did a lay bet for Estonia not to win. This means that Sophie got £100 back from Coral (because she used £20 credits) less her liability of £83.35, giving her £16.65 profits for a few minutes of effort.
Had England won, Stephen would have lost £20 which the exchange would use towards the return of Sophie’s £16.65.
It’s also worth noting that any liability is taken from your balance immediately and will be held by the betting exchange until the event has finished so if you don’t have enough funds in your exchange account, you won’t be able to place the lay bet. Therefore, before you place a lay bet, you must ensure that you have enough funds in your betting exchange balance to cover the liability.
So what does Liability look like on the Betting Exchange? Let’s have a look at the Matchbook Betting Exchange as an example.
In this example, we have opted to place a lay bet on Cardinal Point in the 14:50 race at Yarmouth. Once you click on the odds of 8 (7/1) a bet slip appears on the screen. You can then enter your stake of say £10 and it displays the liability of £70.
Placing this bet can only result in two outcomes:
- Cardinal Point wins the race - The exchange deducts the £70 liability from your balance but hopefully, you backed it to win at a bookies and you will get a return from them.
- Cardinal Point doesn’t win - You lose your stake at the bookies but the exchange returns your £10 lay stake back to your balance.
What Is Liquidity On The Betting Exchange
When placing any type of bet on a betting exchange (back or lay), there has to be enough money in the market that you’re looking to bet on. The good news is that the betting exchanges are very transparent with showing customers this.
Again, using an example from the Matchbook Betting Exchange, let’s look at how they display the liquidity in a sports market:
The liquidity available for each team or competitor is always displayed underneath the odds. So using this example, if you decide to lay £10 on Cinnodin at odds of 3.7, you will be fine and the bet will be fully matched and done as the liquidity available is £17. However, if you wanted to place a lay bet of £20 there isn’t quite enough money in the market to cover the full lay bet.
In this instance, the exchange would match £17 and the remaining £3 would remain unmatched until more funds enter the market from bettors.
TIP: The liquidity tends to increase substantially as the event time gets closer. Therefore, don’t panic if you are trying to lay a bet quite early on as there’s still plenty of time for other bettors to throw their funds into the pot.
What’s In It For The Betting Exchanges?
Given that the betting exchange customers are funding payouts for winnings and liability, how does a betting exchange actually make any money? In return for customers getting higher odds than the normal bookmakers, the exchange will charge a small commission percentage on any winnings.
Customers will place either a back bet or a lay bet and should the outcome be a winning bet, the exchange will take their share in commission which is usually between 2% and 5%. However, there are various offers provided by some of the betting exchanges where customers can enjoy zero commission for specific periods of time and this will be covered a little further on.
Who is the best Betting Exchange in the UK?
There are four main betting exchanges in the UK: Betfair, Smarkets, Matchbook and Betdaq. They fundamentally offer the same type of service yet differ in other ways and offerings.
As mentioned earlier, the exchanges make their money by charging commission. These are the current commission rates for each of them.
| Exchange | Commission Rates | Commission Charged |
| Betfair | 5% (can be reduced to 2%) | Only on wins |
| Matchbook | 2% | Net win |
| BETDAQ | 2% | Only on wins |
| Smarkets | 2% | Only on wins |
That’s the main four main betting exchanges but what do each of them offer?
Matchbook
Originally formed in 2004, Matchbook offered low commission rates but their target markets were only North American sports. It was in 2011 when things started to ramp up for Matchbook when they had new owners. One of which was Matthew Benham, a very wealthy finance expert and professional gambler who also owned two football teams, Brentford and Danish team FC Midtjylland.
Similar to Smarkets, Matchbook is predominantly a betting exchange. However, they do offer Matchbook Zero which is a sportsbook that only covers horse racing and football. The difference between Matchbook Zero and other sportsbooks is that they don’t add a margin or edge and offer 100% odds. The Matchbook Exchange doesn't always cater for all sporting events the way Betfair does, but they do tend to have very good liquidity on the ones they do offer. Their user interface does seem a little more modern and less cluttered and overbearing than their competitors. They also offer an excellent podcast and provide great guides too. As with their competitors, there is a very good App to use when you’re on the go.
New customer offer – Matchbook currently offers the longest 0% commission offer to all Outplayed members. Again, this is activated upon deposit and the deposit must be via debit or credit card. They do offer various alternative promotions where a customer can place different value bets to get free bets in return.
Thanks to Outplayed teaming up with Matchbook, all Outplayed customers can enjoy 0% commission long term basis. Customers can take advantage of this great offer here.
Betfair
Betfair is the longest running and largest betting exchange in the world and considered by most to be the market leader by some distance.
Betfair was formed in 2000 and was the brain child of Edward Wray and Andrew Black. It completely revolutionised the gambling industry with its new offering of a betting exchange where customers could act as the bookmaker. Some years on in 2016, Betfair and Paddy Power merged and now both sit under Flutter Entertainment who also own many other brands including Sky Bet.
So, what do Betfair offer its customers?
Unlike the other betting exchange operators, Betfair also offers a huge separate sportsbook that, like other normal bookmakers, has some good new customer offers. The good news is, the available betting markets on their sportsbook are also available on the exchange giving them the biggest selection of available markets out of all the betting exchanges. Another big advantage to Betfair is that they have so many customers, the liquidity (money in the market) is more often than not, much higher than their rivals. You can find out more about Liquidity here.
Sometimes, customers need to place bets during an event (betting in-play) and Betfair are second to none in that arena as their markets and software are so responsive. One additional feature that Betfair offers is a dedicated Each Way market on Horse and greyhound races. Most of their competitors only offer a place market.
They also offer new exchange customers a sign-up promotion of bet £20 (using a debit card) on their exchange and they will refund £20 to your balance as cash if your bet loses.
The only negative to using Betfair is they charge the highest commission of all the exchanges at 5%. There is an option for customers to change that to the basic plan of 2% within the rewards section of their account. However, opting to use the basic plan would mean any free games, rewards or offers are removed.
Smarkets
10 years after the launch of the Betfair Exchange, Smarkets delivered their exchange. Unlike Betfair, Smarkets is purely an exchange and doesn’t have a sportsbook element. Their user interface and App are both very slick. Smarkets are very data driven and provide customers with a host of live odds data, graphs and statistics. On first appearance it can seem a little bit mind blowing and may feel like information overkill. However, it’s there to help customers and a lot of exchange traders make good use of the data.
As detailed earlier, Smarkets only charge 2% commission which is as low as it gets with the exchange standard rates. However, new customers are offered the chance to sign up and receive 0% commission for 60 days. The 60 day offer becomes active once a new customer deposits £10. Please note, the offer won’t work with all payment types such as PayPal and Skrill.
BETDAQ
Betdaq was founded in 2000 by Dermot Desmond, an Irish entrepreneur. However, they didn’t launch their betting exchange until September 2001 and were the second company to launch an exchange offering to the public. The launch didn’t go as planned and their plan to target the high-rollers with markets detailed in dollars backfired. This derailed their efforts to catch up with Betfair. In February 2013 Ladbrokes bought BETDAQ with the intention of adding an exchange to their existing sportsbook (the opposite way that Betfair did it). Bizarrely, in November 2021, BETDAQ was sold back to Dermot Desmond.
So, on to the modern day, is today’s BETDAQ Betting Exchange any good? The simple answer is yes. As with Betfair, they offer an exchange, a sportsbook and casino games. They offer everything that Betfair does and to be fair, a little more with FREE trading tools on their website. Add this to the fact that they also offer a lower commission rate of 2% and they are a highly attractive option. As you might expect with Betfair having the lion's share of the exchange market, the liquidity in the BETDAQ markets very rarely hits the heights of Betfair.
New customer offer - As with Smarkets, BETDAQ offer 0% commission upon deposit but for a slightly longer period of 100 days (debit card only deposit). Interestingly, they also have an alternative sign-up offer here. Customers can choose to get their first month’s commission back as withdrawable funds but the maximum you can get back is £1000.
How To Make Profits From A Betting Exchange
One way to make money from betting exchanges is to use them for Matched Betting purposes. For matched bettors, the exchanges are an essential tool that enables them to lock in profits. Let’s now look at how this is possible.
When new customers join Outplayed.com, whether that is just for the FREE TRIAL or as a subscription, they are provided with detailed guides and videos on how to complete the sign up offers from the relevant bookmakers in order to make a profit.
Completing your first sign up offer can seem a little daunting but you’ll be guided from start to finish and each offer should take approximately 15 minutes to complete on average.
So, where do you start? Well, as part of your Matched Betting armoury, you’ll be given access to various tools but one of the important tools to begin with is the Oddsmatcher Tool. This will show you the latest back odds from over 100 bookies and lay odds from the betting exchanges to provide the best odds available at that time.
The Qualifying Bet
For the purpose of this example, Coral is the chosen bookmaker and they are offering new customers £20 in free bet credits when they bet a £5 stake. Your initial £5 bet is known as a qualifying bet. In order to find a suitable qualifying bet, use the Oddsmatcher Tool and filter the search for the Coral Qualifying Bet option (highlighted) to return all the bet options available for this stage.
To the left of each result, you’ll see a small calculator symbol (highlighted above), when you click on this it will tell you the details of what you need to back and lay and the possible outcomes as per the below example.
Please note, it’s totally normal to expect a small loss of a few pence when doing qualifying bets but it’s nothing to be concerned about as you’ll make that money back when you use the free bets.
You then place your £5 stake on your chosen bet at Coral and place a lay bet using the figure provided in the match betting calculator. That’s it done, you have just completed what’s needed to release your free bets.
The next stage is to place the free bets to make a profit.
The Free Bets
Now you have completed the qualifying bet and Coral have awarded you free bet credits of £20. It’s worth noting, that you don’t usually have to use all of your free bet credits on one bet and you may choose to split them as, say, two bets of £10. As before, use the Oddsmatcher Tool to find suitable bets to use your free bets on. However, you need to filter the results to Coral Free Bet. You’ll notice that the results return higher odds than when you searched for qualifying bets as this gives customers higher returns.
On to placing the free bet(s): Let’s say the results returned an international match between England and Estonia. Coral are offering odds of 5/1 (6.0) for Estonia to win the match and the exchange are offering the same odds of 6.0 for Estonia to not win the match. From the Oddsmatcher Tool, you can open the calculator as before or alternatively, you can input the information into the Matched Betting Calculator yourself. Both of them will provide the figures you need.
As you are using free bet credits, you should make sure the Bet Type on the calculator is Free Bet (SNR) Stake Not Returned and leave the Mode as Simple. There are other modes but they are things to look at when moving on to more advanced Matched Betting methods. So, the details should show the same as the below image:
So you place a back bet of £20 on Estonia to win at Corals and place a lay bet of £16.67 on Estonia not winning at the exchange. This is where the guaranteed profit comes in irrespective of the result of the game. Let’s look at what the match outcome will look like:
- Estonia win the match – the back bet wins and the Lay bet loses giving you £16.65 profit.
- Estonia lose the match – the back bet loses and the lay bet wins giving you £16.67 profit.
- The match is a draw – that means Estonia did not win so the lay bet wins and you get £16.67 profit.
As you can see, it doesn’t matter what the outcome of the match is, you’ll always make a profit using this Matched Betting method. It is extremely important that you check that you have backed and layed the same event/result.
Conclusion
More recently, the popularity and use of betting exchanges has soared and it’s totally plausible that in the coming years, betting exchanges may supercede the more conventional bookmakers. Matched Betting combined with betting exchanges offers a unique and lucrative approach to betting.
In terms of the four big exchange players, a case can be made for all of them as they each have little variances but the fact is, everybody is different and customers may use them in different ways. Betfair is still the market leader with the largest customer base but there is no reason a Matched Bettor shouldn’t sign up to join all of them. By doing that, pretty much every market going should be covered, you have a backup if one were to be out of service and you get to check the odds for the same event on all of them.
Now that you have the basics, what are you waiting for? Sign up to the Outplayed FREE TRIAL and start making profits today.
Updated: 12 Dec 2024
The Author
Paul brings over four years of Matched Betting experience to Outplayed. His extensive background in financial services and e-commerce, combined with his expertise in online marketing and Matched Betting, makes him a valuable asset to the team.