Last Updated on December 4, 2020
Perhaps you heard the term exchange, or even trader, and you got curious about the subject. Well, you came to the right place, we’ll explain what are betting exchanges, how do they work, what are the best ones and what you should consider when using them.
What is a betting exchange
Think of the stock market, or maybe a fair, where you have people buying and selling stuff. A betting exchange is no different, it’s an online place where people meet to bet against each other, so they are exchanging bets! When you go to your favourite betting website you place a wager that is accepted by the bookie, for example you go to 1xBet to bet on Real Madrid and 1xbet gives you a fixed quote. When using an exchange the difference is it’s not the bookie that accepts your bet, but another gambler. You might want to bet for Real Madrid and i might want to bet against Real Madrid and if our odds match, we both have a matched bet.
So, the main differences of a betting exchange is that you’re playing against other people, not the bookie, and you can place back (for) and lay (against) bets.
Back and Lay bets
Let’s take that example of real madrid. Imagine you check the odds on an odds comparison website and you see that the average odd for real to win is 1.25.
If you place a Back bet of 10€, your responsibility is that 10€ and your potencial profit is 2.50€.
If you place a Lay bet of 10€, your responsibility(or liability) is 2.50€ and your potential profit is 10€!
Did you notice that on a bet of the same value, my liability is your potential profit, and vice versa? That’s how an exchange works!
So, how do the exchanges make money?
Well, they simply charge you a fee on winning bets, for example, on the real madrid case, if i win your 10€ i get paid 10€ minus a small fee for the exchange, say 5% por example, so, i get 9.50€ net profit.
The fee is one of the differences between exchanges.
Betting exchanges comparison
At the moment there are 4 betting exchanges operating in the market. There are some decentralized exchanges (related to cryptocurrency) but they require tech savvy people to use them and aren’t worth your time at the moment because they are a nightmare to use, have huge fees and extremely low liquidity.
So, the 4 licensed and safe exchanges are betfair, smarkets, betdaq and matchbook.
Here’s a small table comparing them:
| Exchange | Base fee | Liquidity | Markets available | payments and customer service |
|---|---|---|---|---|
| Betfair | 5% | 5/5 | 5/5 | 5/5 |
| Matchbook | 2% | 4/5 | 3/5 | 4/5 |
| Betdaq | 2% | 3/5 | 3/5 | 4/5 |
| Smarkets | 2% | 3/5 | 3/5 | 3/5 |
All 4 are safe to use and have their advantages/disadvantages.
Our recommendation at the moment is to use betfair or matchbook. You should try them both and see which one fits bets your betting needs.
Exchange vs bookmaker
Why should you bother to use an exchange over a bookmaker? Well, simply because in about 80% of the markets you’ll have a better odd. Bookmakers typically have a 10% average margin on their payout which is bigger that the exchanges fee on winning bets.
The downside is that is requires a bit of a learning curve to start using an exchange.
If you’re serious about making money you should really give them a try. Either way you should always compare odds or use a tool to find betting opportunities. That alone will dramatically increase your chances of becoming a successful bettor.
