# Betting Exchanges FAQ

Exchange betting (also known as person-to-person betting) enables punters to set the odds on a bet rather than accepting the odds posted by traditional bookmakers. In exchange betting, a punter makes an offer to back (an outcome will happen) or lay (an outcome will not happen) a bet. Another punter then accepts the proposed bet. The parties involved in the bet are the two punters therefore, rather than the punter and the bookmaker as is the case in traditional betting.

The first punter sets the odds when offering to back or lay a bet. This also differs from traditional betting, where bookmakers need to balance their books so that a profit is guaranteed no matter what the event outcome. They do this by building a profit margin (also known as overround) into their prices. To reflect the combined probabilities of the various outcomes in an event, the odds for each outcome when converted to a percentage should total 100%. For example, if the event was the toss of a coin, the probability of a head or a tail is 50%; the probability of either a head or a tail being tossed is 100%. To reflect the probabilities in this event, the odds offered when laying either heads or tails should be 2.0. When these odds are converted to a percentage and added together the total is 100% (100/2.0 + 100/2.0 = 100). This is known as a “round” book. By adjusting the odds so that the total exceeds 100%, it is possible to build a profit margin into the prices offered, which, assuming an equal number of layers for either outcome, guarantees a profit not matter what the outcome. The amount by which the prices exceed 100% is called the overround. For example, if heads or tails was layed at 1.9 rather than 2.0, the book overround would be 5% (100/1.9 + 100/1.9 = 105). Assuming both heads and tails are each backed with a stake of £10, £1 is guaranteed (£20 taken with a total payout of £19). With exchange betting, there is no bookmaker margin built into the prices.

High demand for either backers or layers will force the market to adjust its prices. This is not the same as a bookmaker trying to balance the betting book however, just a reflection of the weight of money coming for or going against a selection in the market.

Punters use a betting exchange to place their bets. A betting exchange is a secure online environment that matches backers with layers and settles all bets. A betting exchange acts as a broker facilitating bets between punters with opposing views, the exchange itself does not take a position on an event by betting in its markets. In addition, a betting exchange:

- Enables you to place bets “in-play” on a live event, giving you the opportunity to find value as the event progresses.
- Lets you guarantee yourself a profit regardless of the event outcome by trading on price movements – make money by correctly judging the movements in the odds for an event rather than the result.

Exchanges earn commission when users win. They do not make profits from users’ losses or close or cap the accounts of successful users.

← What is exchange betting?When you back a selection, you are betting that a particular outcome will occur. For example, a certain horse to win a race or a football match ending as a draw. You will make a profit if that outcome happens. This is like making a bet with a traditional bookmaker.

For your bet to be accepted, another punter needs to have the opposing view on the event outcome and be prepared to lay your selection at the desired price and odds. This allows a betting exchange to link the opposing bets so that they become matched.

If the odds you want are not available or a betting exchange matches the bet with another punter while you in are the process of submitting your bet, you can request better odds in the hope that another punter accepts your offer.

When you place a back bet, you risk your stake money in return for a chance of getting your stake back plus a return on it. For example, you back a horse to win with a £10 stake at odds of 5.0. If the horse does not win, you would be liable to pay out your £10 stake, which goes to the layer. If the horse wins, your payout is £50 (less commission) — your £10 stake plus £40 profit. The money necessary to honour either side of the bet has already been deposited and so bet settlement is guaranteed.

← What is a back bet?When you lay a selection, you are betting that an outcome will **not occur**. For example, you might offer a lay bet because you find it easier to pick a horse that will not win rather than one that will win. Laying a selection allows you to assume the role of bookmaker and offer odds to other punters. Your aim is to win a stake from a backer in return for offering a potential return to that backer. If the outcome you are laying does not happen, you receive the backer’s stake. If the outcome occurs, you pay out to the backer the stake multiplied by the odds. For example, if you were to lay a horse for £10 at odds of 5.0, you would be liable to pay out £40 from your account if that horse won. The Betting Exchange returns the £10 stake to the backer plus the £40 profit. If the horse does not win, you keep the £10 staked by the backer.

For your bet to be accepted, another punter needs to have the opposing view on the event outcome and be prepared to back your selection at the desired price and odds. This allows a betting exchange to link the opposing bets so that they become matched.

← What is a lay bet?If you are unwilling to take the available odds for a selection in a Betting Exchange market, you can request better odds. You may feel that the odds for a selection will drift and so offer longer odds in anticipation of the price movement. If you are realistic about the odds that you request, your bet may stand a very good chance of being matched.

For example, a selection is available to back at 4.0 and to lay at 5.0. You do not think the selection will win, and so decide to lay it, but want to reduce your liability. To do this, you can lay the selection at 4.5 — odds that fall between what is currently available. To make your offer, submit the bet in the usual way, but instead of accepting the best available odds to lay, request odds of 4.5. Assuming another user does not ask for odds lower than 4.5 in the meantime, your odds will appear as the best available on the lay side, replacing the previous best, 5.0.

If you have already placed a bet, you can change the odds of the existing bet, as long as the bet is unmatched.

← How do I ask for my own odds?Decimal format odds, unlike the fractional format odds traditionally quoted in the UK, include the stake as part of the total return. Decimal odds therefore represent your total payout and not just your profit. Decimal odds are always greater than 1.0 as “1” represents the stake. As an example, decimal format odds of 4.0 are equivalent to fractional format odds of 3/1. In both cases, the total return for a winning £10 bet is £40: 4.0x£10 or 3x£10+£10 (the stake). All odds quoted on a betting exchange are expressed as decimals.

Decimal odds are the factor that lets you calculate how many times the stake the payout (or for lay bets the liability) will be. To calculate your return for a back bet or liability for a lay bet therefore, multiply your stake by the odds. For example, £100 at 3.0 on a back bet returns £300 — £200 profit plus the £100 stake. The return is therefore three times the stake, or for each pound you bet, the payout will be £3.00.

When the profit is less than the stake, which is normally the case for the most likely outcome (the favourite team, for example), the decimal odds fall between 1.0 and 2.0. These odds are usually referred to as odds-on.

Even odds are when you win exactly the same amount as your stake. The decimal odds representation of evens is 2.0.

When the profit is greater than the stake, which is normally the case for the least likely outcome (the underdog team, for example), the decimal odds will be greater than 2.0. These odds are usually referred to as odds-against.

## Odds Conversion

To convert decimal odds to fractional odds, subtract 1 from the decimal odds and then convert the decimal number to a fraction. For example, decimal odds of 4.0 are equivalent to fractional odds of 3/1 ((4.0-1.0)/1 = 3/1).

To convert fractional odds to decimal, you convert the fractional number to a decimal and then add 1. For example, to convert fractional odds of 3/1 to decimal format, first convert the fraction to a decimal by dividing the numerator (3) by the denominator (1) and then add 1. This results in decimal odds of 4.0 ((3/1)+1 = 4.0).

## Fractional to Decimal Odds Conversion Table

Fractional | Decimal | Fractional | Decimal | Fractional | Decimal |
---|---|---|---|---|---|

1/10 | 1.10 | 1/1 | 2.00 | 5/1 | 6.00 |

1/9 | 1.11 | 11/10 | 2.10 | 11/2 | 6.50 |

1/8 | 1.12 | 6/5 | 2.20 | 6/1 | 7.00 |

1/7 | 1.14 | 5/4 | 2.25 | 13/2 | 7.50 |

1/6 | 1.17 | 11/8 | 2.38 | 7/1 | 8.00 |

1/5 | 1.20 | 6/4 | 2.50 | 15/2 | 8.50 |

2/9 | 1.22 | 13/8 | 2.63 | 8/1 | 9.00 |

1/4 | 1.25 | 7/4 | 2.75 | 17/2 | 9.50 |

2/7 | 1.29 | 9/5 | 2.80 | 9/1 | 10.00 |

3/10 | 1.30 | 15/8 | 2.86 | 10/1 | 11.00 |

1/3 | 1.33 | 2/1 | 3.00 | 11/1 | 12.00 |

4/11 | 1.36 | 85/40 | 3.12 | 12/1 | 13.00 |

2/5 | 1.40 | 11/5 | 3.20 | 14/1 | 15.00 |

4/9 | 1.44 | 9/4 | 3.25 | 15/1 | 16.00 |

1/2 | 1.50 | 12/5 | 3.40 | 16/1 | 17.00 |

8/15 | 1.53 | 5/2 | 3.50 | 18/1 | 19.00 |

4/7 | 1.57 | 13/5 | 3.60 | 20/1 | 21.00 |

8/13 | 1.62 | 11/4 | 3.75 | 25/1 | 26.00 |

4/6 | 1.67 | 3/1 | 4.00 | 33/1 | 34.00 |

8/11 | 1.73 | 10/3 | 4.33 | 40/1 | 41.00 |

4/5 | 1.80 | 7/2 | 4.50 | 50/1 | 51.00 |

5/6 | 1.83 | 4/1 | 5.00 | 66/1 | 67.00 |

10/11 | 1.91 | 9/2 | 5.50 | 100/1 | 101.00 |

In return for providing the facility for users to place bets with each other, a betting exchange deducts a commission charge from your profit on a market. If you have a losing bet therefore, you pay no commission. If you win, a betting exchange retains a percentage of the profit. To see what commission rate applies to a particular market, check the rules for that market.

The commission is calculated on your net profit on a particular market. Your net profit is the payout from your winning selections in a market minus:

- The relevant stake money for back bets.
- Any losses from losing back or lay bets.

For example, you back a selection to win at odds of 7.0 with a stake of £20. The commission rate defined for the market is 5%. If your selection wins, the commission you pay is £6 — £120 (profit from the back bet) x 5%. If your selection loses, you pay no commission.

If you back and lay the same selection, the commission is based on the profit from the winning bet minus the loss from the losing bet. For example, in the bet described earlier, the odds shorten to 4.0, enabling you to lock in a profit by placing a lay bet of £35. If the selection you backed wins, the commission you pay is £0.75 — (£120 minus £105 (loss from lay bet)) x 5%. If the selection you backed loses, the commission you pay is also £0.75 — (£35 (profit from lay bet) minus £20 (stake from back bet)) x 5%.

If you back multiple selections in the same market, the commission is calculated on the profit from the winning bets minus the loss from the losing bets. For example, you back both Manchester United and Liverpool in a “Top 3 Finish” Market. You stake £10 on Manchester United at 1.2 and £10 on Liverpool at 2.2. If Manchester United win and Liverpool lose, you pay no commission because your losses are greater than your winnings. If Liverpool win and Manchester United lose, the commission you pay is £0.10 — (£12 profit from the winning bet minus £10 loss from the losing bet) x 5%. If both teams win, the commission you pay is £0.70 — £12 (profit from both bets) x 5%.

← How does the commission system work?## Odds Markets

Odds betting is the most common form of betting and requires you to predict whether an outcome will happen. Odds express the probability of an event occurring. Lower (shorter) odds indicate that a particular outcome is likely to occur. The outcome deemed most likely to occur and therefore quoted at the lowest odds is often known as the favourite. Conversely, higher (longer) odds indicate that the likelihood of an event occurring is low.

Unlike traditional betting markets, in which customers can only take odds offered by bookmakers, a betting exchange gives you the option to both take (back an outcome) and offer (lay an outcome) odds.

When you back a selection, you are betting that a particular outcome will occur. For example, a certain horse to win a race or a football match ending as a draw. You will make a profit if that outcome happens. This is like making a bet with a traditional bookmaker. For example, odds of 3.0 are available for Everton to win and you feel these odds represent good value for that outcome. You therefore back Everton to win. Assuming a stake of £100, your potential profit is £200, less commission, and your potential loss is £100 (your stake).

When you lay a selection, you are betting that an outcome will **not occur**. For example, you might offer a lay bet because you find it easier to pick a horse that will not win rather than one that will win. Laying a selection allows you to assume the role of bookmaker and offer odds to other punters. Your aim is to win a stake from a backer in return for offering a potential return to that backer. If the outcome you are laying does not happen, you receive the backer’s stake. If the outcome occurs, you pay out to the backer the stake multiplied by the odds. For example, if you were to lay a horse for £10 at odds of 5.0, you would be liable to pay out £40 from your account if that horse won. A betting exchange returns the £10 stake to the backer’s plus the £40 profit. If the horse does not win, you keep the £10 staked by the backer. For example, you are sufficiently confident that Everton will not win to accept the bets of other people who think Everton will win. Assuming you offer to lay Everton at odds of 3.0 for £100, you receive the backers’ stakes if Everton lose or draw and your return is therefore £100. If Everton win, you pay out to the backers a total of £300.

When a back bet and a lay bet are placed on the same market selection at the same, or similar odds, a betting exchange automatically links these two opposing bets, and they become matched. Once bets are matched, the odds cannot be changed. In addition, matched bets cannot be cancelled by either backer or layer.

Odds markets can be win only or place. Win only markets have one winner. Place markets let you back or lay a selection to be placed in a particular event. For example, a horse to finish 1st, 2nd, or 3rd in a horse race with 8 or more runners. Place markets are available for most events with a large number of entrants. The numbers of places available in a market varies, and so it is necessary to check the market rules to see how many places there are.

At a betting exchange, all odds are expressed as decimal odds. Decimal format odds, unlike the fractional format odds traditionally quoted in the UK, include the stake as part of the total return. Decimal odds therefore represent your total payout and not just your profit. Decimal odds are always greater than 1.0 as "1" represents the stake. As an example, decimal format odds of 4.0 are equivalent to fractional format odds of 3/1. In both cases, the total return for a winning £10 bet is £40: 4.0x£10 or 3x£10+£10 (the stake).

## Asian Handicap Markets

In Asian Handicap markets, both football teams are given or deducted goals before the match starts. The favourite is given a negative handicap, for example -1, which it has to overcome. The underdog is given a positive handicap, for example +1, giving the team a head start. To determine the outcome of the bet, the final score at full time is used, after taking the handicap into account. There are two types of handicap: half goal (0.5, 1.5 and so on) and whole goal (0, 1 and so on). For whole goal handicaps, if the final score is level after taking the handicap into account, bets are refunded. For half goal handicaps, it is not possible for the final score to be level after applying the handicap. There are two types of handicap bet: single (for example, +1.0) and split (for example, +1.0&+1.5). With split handicaps, the stake is split equally between the two handicaps.

Single handicap bets have three possible outcomes:

- The bet wins.
- The bet loses.
- The bet draws (stake refunded).

Split handicap bets have four possible outcomes:

- Both bets win.
- One bet wins and the other bet draws (stake refunded).
- One bet draws (stake refunded) and the other bet loses.
- Both bets lose.

A betting exchange lets you make a judgement on the outcome of an event. If you think a particular outcome will happen, you can back it. If you do not think a particular outcome will happen, you can lay it. As an alternative to predicting an event outcome, you can also make a judgement on the direction of the movement of the odds associated with an event. If you correctly predict this movement, you make a profit regardless of the event result. Predicting the direction of price movements is known as trading.

Trading is where you back or lay an outcome in anticipation of a change in the odds that will allow a further bet to guarantee a profit. For example, at the start of the season, a punter backs Liverpool to win the Premiership at odds of 15.0 with a stake of £100. As the season progresses, Liverpool’s form is such that the odds shorten to 4.0. The punter now lays Liverpool at these odds to win £150, thereby guaranteeing a profit regardless of the outcome of the Premiership. If Liverpool win the league, the payout is £900 (profit from back bet minus liability from lay bet: £1500 – £600). If Liverpool fail to win the league, the payout is £50 (profit from lay bet minus back bet stake, £150 – £100). The former, more profitable, outcome is more favourable, but the punter will not lose money either way. A combination of bets that guarantees a profit is known as a green book.

Because the goal is to lock in a profit, traders concentrate on price movements during an event rather than the final result. If they correctly predict the direction in which prices move, they can effectively place a no-risk bet by backing and laying at different prices at either end of the price range. Backing and laying at different liabilities enables the trader to make a profit from the difference between the two.

When bets result in a green book (all possible outcomes showing a profit), the liability associated with the bets is zero. This means a betting exchange does not need to allocate funds to cover the various event outcomes, freeing up money (prior to bet settlement) for bets on other markets.

← What is trading?A betting exchange gives you the opportunity to place bets while an event is taking place. This is known as an in-play or in-running market. Particularly suited to live televised events, the odds available for in-play markets change to reflect the changing course of the event, letting you constantly revise and improve your position.

At the start of an event for which an in-play market is available, a betting exchange cancels any unmatched bets and opens the in-play market. You can place bets on the in-play market from the start to the finish of the event.

As the event unfolds, you can take advantage of the changing circumstances in the event and place bets to offset any previous bets that you now feel are mistakes. For example, a team that you backed before the kick-off may lose a key player through injury and you therefore improve your position by placing a covering bet to reduce your potential losses.

The dynamic nature of in-play markets provides new ways to find good value odds. As prices change in response to changing circumstances, you have the opportunity to judge whether changes that affect the odds will affect the event outcome. For example, you think that a favourite team will win but the pre-match odds are not attractive and you therefore wait to place an in-play bet. The favourite fails to score early and the price improves as a consequence. You do not feel that this setback will alter the eventual outcome and so place a bet at the better price.

You can also look for value in an in-play market by interpreting a situation in the opposite way to the majority of other punters. For example, if a horse performs extremely well in the early stages of a race, the rush to back the horse may be such that the price collapses, and it becomes a value lay.

There are two types of in-play markets: managed and unmanaged.

In a managed in-play market, a time delay is applied following a dramatic change in market conditions such as the scoring of goal. During the timeout period, no users can place a bet. The time delay gives users the opportunity to cancel or edit unmatched bets.

In an unmanaged in-play market, no time delay is applied following a change in market conditions. Unmanaged markets give users who are quick to react the opportunity to profit from a change in circumstances in the event. For example, the opportunity to place a value bet after a horse falls.

← What is an in-play market?Time delays are applied in some in-play markets following a dramatic change in market conditions. For example, when a goal is scored, a player is sent off, or a penalty is awarded in a football match. The delay gives users the opportunity to cancel or edit pending bets. Time delays are also used to prevent users from being adversely affected by minor delays in signal broadcast.

← Why is there a delay before I can place a bet on an in-play market?The dynamic nature of the exchange may result in users competing to place the same bet. While you are in the process of submitting a bet, another user could have already accepted the offered odds.

No bets are final until they are matched.

← Why is the bet I want no longer available?A matched bet is a binding agreement between the backer and layer and so cannot be cancelled or changed by either party.

← Can I cancel or change a matched bet?