What is exchange betting?

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.

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