This page gives a little background into the concept of what a betting exchange is, and how they came to forefront the betting scene. After the main article you’ll see a few offers available for the main exchanges, so if you want to get involved with this type of betting make sure you take advantage of one of these sign up deals.
A little betting exchange history
Betting exchanges are a relatively new addition to the sports betting world. Modelled on the financial markets they first came to prominence around the turn of the Millennium with an early site called “flutter.com” – this was a revolutionary idea at the time that relied on the simple concept of peer to peer betting – that is to say one person betting against another, rather than against a traditional bookmaker. At the time, they actually had in mind a model whereby people could use their site to settle arguments or sporting rivalries, so for example, you could use it to set up a bet with your mate about who would win the weekly game of darts down the pub.
A great idea in principle, but unfortunately, this casual side the betting was part of its downfall. It was a little too late by the time they realised they should actually be concentrating on matching up the sort of people who like to bet on the Premier League and all the other massive sporting events around the world. This would open up a much, much bigger audience, helped by the rabid growth of the satellite sports channels and wall to wall football coverage.
One error wasn’t ideal, but it was further compounded by the other mistake they made, using fractional odds, rather than the more mathematically intuitive decimal odds employed by their only rival at the time – Betfair. Yet a lot of users had a preference for the Flutter experience, and with a more competitive commission model it still looked capable of winning the battle. But before it had chance, and in what some consider to be a panicked move, Betfair bought them out. Flutter.com was taken offline in 2002, and in the years since Betfair has prevailed, growing absolutely massive in the process.
It wasn’t without it’s fans though, and we should certainly always remember it for it’s innovative place in the early days. There’s a great piece in the Guardian that talks about what could have been if things had panned out differently for them. As it stands now though, Betfair dominates the industry, with Betdaq and a few more minor companies making up the numbers.
What is a betting exchange?
As touched on above, the core concept behind a betting exchange is allowing people to bet against one another. To do this, it offers a series of markets for various sporting events, and allows the end users to place back or lay bets into the market. So it’s essentially a platform that allows people to put a price on their opinion, and in doing so, offer that price to anyone willing to oppose it. Perhaps this is better explained with a couple of simple examples:
Take a tennis match, and the “winner” market. There are 2 players, so two possible outcomes. Player 1 wins, or player 2 wins. If you place a bet on player 1 to win, that is the exact same thing as placing a bet on player 2 to lose.
Take a football match, and again the “winner” market. Again there are two possible winners, but now there is also the draw to consider, hence we have 3 possible outcomes. If you place a bet on team 1 to win, you are saying two things, firstly that it will not be a draw, and secondly team 2 will not win. So backing a win is opposing two of the outcomes.
Consider now that using a betting exchange you can lay a selection. This is a bet saying an outcome will NOT occur. As we saw with the tennis match, placing a lay bet on player 2, is exactly the same as a win bet on player 1. But with the football match it’s a little different, and this is where using a betting exchanges opens up a whole range of new betting opportunities.
With the football match, if you lay team 1, you are saying that they will not win. This means you are now saying that either team 2 winning, or the draw are winning results for you! It’s essentially allowing you to play bookmaker.
Where does the money on the exchange come from?
When a market opens it is simply a blank canvas, ready for the first backers and layers to start putting their prices up. Soon after a new market is open, orders will start to flood in, and the market will take shape. This is the point at which another benefit of the exchange becomes apparent. If you log on to place a bet but don’t like the look of the price you see – simply ask for a better one! This will be entered into the market as an “unmatched” bet, and will sit there available for someone to take. This is where the whole difference of opinion concept comes in. Someone thinks you won’t win your bet, they are free to put their money on the line to oppose it.
Many thousands of people use betting exchanges all over the world, and you’ll see that there is generally a huge amount of money washing around, particularly on the bigger events such as live TV football matches. The collective weight of all this money represents the opinion of the crowd, hence gives a reasonable indication of the genuine probability of something happening. A market with good liquidity is one where there are plenty of bets being traded and there’s a competitive price available to both back and lay, generally moving quickly in response to live action. The top exchanges always have this for the bigger events, particularly when you look at in-play betting, an absolute staple of the exchanges.
Learning how to use a betting exchange
Part of our betting school section is devoted to using betting exchanges. We explain how to get started with exchange betting in one of our betting school lessons, and there’s more advanced tutorials in the follow up sections. We’ll also soon have a new section with reviews of some of the software you can use to automate the betting you do across the exchanges.
Betting exchange offers
We’ve got the offers from all the main companies, and remember to check out our bookie bonus and review section for more information about each of them. Below is a quick summary of each of the three main companies offering exchange betting services in 2017.
The original and biggest betting exchange. It’s the market leader by a distance, boasting hundreds of markets across a multitude of sports, with great liquidity across the board.
A worthy runner up in a market dominated by one brand. But as any trader will tell you, you should never just bet with a single exchange. Betdaq is the next biggest, and they are getting bigger all the time. In their quest to catch up they have had some eye-catching deals for new exchange customers, so keep an eye out for these before you join.
Fancy an alternative to the established “big two” of the exchange betting world? Ideal for a backup to the main two, or indeed as a viable exchange in its own right. Matchbook is closing the gap on the other two all the time.