What is the Betfair Exchange
Since its launch in June 2000, the Betfair Exchange has developed in to the world’s largest sports betting exchange, offering punters the opportunity to back and lay bets across over 38 indvidual Sports and Specials, all of which can be easily accessed both on-site and within the Betfair Exchange app. To add a sense of the sheer size of the Betfair Exchange, there were well over 220,000 markets available on Horse Racing over the course of 2019.
In simplified terms, the Betfair Exchange provides users with the opportunity to bet against one another, as opposed to the traditional method of betting via a bookmaker. This transformational betting platform was developed using a model which mirrors share trading, but with betting odds on offer for users to engage with. The value element of the Exchange stems from the removal of the need for the margin that fixed-odds provided for bookmakers, with bettors able to offer or request odds from fellow Betfair Exchange users, in what it is a competitive marketplace.
How does the Betfair Exchange work?
Starting with the basics of how the Betfair Exchange works, users are best classified in two categories, ‘Backers’ and ‘Layers’, with both required to create or ‘match’ a bet.
To clarify what is meant by these two terms, we’ll run through a short example. Exchange users who believe that an event will occur, can be identified as a ‘Backer’, and will therefore place a ‘back bet’ in the hope that an event will occur, say for instance Clan Des Obeaux to win the 2019 King George VI Chase at Kempton, and will place a bet on him to do just that at odds of 6.4 – with a £10 stake returning £54 prior to commission being deducted, plus the initial £10 stake.
On the other hand, the Exchange user who believes that the same event will not occur, has the option to ‘lay’ that selection, and therefore will offer a price on Clan Des Obeaux not to win the 2019 King George VI Chase, which can be seen below at odds of 6.6 – Laying £10 at these odds would create a liability of £56, with the ‘Layer’ gaining £10 if Clan Des Obeaux fails to win the 2019 King George VI Chase, before commission is deducted.
Once a price which Backers believe is acceptable has been established with the Layer, the bet will be 'matched'. This is basically a confirmation that the bet has been struck between the two different users of the Exchange, and the liability of an outcome of an event has been agreed upon.
This is facilitated in the Betfair Exchange model through a process of bringing all those who want to lay, and all those who want to back, together, which in turn forms a market. The newly created market is then displayed as a page of odds which users can click to bet on, more or less the same as any other online bookmaker. Odds displayed in blue and to the left of that enable the ‘Backing’ function, whilst odds presented in pink and to the right of that, are to be utilised by ‘Layers’.
Returning once more to the visual example, the total amount of stakes which have been ‘matched’ within a specific market is also visible on the Betfair Exchange. That £36,445 had been ‘matched’ on the 2019 King George VI Chase market at the time of writing – a figure which will rise significantly as the event approaches.
The key benefits of using the Betfair Exchange
It goes without saying that the Betfair Exchange is a truly revolutionary product, which has been central to the online gambling revolution. In comparison with the traditional approach to betting, through placing a bet with a bookmaker, the Betfair Exchange brings about a range of benefits for its users, as will be explored.
• Better odds
All punters seek value. Generally, the Betfair Exchange provides users with much more favourable odds, with the Industry start price often coming up short against the Betfair Exchange starting price (BSP). The reason behind this is that there is pressure on a ‘layer’ to offer a fairer price, as deemed by the market – the backers - in order to get their own bet matched, which of course would be for a specified outcome not to occur in an event.
• Increased transparency
A further benefit of using the Betfair Exchange is the transparency which the platform provides. The Betfair Exchange in simple terms does not go head-to-head with punters like the traditional approach to gamble, and therefore does not require customers to lose in order to profit. Instead, the Betfair Exchange charges a small commission percentage on each bet matched, which is paid by the winning punter upon competition of an event, whether that be a ‘Backer’ or a ‘Layer’ who has profited from the bet. Thereby, in all honesty, it can be stated that the Betfair Exchange encourages punters to win.
• A fairer experience
Prior to the introduction of the Betfair Exchange, punters were often only able partake in back betting, with prices always subject to the decision of the bookmaker who gained their custom, with the bookies commonly instilling large over-rounds on their books, particularly when it came to smaller events. What that meant is that the bookmaker could effectively determine the profit margin added to his markets, only having to consider the competition of rival bookmakers when forming a market.
The development of the Betfair Exchange has effectively allowed the user to take on the role of the bookmaker themselves – creating a more competitive marketplace, as users wager against one another. Users have the option to offer and request odds from fellow Betfair Exchange gamblers, and with a high level of competition, profit margins must be kept to a minimum – thereby rewarding those with the best knowledge, and ensuring the prices offered are generally far greater and more importantly, much fairer, than those on offer with traditional bookmakers.