A betting exchange is a marketplace for customers to bet on the outcome of sporting events.
Betting exchanges offer the same opportunities to bet as a bookmaker with a few differences. You can buy (Back) and sell (Lay) the outcome, you can trade in real-time throughout the event and you can trade out to cut your losses or lock in profit. Bookmaker operators generate revenue by offering less efficient odds. Betting exchanges generate revenue by charging a transaction fee.
Exchanges make their money by charging a commission which is calculated as a percentage of net winnings for each customer on each event, or market. This ranges from 1.7 to 5% depending on the exchange. The odds available on a betting exchange are usually better than those offered by bookmakers, in spite of the commission charged, because there are smaller overrounds.
Traditionally, betting has occurred between a customer and a bookmaker where the customer ‘backs’ (bets that an outcome will occur) and the bookmaker ‘lays’ (bets that the outcome will not occur). Betting exchanges offer the opportunity for anyone to both back and lay.
For example, if someone thinks Team ‘A’ will win a match, he may wish to back that selection. A bookmaker offering the punter that bet would be laying that selection. The two parties will agree the backer’s stake and the odds. If the team loses, the layer (bookmaker) keeps the backer’s stake. If the team wins, the layer will pay the backer the winnings based on the odds agreed.
As every bet transacted requires a backer and a layer, and the betting exchange is not a party to the bets transacted on it, any betting exchange requires both backers and layers.
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