Betting Exchanges

Betting exchanges available for UK residents are:

  1. Betfair
  2. Matchbook
  3. Smarkets
  4. Betdaq

Betfair is by far the largest and offers the most liquidity and generally offers more matches which go in-play.

  • Liquidity => liquidity on the exchange is important for trading. Remember this is not a bookmaker, for every ‘Back’ bet you place there must be another exchange user willing to take an opposing ‘Lay’ position. And vice versa when you place a ‘Lay’ bet.
  • In-play => a match going in-play means it is available for trading (the placing of ‘Back’ and ‘Lay’ bets) whilst the match is in progress. This is a critical feature in order to lock-in profits whilst trading as will be seen in the examples below.

The benefits of the other exchanges, Matchbook, Smarkets and Betdaq, is that they have lower commission charges. As an indication, Betfair commission is 5% on net profits (per market). Whereas the others charge 1.5%-2%.

We recommend starting with Betfair and using one or two of the others as a backup. Betfair do occasionally have outages, so a backup can be useful from that point of view.

Backing and Laying Explained

The following two sections explain the logic of Back and Lay bets using examples from an exchange market. This are only intended to clarify how the bets work. They deliberately omit details such as commission, time of entry and how price changes.

Back Bet Explained

A Back bet is probably something most people are familiar with from placing bets on football matches, horse races or other events with bookmakers. The bookmaker advertises a price, which will in most cases keep changing right up until the event starts, you place your stake and you win or lose. The amount you could win is a function of the price (or odds) and the amount you could lose is limited to your stake.

Here’s an example explaining the outcomes of a ‘Back’ bet using the Over/Under 2.5 Goals market of a football match from Betfair. The match is Colombia vs Paraguay in the 2019 Copa America and the screenshot is about 2 days ahead of kick-off.

Here’s a view of the market as it stands on Betfair.

Let’s say I wanted to back over 2.5 goals in this match with a stake of £5.

From the screenshot, the currently available price (or odds) for that are £2. This is shown in the table in the blue box on the same row as ‘Over 2.5 Goals’.

Based on my stake of £5, the method to calculate the potential return if 3 goals or more is scored is:

Potential Return = (stake x price) => (£5 x £2) = £10

then, the profit is calculated by deducting the stake from the return:

Potential Profit = (stake x price) – stake => (£5 x £2) – 5 = £5

In this example, £5 (the stake) is risked for a potential profit of £5. Note this example excludes the exchange commission. This would be deducted from any profit (typically 2-5%). There is no commission to pay if you lose.


Lay Bet Explained

As explained earlier, a Lay bet is the opposite of a Back bet. You are betting against something happening. Lay betting is only available from betting exchanges, ordinary bookmakers do not offer Lay betting.

I will use the same market as that used to explain the logic behind a Back bet.

Let’s say I wanted to Lay Over 2.5 goals in this match, again I will use a £5 stake. This means there can only be 0, 1 or 2 goals scored in the match for me to win the Lay bet.

Just to recap, by placing a Lay bet you are accepting somebody else’s Back bet. You can also think of this as though you are acting like the traditional bookmaker in taking somebody’s bet. This means, if you win the Lay, then your winnings is their stake. Whereas if you lose the Lay, then you have to cover their winnings, referred to as liability on exchanges.

From the screenshot, the currently available price (or odds) to Lay ‘Over 2.5 Goals’ is £2.24. This is shown in the table in the pink box on the same row as ‘Over 2.5 Goals’.

Based on my stake of £5, this means I am willing to accept somebody’s bet with a stake of £5 at a price of £2.24.

Potential Profit = (stake) => (£5) = £5

With a Lay bet you also need to cover the liability of the Back bet you’re accepting. In this case you’re accepting the liability for a Back bet stake of £5 at a price of £2.24. Hence your potential liability is:

Potential Liability = (stake x price) – stake => (£5 x £2.24) – £5 = £6.20

In this example, £6.20 (the liability) is risked for a potential profit of £5. Note this example excludes the exchange commission. This would be deducted from any profit (typically 2-5%). There is no commission to pay if you lose.

You may have noticed the other line in this Betfair market which has not been mentioned, ‘Under 2.5 Goals’. You can also Back and Lay to cover the same results as described above, however, note that if you want to replicate the Back ‘Over 2.5 Goals’ then you would in fact Lay ‘Under 2.5 Goals’ and likewise for the Lay of ‘Over 2.5 Goals’. You may occasionally find a marginally better price using this opposites approach, but the exchange markets are generally quite efficient.

Summary

With a Back bet you are never risking more than your stake. The returns, and profit, are greater the higher the price is. Refer to Example 1: Back Bet for screenshots and explanations of how to place a Back bet at Betfair. Other exchanges are very similar.

Conversely, with a Lay bet, your liability gets greater the higher the price is. Your profit will only ever be equal to the stake. However, ss you will note in later descriptions, a Lay bet does offer some attractive opportunities when placed at the right time and the right price. Refer to Example 2: Lay Bet for screenshots and explanations of how to place a Lay bet at Betfair. Other exchanges are very similar.