What Are Exchange Bets?

When checking out betting offers, many will reference the fact that a deal may “not include exchange bets”. But what are exchange bets?

exchange bets excluded

Betting exchanges such as Betfair, which helped revolutionise the betting industry back in 2000, allow their members to bet against each other rather than sticking to the traditional betting scenario of punter v bookie.

So, members can place bets on the exchange, often with the reputation of claiming bigger prices than the standard fixed industry odds, or they can essentially “play the bookie” and offer odds to fellow members.

What’s The Difference Between a Bookmaker and Betting Exchange?

Bookmaker v Betting Exchange

While traditional high street and online bookmakers base their prices, and their risk, on taking on the punters but a betting exchange takes no such risks for itself. Rather, an exchange is technology-based. It provides the electronic platform on which people can match bets against each other, taking only a commission on any winnings.

Bookmakers can contract or expand their odds on a given horse according to its popularity in the market, or owing to their liabilities. In theory, a horse being heavily backed from 3/1 all the way into 7/4 can still be offered at 2/1, 9/4 or even bigger on the exchanges of a layer doesn’t think it will win and is willing to offer those odds.

How Do Betting Exchanges Work?

Betting Exchange Example

While it has proven to be controversial to some, trainers, owners and jockeys certainly not being allowed to do it, the fact that exchanges allow people to lay horses is what makes it so different to traditional betting.

Laying means, essentially, you are playing the bookmaker. Instead of putting money on a horse to win, you’re basically ‘backing it to lose’.

Members can set limits on this, unlike most bookmakers. They may believe a 2/1 shot is a bad favourite and so can ‘lay’ it, meaning they want it to lose. Do attract bets, they may offer this 2/1 shot at 5/2 for example, but that means you will owe winnings to everyone who matches with you at that price.

Limits can therefore be set. If £100 was your limit, then as soon as liabilities to that amount rack up on said horse you will take no more bets. If the horse wins, you’ve lost that £100. However, all the money placed with you is yours if the horse does indeed go on to lose.

Exchanges have revolutionised betting indeed, but not in the way people may think. Rather than simply being able to play the bookmaker role, many play both sides which exchanges make possible.

Should you back a horse at a certain price and that price contracts heavily, you can lay the same horse to lock in a win. For example (no commissions taken into account):

  1. £10 win bet on a 10/1 shot
  2. Price contracts to 5/1

In this case, you can accept liabilities at the shorter price up to, say £70. If the horse loses, you keep that £70 which, minus the £10 win outlay, is a win of £60. If, however, the horse wins you lose the £70 lay money but will return £110 from the basic win bet, meaning a return no matter whether the horses wins or not.

Do Exchanges Offer Bigger Odds for Punters?

Confused Man Thinking

The short answer is yes. And no! While the familiar TV adverts will tell you exchanges always offer better prices on average for winning horses, it really isn’t as simple as that and especially for the more discerning or professional punter.

Typically, taking an entire month or even a whole year into account, the average price of a winner on the exchanges even after commission may be slightly higher than the official industry starting prices.

However, including every single winner doesn’t really help every punter. Generally, when looking at strong favourites, last-time-out winners, in-form horses and so on, this really doesn’t turn out to be the case.

The reason may well be that there are shrewd layers on the exchange as well as shrewd backers. If a horse is a 16/1 shot in the offices, it may be 20/1+ on the exchanges and of course, the odd one will win, skewing the overall figures.

However, the layers will not be taking too much of a chance about a strong favourite, well-bred, in form and which maybe won last time out. So, if anything, they may offer even shorter prices about such types and over the course of time you’d be better off sticking with the traditional fixed odds markets.

One last reason you may not get the most out of your exchange account is the lack of offers. Given that exchanges are punter v punter, most offers simply concern sign-up bonuses or ‘refer a friend’ deals.

Traditional bookies on the other hand will offer ‘best odds guaranteed’, ‘price boosts’ and free bets on a regular basis.

The exchanges therefore are probably better for layers. You can’t always be too confident a horse will win, but you can often be a little more confident that a horse will lose.