Betting exchanges started a few years ago now and rapidly became more popular than the bookmakers for 1 simple reason and that was money. People could bet on the exchanges and get better odds than the bookmakers. The betting exchanges are simply a tool for people to bet on their prediction of a sporting or non-sporting event with someone else of the opposite opinion.

The other big difference between an exchange and a bookmaker is that you can lay any event instead of backing it. Laying an event means you think that a horse, team or person will lose and not win. In a field of 10 horses you can back one to win and 9 are in effect running that race against you. You don't want them to win, you want yours to. If you lay a horse to lose however the other 9 are running for you not against you. You just want yours to lose and you don't really care who wins. This has made a giant impact on how people now bet and is another reason the exchanges have taken off with such a massive growth.

How does it work?

Lets take a football match as an example. Liverpool are playing Portsmouth in the Premiership and I think Liverpool are going to win. I will go to a betting exchange like Betfair or Betdaq and place a bet in the back column for say £10.00. Someone else will think that Liverpool are going to lose the match and they will go to the exchange and place a bet in the Lay column for say £10.

The betting exchange will match us together (very quickly and electronically) and hey presto our differences of opinion are now pitted against each other as a bet! The exchange will hold on to all the money until the outcome of the match is known and then they will pay the winner their money minus a small percentage for providing the service.

Simple.

So who are the main betting exchanges out there?

We are going to look at the 2 largest exchanges at the moment as they are well established and provide excellent liquidity in the market. The liquidity is the amount of money available to be bet with on each event. If there is no liquidity in an event you won't be able to trade very easily.

Betfair


Easily the largest of the exchanges. Commission on winnings starts at 5% and can be as low as 2% depending how much you spend with them. The commission rate is based on a points system based on the cumulative total profit or loss of each bet you make. The more this is the more points you get and the lower your commission becomes. Your points balance does decay however at 15% per week so periods of reduced activity will see your rate go back up again.

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Betdaq

This is the second largest and oldest exchange out there. Commission starts at 5% and can be reduced to 2%. The commission also works on a decaying profit/loss points system very similar to Betfair although the levels of activity to reach the lower commission rates are less than those required by Betfair.

Who you choose is really up to you and each has advantages and disadvantages. Some people simply prefer the look of one over the other but they perform the same function. They give you a platform on which to trade. We personally use Betfair as we have for years and have had no reason to change. The choice is yours.