How Does The Betfair Exchange Work?

Last Updated on November 26, 2020 by Ben Adams

The Betfair Exchange is the worlds biggest online sports betting exchange.

Betfair has enabled people to make money with minimal risk by using matched betting strategies.

In this in-depth beginners guide, I’ll explain everything you need to know about the Betfair Exchange.

Furthermore, you’ll understand and know the difference between back bets and lay bets.

What Is A Betting Exchange?

Betting exchanges provide a platform for customers to bet against each other.

As a result, in most cases, betting exchanges will offer significantly better and fair odds compared to bookmakers.

Betting against other people may sound complicated at first.

The reality is, that you never know who you are trading against.

Betting exchanges provide an interface that makes placing bets very similar to how you would using a regular online bookmaker.

The main difference, is that betting exchanges allow lay betting.

Lay betting means betting on a selection to lose rather than win.

On the Betfair Exchange, BACK ODDS are displayed in blue and LAY ODDS in pink.

Back Bets vs Lay Bets: How The Betfair Exchange Works

A back bet is a bet you will most likely already be familiar with.

This is a bet placed on something you think WILL happen.

This type of bet is a normal bet you can place at any bookmaker shop or online.

A lay bet is a bet placed on something that you think WILL NOT happen.

Lay bets can only be placed at betting exchanges.

 

Every bet that is placed on the Betfair Exchange involves these two types of bets.

This means one person is backing the selection to win, and the second person is backing the same selection to lose.

Going back to my Farmyard example:

If I want to place £10 on Sheep to win at 10/1 (which returns £100 winnings + my £10 bet stake).

I need someone else to risk £100 at 1/10 (and they would stand to win £10 which is my bet stake).

The person risking the £100 is playing the same role as a traditional bookmaker. 

Betfair opened up this opportunity for this type of betting.

How Does The Betfair Exchange Make Money?

You may be wondering how the Betfair Exchange makes money when all the betting activity is between its customers.

Betfair charges a commission on your net winnings on a market (You do not pay commission on losing bets).

This is how betting exchanges make their money.

On the other hand, bookmakers never charge commission.

Instead, they offer you unfair odds. And that is how they make their money.

Betfair’s Commission Charge Example: How Does It Work?

The standard commission charge is 5% of your bet winnings on a market.

If you win a bet at 10/1 your profit is £100.

Betfair will deduct £5 (5% of £100) and you’re net profit will be £95.

Customers can opt-in to ‘My Betfair Rewards’ to choose a lower commission rate.

Betfair Exchange Rewards Plan

I recommend sticking with the most popular Rewards plan with 5% commission for anyone new to matched betting.

The promotions and benefits you’ll receive will be more valuable than the lower 2% commission available with the Basic plan.

Betfair also has a separate sportsbook which operates as a normal bookmaker.

If your Betfair Sportsbook account gets gubbed (restricted). Then it makes good sense to move to the Basic plan and take advantage of the lower commission rate.

Why Everyone Who Places A Bet Should Consider Using The Betfair Exchange

Even if you aren’t matched betting, and just want to gamble on sports (please don’t!), it would be in your interest to use the Betfair Exchange.

There are some key benefits to using betting exchanges as oppose to bookmakers.

– Value

Customers can select odds they think are fair and wait to see if another member is willing to take the risk (lay your bet).

The odds available at the Betfair Exchange are formed by thousands of peoples opinions.

This in turn results in markets being priced accurately at ‘true’ odds (based on this theory).

Meaning the odds you take reflect the actual chance of something happening.

– Cashing (Trading) Out

For most markets you enter, you will have the option to cash-out at any time the market is open.

Cashing out at a betting exchange allows you to lock in an even profit or reduced loss at any stage at fair odds.

Bookmakers also offer cash-out options on bets. The amount they offer is almost always a terrible deal and bad value for the customer.

Betfair Exchange Rivals: Are There Any Better Alternatives?

There are three other popular betting exchanges that pose as the Betfair Exchanges main competitors.

These are:

Smarkets (2% Commission)

Matchbook (2% Commission)

Betdaq (2% Commission/0% Commission on selected sports)

You’ll notice these rival betting exchanges all start with lower commission rates.

The lower commission is great, but the main advantage Betfair hold (even at 5% commission) is that they have more liquidity throughout their markets.

What Is Liquidity?

The liquidity is the amount of money available for you to back or lay on any given selection.

The more money available the better in terms of getting your bets successfully matched.

The liquidity is displayed on the odds buttons of each selection as highlighted above.

So, Is Betfair The Best Betting Exchange?

For those new to matched betting, I recommend using the Betfair Exchange, to begin with.

It is the most user-friendly betting exchange and has the benefit of stable markets with plenty of liquidity.

However, as you gain momentum I would consider using Smarkets and Matchbook as well.

When you join a matched betting service such as Oddsmonkey. You are eligible for 0% commission at Smarkets and Matchbook on all bets.

This is hugely beneficial, especially when you begin placing larger lay bets.

The money you save on commission will easily offset the cost of the Oddsmonkey membership.

It’s also wise to have at least a couple of betting exchanges open anyway.

In the rare case that a betting exchange website is down, you will have the option of logging in to another site to lay your bets if required.