Betting exchanges explained, from back and lay to liquidity

A betting exchange is a marketplace where bettors trade with each other instead of betting against a bookmaker. It sounds technical, and the screens can look intimidating at first, but the idea is simple. Someone thinks a team will win, someone else thinks it will not, and the exchange matches them and takes a small commission from the winner. Because there is no bookmaker margin in the odds, exchange prices are often the best available. This guide explains how exchanges work, compares the main ones in Britain and covers the pitfalls. For our ratings of traditional bookmakers, see the main guide to the best betting sites.

Opening an exchange account is the same as opening an account with a bookmaker. You register, verify your identity and deposit using a debit card or e-wallet. Credit cards cannot be used, as for all gambling in Great Britain.

The main UK betting exchanges

All four hold Gambling Commission licences. For most people, Betfair is the place to start because of its liquidity, with Smarkets a strong second account.

Exchanges are regulated in the same way as bookmakers. Each of the four above holds a Gambling Commission licence and must meet the same standards on customer funds, complaints, identity checks and safer gambling tools as any other operator.

How an exchange works

On an exchange, every bet has two sides. A back bet is a bet that something will happen, just like a normal bet with a bookmaker. A lay bet is a bet that something will not happen. When you lay, you are taking the role of the bookmaker, accepting another customer's back bet.

The exchange shows the best available back and lay prices for each selection, along with the amount of money waiting to be matched at each price. When a back and a lay meet at the same odds, the bets are matched. The exchange holds both stakes and pays the winner when the event is settled.

Reading the market screen

Most exchanges show three back prices and three lay prices for each selection. The best back price, the highest odds available to back, is usually shown closest to the centre. The best lay price, the lowest odds available to lay, sits next to it. Below each price is the amount of money available at that price. A narrow gap between the two central prices, with large amounts beneath them, indicates a busy, reliable market.

Requesting your own price

You do not have to accept the prices on offer. You can request a bigger price for a back bet, and your bet will wait in the market until someone is willing to lay it at those odds. If no one takes it, it stays unmatched. This is useful if you think the price will drift before the event starts.

Backing and laying explained

Backing

Backing works exactly like a normal bet. If you back a team at decimal odds of 3.0 with £10 and they win, you receive £20 profit, minus commission, plus your £10 stake.

Laying

Laying reverses that. If you lay a team at 3.0 for a £10 stake, you are accepting someone else's £10 back bet. If the team loses, you win their £10, minus commission. If the team wins, you must pay out their £20 profit. That £20 is your liability, and the exchange holds it from your balance until the event is settled.

Why liability matters

The liability on a lay bet can be much larger than the stake, particularly at long odds. Laying a player at 20.0 for £10 means risking £190. Always check the liability figure the exchange shows before confirming a lay bet. It is the amount you could lose.

Laying for beginners

A sensible way to try laying is to lay a strong favourite at short odds for a small stake. At short odds, the liability is close to the stake, so the risk is easy to understand. Avoid laying long-odds selections until you are comfortable, because the potential loss grows quickly as the odds lengthen.

Commission and how it affects your returns

Exchanges make their money by charging commission on your net winnings in each market. If you win overall in a market, commission is taken from that profit. If you lose, no commission is charged. Rates differ between exchanges and can depend on the type of account or market. Smarkets, Matchbook and Betdaq generally charge lower standard rates than Betfair, while Betfair offers the deepest markets.

Comparing exchange and bookmaker prices

To compare an exchange price with a bookmaker's fairly, reduce the exchange profit by the commission. At 2 percent commission, a back bet at 3.0 returns profit of £2 per £1 staked, less 4p, making it equivalent to fixed odds of about 2.96. At 5 percent, the equivalent is 2.90. If the bookmaker is offering more than that, the bookmaker is the better bet.

The Betfair Premium Charge

A small number of very successful Betfair customers pay an additional charge on their profits, known as the Premium Charge. It applies only to accounts that have made substantial long-term profits and is unlikely to affect ordinary users.

Commission in practice

Because commission is charged only on net winnings in a market, it does not apply to losing bets. If you place several bets in the same market, such as backing two horses in one race, commission is worked out on your overall profit in that market, not on each winning bet individually.

Liquidity: why the busiest exchange usually wins

Liquidity is the amount of money available to be matched in a market. On busy markets such as a Premier League match, a golf major or a darts final, there may be large sums at each price, and the gap between back and lay prices is small. On quiet markets, the money available can be small, the gap can be wide and prices can jump around.

That is why Betfair remains the leading exchange despite its higher commission. More liquidity means you are more likely to get your bet matched at the price you want. For big events, the lower-commission exchanges can match Betfair on price, and they are worth checking. For niche markets, Betfair is often the only exchange with enough money to be useful.

When to use a bookmaker instead

Exchanges are not always the best choice. On minor markets with little money, a bookmaker's fixed price may be better than the thin exchange market. For racing, a bookmaker offering Best Odds Guaranteed can beat the exchange if the price drifts. And for simple bets on popular events, a bookmaker's app may simply be quicker to use. Most experienced bettors use both.

What exchanges are good for

Better prices

The most common reason to use an exchange is simply better odds on popular markets. Many bettors check the exchange price first and bet with a bookmaker only when it beats it.

Betting against an outcome

Laying lets you bet that a favourite will not win, something a traditional bookmaker does not directly offer. In golf or darts outrights, for example, you can lay the favourite rather than trying to pick a winner from the rest of the field.

Trading

Some users back a selection at one price and lay it at a shorter price later, locking in a profit whatever the result. This is called trading. It sounds appealing, but it is time-consuming and harder than it looks, and most people who try it lose money over time.

Cash out on exchanges

Exchanges offer a cash out button that closes your position at current market prices by placing an opposite bet for you. Because exchange prices have no built-in margin, this is often fairer than cash out at a traditional bookmaker. Commission is still charged on any profit in the market.

Hedging a bet

Exchanges also let you hedge an existing bet placed with a bookmaker. If you have an outright bet on a golfer who leads going into the final round, you could lay them on the exchange to guarantee a profit whatever happens. The amount you lay determines how much profit you lock in and how much you give up if they go on to win.

Hedging can also be done with a bookmaker, but the exchange is usually the more flexible option because you can lay the exact selection you backed, at a price set by the market.

Exchanges across different sports

Football and horse racing have the deepest exchange markets. Tennis, golf majors, darts and cricket internationals are well traded. Snooker, rugby and smaller events are covered but with less money. In minor sports, a fixed-odds bookmaker with a good price may be more practical than a thin exchange market.

Exchanges also offer in-play markets on most major events. In fast sports such as tennis and darts, prices can move very quickly, and there is a short delay on in-play bets to protect against users with faster information.

In-play exchange markets on sports such as football and tennis move very quickly after key moments. A goal or a break of serve can move prices dramatically in a second or two. Exchanges suspend markets briefly around these moments, and unmatched bets may be cancelled automatically, so check your open bets after any big event in the match.

Exchange accounts and restrictions

One major advantage of exchanges is that they do not restrict winning customers in the way some bookmakers do. You are betting against other users, not the exchange, so the exchange has no reason to limit your stakes. This makes exchanges the natural home for bettors who have had accounts limited elsewhere.

Exchanges must still carry out the same identity and affordability checks as any other licensed operator, and they must offer the same safer gambling tools.

If you have been restricted by a bookmaker, an exchange is the obvious alternative, but remember that other users on the exchange are often experienced and well informed. The prices reflect their combined judgement, which makes finding value harder than it might seem.

Getting started on an exchange

If you are new to exchanges, start with small back bets on markets you know well. Get used to reading the back and lay columns and to checking whether your bet has been fully matched. Try laying only once you are comfortable, and always look at the liability before confirming. Most exchanges have a simplified view or tutorial for new users, and it is worth using.

Where to find help on the exchange

Every exchange has a help section explaining its commission rates, settlement rules and market suspensions. It is worth reading once before you place your first bet, and checking again if anything in the market behaves in a way you do not expect.

Keeping exchange betting under control

Exchanges can pull you into long sessions, particularly if you start trading in-play. Set a deposit limit, keep an eye on your total liability across markets and use reality checks to remind you how long you have been logged in. Losses from laying can be large relative to the stake, so be especially careful with lay bets at long odds.

Used well, an exchange is one of the most useful accounts a bettor can have. It gives you better prices, more flexibility and a benchmark for every bet you place elsewhere. Used carelessly, particularly through lay bets at long odds, it can cost money quickly.

Questions and answers

Fiona Galbraith

Sports editor

Fiona covered football, golf, darts and snooker as a sports features writer in Glasgow for sixteen years, from the Old Firm to the Crucible. She has bet on all of them, usually for small stakes, and reviews bookmakers on how well they cover the whole sporting calendar.

About Fiona and the Almanac