Difference between Bookmakers and Betting Exchanges
If you bet on Tennis, you should definitely have an account in Betfair Exchange.
I’ll use Betfair Exchange as an example; it’s the biggest exch. with higher liquidity and the best odds.👇
- A Betting Exchange is a marketplace where bettors place their bets. It’s like the stock market, but instead of trading stocks, you trade players’ odds
- To better understand, let’s discuss the differences between a Bookmaker and a Betting Exchange:
1️⃣ This is key: you can bet for something happening (BACK), as well as against it happening (LAY). It means you can bet in favor of one player or against his/her rival. It’s the same, but as we’ll see later, it’s always important to see which option is better because the odds can be different. You can also bet against other events happening, such as a player winning 2 sets to nil.
2️⃣ In a bookmaker, the fee you implicity pay is the house margin. Imagine a tennis match where each player has a 50% chance of winning and therefore where the fair odds are 2.0/2.0. A bookmaker might offer odds of 1.95/1.95, 1.90/1.90, etc. This difference from 2.0/2.0 is their margin.
In exchange, you pay a percentage of your winnings. This fee varies between different exchanges. At Betfair Exch., it depends on your country and other variables. It can be as low as 2%, or as high as 5%, 8%, or even more. There’s a Premium Charge for those who win a lot, but it only affects around 0.5% of Betfair bettors
3️⃣ Another advantage of using an exchange is that if you have a price below which you wouldn’t bet, you can leave the order in the market. If that price is reached, your bet will be matched, and if not, it won’t. In a bookie, you have to continuously monitor if the price reaches the level you want.
4️⃣ At a bookie, if you bet multiple times in the same match, either pre-match or live, you have to ‘pay’ the house margin each time. In exchange, you only pay a percentage of your overall net winnings. Gains are offset by losses. This is great for traders, both pre-match and live, and is a significant advantage for active bettors.
5️⃣ Limits: A bookie always limits how much you can bet, though some like Pinnacle have very high limits. In exchange, you can bet as much as the market liquidity allows. The limit is what other bettors offer.
6️⃣ All bookies, with the exception of Pinnacle and a few others, will limit the size of your bets or even close your account if you win a lot. In exchange, you won’t be banned for winning too much because your gains are not their losses. They are interested in having as much betting as possible, as they earn a percentage of all the bettors’ winnings.
7️⃣ It’s proven that bookies set higher margins on higher odds (favorite-longshot bias). However, in an exchange, this effect doesn’t exist because you’re not betting against the house.
This is especially important for underdog bettors: generally, you’ll get higher odds on an exchange than at a bookie, even after accounting for the exchange fees. There is not favourite longshot-bias in betting exchanges.
8️⃣ Another advantage of an exchange is that Live betting, it’s much better than a bookie. You can leave your orders in the market, trade, see real-time price changes, and as mentioned earlier, only pay commission on net gains… there’s no comparison.
9️⃣ Regarding liquidity, in minor events and markets, you’ll almost always find better prices at a bookie. The reason is that if a market has low liquidity and fewer bettors, the spread between bid and ask will be wide, meaning lower odds. This is the biggest drawback of an exchange, so it’s generally not suitable for betting on minor events and markets.
⛏ Now let’s see how the Back and Lay work in the example from the screenshot:
Imagine you want to bet on Rune at the current market price. You can either bet on him at odds of 1.66 or bet against Tsitsipas (LAY) at 2.52. In this second scenario, you would be offering another bettor odds of 2.52 if Rune wins. The bet is the same, but you need to see what’s more interesting.
Let’s assume no commissions for simplicity. If you bet 100€ on Rune, your potential gain is 100 x (1.66-1) = 66€. This means that another bettor/s is/are offering you odds of 1.66, and you are accepting it. But if you want to bet against Tsitsipas, other bettor/s is/are now asking for 2.52. You can accept this price, meaning if Rune wins, you’d pay them 152€ for every 100€ bet. This is equivalent to odds of (100/152) +1 = 1.658 on Rune.
Thus, betting against Tsitsipas at the current market price (1.658) is slightly worse than directly betting on Rune at 1.66. So you should opt for backing Rune at 1.66.
But if you want to push it a bit, you could also offer 2.50 to Tsitispas backers, instead of taking the market’s 2.52, or asking for 1.67 on Rune. These orders would then be sent to the market, waiting to be matched.
There’s a small risk the market could move against you and your order might not be matched. It depends on how eager you are to place that bet.
Normally, if you leave it in the market, it will be matched, but if you think the price is great and the market might move soon, sometimes it’s better to take the price; this is something you should assess in every bet and you’ll learn with experience.
🚨In summary, should you have an account on an exchange like Betfair? The answer is YES. But it should be on Betfair Exchange with international liquidity. Some countries, for legal reasons, only have liquidity from bettors within that country, making betting there pointless. Low liquidity, wide spreads, and poor odds.
✅Adding an exchange to your list of bookies will translate into better odds and therefore better results.
A problem with Betfair Exchange and the rest of the exchanges is that, due to regulatory issues, it’s not accessible to users in many countries…
If we missed something, add it in the comments