What is a Betting Exchange?
While at first glance bookmakers and betting exchanges seem very similar there are some key differences in the way that they work.
When you place a bet with a bookmaker (William Hill, Ladbrokes) you are betting against the bookmaker itself, however when placing bets on a betting exchange (Betfair, Smarkets) you are actually betting against other users on the exchange, hence the term ‘betting exchange’. Exchanges then make their money by charging a small commission on winning bets.
How Do Exchanges Make Money ?
Unlike Bookmakers who make their money from losing bets, exchanges charge a small commission on their customers winning bets. This amount varies from platform to platform and is generally between 2% and 5%.
By using the matched betting calculator, when placing our lay bets with exchanges, we factor this charge in in order to work out the required lay stake for our qualifying bets and free bets.
Using Exchanges For Matched Betting:
For matched betting to work we need to be able to cover all outcomes of an event and exchanges provide us with the ability to bet against an outcome happening.
When using matched betting we are always placing two separate bets to cover all outcomes and ensure we make a profit on free bet offers from the bookies.
A BACK bet (to win) with a bookmaker (e.g. Coral).
A LAY bet (to lose) with an exchange (e.g Betfair).
It is the combination of these back and lay bets that allow us to cover all outcomes (win/lose/draw) and make our profit
Which Exchange Should I Use ?
When it comes to choosing a betting exchange there are three main ones that are recommended, Betfair, Smarkets and Matchbook. These are the main players in the market for the UK and will provide us with what we need in order to work our way through the free bet offers.
Below is a brief overview of the main exchanges. For beginners it is best to start with Betfair while you learn the ropes of matched betting as it is the biggest exchange and has a good user experience.
Betfair is the largest and most well known exchange in the world with over 4,000,000 users. Betfair offers the widest coverage for sports of any exchange and provides a good user experience for those new to matched betting. The exchange also benefits from a larger customer base which means it can generally offer more market liquidity than other exchanges. The commission charge on Betfair is sett at 5%.
No longer the new kid on the block, Smarkets has risen to become a major exchange. With a tech led approach the platform provides a users with a really good experience and a mobile app that (in my opinion) is streets ahead of the others. In the early days there were reliability issues, however with continual updates their mobile experience has come a long way. Smarket also has a lower commission charge at 2.5%.
Not as prominant as either Betfair or Smarkets, Matchbook offers good coverage on sports, particularly US sports, and has the best commission charge at 2% for resdidents of the United Kingdom, Republic of Ireland, Channel Islands and Isle of Man. Outside of these regions the commission is set at 4%