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| Betting Exchanges - Person-to-Person Betting |
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Betting exchanges have emerged from the ability of the internet to link people together from all areas of the world and have revolutionised the betting and gambling markets. In a betting exchange there is no Bookie, punters bet with each other - ‘person-to-person’ - and the exchange acts as the middle man providing the medium for punters to trade with one another, taking a commission on the net winnings. Punters have the option to ‘back’ a certain event, as they would usually do with an Online Bookie. They also have the option to ‘lay’ an event, effectively becoming the Bookie, by offering odds to someone else. ‘Laying’ an outcome is effectively ‘backing’ it not to win.
For example, if someone thinks Team A will win a competition, he may wish to back that selection. A Bookie offering the punter that bet would be laying that selection. The two parties will agree the backer's stake and the odds. If the team loses, the layer/Bookie keeps the backer's stake. If the team wins, the layer will pay the backer the winnings based on the odds agreed. Another attraction that the Betting Exchanges have over the traditional Bookmakers is that punters can ‘lock in’ profits on the exchange. For example if a punter backs an event early at odds of 10/1, but then nearer the start of the event the odds have shortened to 5/1, the punter can lay the bet at 5/1 guaranteeing a profit.
Exchanges make their money by charging a commission which is calculated as a percentage of net winnings for each customer on each event, or market. Gamblers whose betting activities have traditionally been restricted by Bookies (normally for winning too much money) have found these sites a boon since they are now able to place bets of a size unrestricted by the exchange - the only restriction is that one or more opposing customers need to be willing to match their bets. Moreover, the odds available on a betting exchange are usually better than those offered by Bookies.
When BetFair first came onto the scene in April 2001 about £1m of bets were being matched a week, today that figure is more like £30-£40 million. This is money that punters would usually be betting with traditional Bookies on the internet so obviously concerns have been raised over the legality of the exchanges by the more established bookies. Betfair’s popularity can also be shown by the usage of their site. The Betfair website is the third most visited gambling website by UK internet users for the month ending March 2004. The two websites in front of BetFair are 888 and William Hill with Ladbrokes being right down in sixth.
The main advantage of betting via an exchange is that the odds available are nearly always better than the traditional Bookies are offering. Internet punters are at great advantage because they can see via comparison websites the odds for many sporting events compared against many competing Bookies and the exchanges. If you search for the best odds for a given event on these sites you will find that the price being offered on Betting Exchanges is the most competitive. Generally the Best Bookies work to an overround of about 110%, a simple example is an event where there is a 50-50 chance of either result occurring such as the toss of a coin, there is an evens chance that it will be heads and an evens chance that it will be tails. A Bookie won’t offer you evens on the event, but instead he will offer odds of 5/6, meaning for every 6 you stake you will win 5. This is how the Bookie makes his money. On a betting exchange the odds on offer are very competitive, this is because there are no set profit margins as punters are betting with each other. Typically for any sporting event that attracts a lot of interest such as an English Premier League match or a horse race at the Grand National the overround of the book on the exchange is generally no more than 101%. |
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