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A betting exchange is a marketplace for customers to bet on the outcome of discrete events.Betting exchanges offer the same opportunities to bet as a bookmaker with a few differences. Gamblers can buy (also known as "back") and sell (also known as "lay") the outcome, and they can trade in real-time throughout the event, either to cut their losses or lock in profit. Bookmaker operators generate revenue by offering less efficient odds. Betting exchanges normally generate revenue by charging a small commission on winning bets.
The first betting exchanges were Matchbook, flutter.com and Betfair. Flutter and Betfair merged in 2001 with Betfair chosen as the primary betting exchange.The flutter.com site ceased operations in January 2002. Since then Betfair has maintained a leading position in the betting exchange market. BETDAQ (which also trades as the 'Ladbrokes Exchange') is believed to be the second largest betting exchange and it had an estimated 7% share of the betting exchange market in 2013. BETDAQ is owned by Ladbrokes plc (now Ladbrokes Coral) following the acquisition in February 2013.
Most 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 been restricted by bookmakers (normally for winning too much money) are able to place bets of unrestricted size as long as one or more opposing customers are willing to match their bets. The odds available on a betting exchange are usually better than those offered by bookmakers, in spite of the commission charged, because there are smaller overrounds.
In spite of these advantages, exchanges currently have some limitations. Because exchanges seek to concentrate their liquidity in as few markets as possible, they are not currently suited to unrestricted multiple parlay betting. Betfair does offer accumulators but these are limited in number and type: users cannot determine the outcomes contained in accumulators themselves. Some exchanges such as BETDAQ also offer multiples but the exchanges act in the same manner as traditional bookmakers in doing so (i.e. they themselves and not a customer act as the layer of such bets). Exchanges also tend to restrict the odds that can be offered to between 1.01 (1 to 100) and 1000 (999 to 1).
Traditionally betting has occurred between a customer and a bookmaker where the customer 'backs' (bets that an outcome will occur) and the bookmaker 'lays' (bets that the outcome will not occur). Betting exchanges offer the opportunity for anyone to both back and lay.
For example, if someone thinks that Team A will win the competition, they may support that choice. The bookmaker offering this bet to the player will choose this option. Both sides will agree on the sponsor's bet and odds. If the team loses, the layer/bookmaker retains the patron's bet. If the team wins, the layer will pay the sponsor the winnings according to the agreed odds. Since every bet you make requires a patron and a layer, and the exchange of bets is not a participant in the bets made on it, any exchange of bets requires both patrons and layers.
Exchanges allow bets to be made in-running or in-play (i.e. to make bets while a race or match is in progress). This feature is generally restricted to the most popular events for which widespread, live television coverage is available.
Whereas non-in-play bets are entered into the system immediately after being placed by the customer, when betting in-play a time delay might be instituted so as to make it somewhat more difficult for unscrupulous customers to accept offers for bets that for whatever reason have suddenly become highly favorable. Markets may also be actively managed by the operator. In this case, betting will be briefly halted after each occurrence likely to cause a substantial change in the odds (for example, in association football matches goals, penalty kicks and sendings off would warrant such suspensions), so that unmatched bets can be cancelled.
Arbitrageurs (colloquially "arbers") attempt to simultaneously bet on all possible outcomes to make a guaranteed profit. A trader operates similarly to an arbitrageur but is willing to take on extra risk and bet on events where no immediate profit is possible. A trader hopes to make a profit by closing out the bet at a later stage at more favorable odds. Closing out a bet for profit involves collecting more money by laying than is paid out when the outcome is backed back. If the event does not occur then no money is lost, alternatively if a trader is able to lay a higher stake at shorter odds than his back stake then he can theoretically guarantee the same amount of profit regardless of the outcome. On the other hand, if the odds move against the trader he might elect to close out the bet so as to minimise his loss. Trading can be done either before the start of an event or while the event is in progress if in-play betting is offered. Compared to trading before the event commences, trading in-play usually involves both greater risk and also the potential to make more money.
Traders can make money by betting exclusively with betting exchanges or bookmakers, or by combining the two. The trader could lay at a low amount on a betting exchange and then back at a higher price with a bookie or another exchange. This must be done simultaneously to guarantee a profit or else the opportunity could quickly cease to exist with liquid markets quickly correcting prices and bookies trying to avoid being arbitraged.
Most exchanges post the book percentages (colloquially known as the overround or "vig") prominently for each market. These percentages are essentially the cumulative implied percentage chances of the odds on offer for each selection and for a single winner market will usually add up to more than 100% for all back selections (but only marginally over in a competitive market), and under 100% for the lay selections. This ensures that simultaneously backing or laying all selections in a market will not normally guarantee a profit. Occasionally though (especially in circumstances where odds are prone to change rapidly) exceptions will arise where offers to back or lay all selections will be made that if simultaneously and cumulatively accepted at exactly the right stakes would permit an arbitrageur to guarantee a profit. However, such phenomena tend to correct themselves very quickly and exchanges generally try to dissuade customers from attempting to take advantage of such circumstances.
Furthermore, for a trader or arbitrageur to combine different exchanges and/or bookmakers for a profit requires a substantial price differential if a profit is in fact to be made once the exchange's commission is taken into account. Even between exchanges, such large price differences are rare, brief and usually involve relatively small stakes. Fortunately for traders, almost all betting exchanges charge commission on net winnings only and charge no commission at all in the event of a net loss. This suits the trader's high turnover, low profit strategy provided he bets exclusively with a single exchange.
Unless a trader is willing to accept the risks inherent with in-play trading, the profit or loss for a trader will typically be no more than 10% of the total amount of his combined back and lay stakes in any particular market, so to make meaningful amounts of money a trader needs to commit a relatively large amount of capital. The trader therefore runs the risk of having a large unwanted bet on an event if he is unable to close his position before the event starts (e.g. if there are technical problems with his Internet connection or with the exchange).
Traders and arbitrageurs are often credited with "seeding" markets with more competitive prices than would be present without them. However, Betfair's imposition of a premium charge in September 2008 was seen by some as being directed at the most skilled traders, whom it is speculated trade for a loss very infrequently and thus would otherwise pay little in the way of commission. In response, rival exchanges have pledged not to introduce similar charges, perhaps in hopes of enticing traders to move their business (and capital) elsewhere.
The fact gamblers can lay outcomes on the exchanges has resulted in criticism from traditional bookmakers including the UK's "Big Three" - Gala Coral Group, Ladbrokes and William Hill. These firms argue that granting "anonymous" punters the ability to bet that an outcome will not happen is causing corruption in sports such as horse racing since it is much easier to ensure a horse will lose a race than to ensure that it will win.
Exchanges counter that, while corruption is possible on any gambling platform, the bookies' arguments are motivated not by concern for the integrity of sport but by commercial interests. Exchanges also assert they are well aware of who their customers are and keep a complete record of all betting activity in case of enquiries, whereas high-street bookies take anonymous cash bets. Furthermore, customers can monitor the odds on the exchanges' user-friendly platforms independently. Exchanges and the authorities can be immediately alerted should suspicious betting patterns become apparent. Some exchanges have signed agreements with governing bodies of sport including the Jockey Club, with whom they insist they will co-operate fully if the latter suspects corruption to have taken place. Exchanges have co-operated with police investigations when asked to do so, sometimes leading to arrests.
In February 2013, Ladbrokes (now Ladbrokes Coral) acquired BETDAQ, which is a betting exchange. Of the UK's "Big Three" only William Hill doesn't own a betting exchange.
Gambling is the wagering something of value on an event with an uncertain outcome with the intent of winning something of value. Gambling thus requires three elements to be present: consideration, risk (chance), and a prize. The outcome of the wager is often immediate, such as a single roll of dice, a spin of a roulette wheel, or a horse crossing the finish line, but longer time frames are also common, allowing wagers on the outcome of a future sports contest or even an entire sports season.
Spread betting is any of various types of wagering on the outcome of an event where the pay-off is based on the accuracy of the wager, rather than a simple "win or lose" outcome, such as fixed-odds betting or parimutuel betting.
Fixed-odds betting is a form of wagering against odds offered by a bookmaker or an individual or on a bet exchange. It involves betting on an event in which there is no fluctuation on the payout. In Australia, the practice is usually known as "SP betting".
A bookmaker, bookie, or turf accountant is an organization or a person that accepts and pays off bets on sporting and other events at agreed-upon odds.
Betfair is an online gambling company which operates the world's largest online betting exchange. It also offers a Sportsbook, online casino, online poker and online bingo. The company's headquarters are located in Hammersmith in Greater London, England, and Clonskeagh, Dublin, Ireland.
Odds provide a measure of the likelihood of a particular outcome. They are calculated as the ratio of the number of events that produce that outcome to the number that do not. Odds are commonly used in gambling and statistics.
Vigorish is the fee charged by a bookmaker for accepting a gambler's wager. In American English it can also refer to the interest owed a loanshark in consideration for credit. The term came to English usage via Yiddish slang, which was itself a loanword from Ukrainian or Russian.
In gambling, a Dutch book or lock is a set of odds and bets which guarantees a profit, regardless of the outcome of the gamble. It is associated with probabilities implied by the odds not being coherent.
Paddy Power is an Irish bookmaker founded in 1988 in Dublin, Ireland. The company conducts business through a chain of licensed betting shops in Ireland and the United Kingdom, and by operating Ireland's largest telephone betting service. On the internet, it offers sports betting, online poker, online bingo, online casino and online games. It merged with Betfair to create Paddy Power Betfair now Flutter Entertainment on 2 February 2016.
Sports betting is the activity of predicting sports results and placing a wager on the outcome. The frequency of sports bet upon varies by culture, with the vast majority of bets being placed on association football, American football, basketball, baseball, hockey, track cycling, auto racing, mixed martial arts, and boxing at both the amateur and professional levels. Sports betting can also extend to non-athletic events, such as reality show contests and political elections, and non-human contests such as horse racing, greyhound racing, and illegal, underground cockfighting. It is not uncommon for sports betting websites to offer wagers for entertainment events such as the Grammy Awards, the Oscars, and the Emmy Awards.
Betting arbitrage is an example of arbitrage arising on betting markets due to either bookmakers' differing opinions on event outcomes or errors. When conditions allow, by placing one bet per each outcome with different betting companies, the bettor can make a profit regardless of the outcome. Mathematically, arbitrage occurs when there are a set of odds, which represent all mutually exclusive outcomes that cover all state space possibilities of an event, whose implied probabilities add up to less than 1. In the bettors' slang an arbitrage is often referred to as an arb; people who take advantage of these arbitrage opportunities are called arbers.
Gambling in the United Kingdom is regulated by the Gambling Commission on behalf of the government's Department for Digital, Culture, Media and Sport (DCMS) under the Gambling Act 2005. This Act of Parliament significantly updated the UK's gambling laws, including the introduction of a new structure of protections for children and vulnerable adults, as well as bringing the burgeoning Internet gaming sector within British regulation for the first time.
Mаtched bеtting is a bеtting technique used by individuals to profit from the free bets and incentives offered by bookmakers. It’s proponents consider it risk-free in theory as it is based on the use of a set of mathematical equations rather than left to chance.
Betdaq is the trading name of Global Betting Exchange Alderney Limited (GBEA), whose registered office is in St. Anne, Alderney. GBEA was originally part of the Global Betting Exchange (GBE) group of companies founded in 2000 by leading Irish businessman Dermot Desmond who had the vision of creating a website where fans come together to bet with each other over the internet. GBEA was acquired by Ladbrokes in February 2013. Betdaq is the second largest betting exchange operator with approximately 7% market share. Betdaq allows people with different opinions on the likely outcome of an event to bet against each other. A betting exchange allows people to bet against each other rather than against a bookmaker.
The Tote is a bookmaker in Britain which offers parimutuel betting on British horse racing in Britain. The firm was owned by the UK Government from 1928 and was the only bookmaker in Britain allowed to offer parimutuel betting on horse racing. The Tote was then sold to Betfred in July 2011 for £265 million, allowing them to offer parimutuel betting services.
Advantage gambling, or advantage play, refers to legal methods, in contrast to cheating in casinos, used to gain an advantage while gambling. The term usually refers to house-banked games, but can also refer to games played against other players, such as poker. Someone who practises advantage gambling is often referred to as an advantage player, or AP. Unlike cheating, which is by definition illegal, advantage play exploits innate characteristics of a particular game to give the player an advantage relative to the house or other players. While not illegal, advantage play is often discouraged and some advantage players may be banned by certain casinos.
An odds compiler is a person employed by a bookmaker or betting exchange who sets the odds for events for customers to place bets on. Apart from pricing markets, they also engage in any activity regarding the trading aspects of gambling, such as monitoring customer accounts and the profitability of their operations.
Sportsbet.com.au, also known as Sportsbet, is an online gambling company owned by British conglomerate Flutter Entertainment, primarily targeting the Australian market. Sportsbet is licensed as a corporate bookmaker in the Northern Territory under the Racing and Betting Act 1993 (NT). Sportsbet offers betting services online through its website and its mobile app as well as by telephone, and has more than 1.25 million Australian customers as at the end of 2019.
Betfair Australia is the Australian operation of the web betting exchange, Betfair. Established in 2005, Betfair Australia operates Australia's only betting exchange under a Tasmanian Gaming Licence. Since August 2014 Betfair Australia has been fully owned by Crown Resorts.