Bookies v's Exchanges

What are they? And what's the difference?

When you’re new to betting, it can sometimes be difficult knowing the difference between all of the different available options. One common area of confusion is centred around the use of betting exchanges and sportsbooks (bookies).

What’s the difference?


You may well have used a sportsbook before, or a traditional high street bookmaker/bookie.


The bookmaker creates what is known as the ‘book’. This is where he forms the betting market for an event, with each of the different selections that are available at a given price. He prices each selection so that the combined probabilities add up to slightly over 100%, by adding what is known as an over-round or vig (see our guide to odds for an explanation).


You, the customer, then place a bet with the bookmaker at the available odds, and if your selection wins, you’re paid at a multiple of the odds. A betting exchange differs because they don’t set odds, they don’t take your bets, and they don’t pay you out of their own pocket.


The betting exchange company (e.g. Betfair) just provides a platform for users to bet against each other. One user acts as the bookmaker, and the other person plays the role of a traditional gambler. Because of this, the betting market looks completely different, as you’ll see below:




In the above picture, a back bet is a traditional bet (in blue). You place a bet and you’re paid out at a multiple of the odds you backed your selection at. A lay bet (in pink), is where a gambler plays the role of the bookmaker. They are effectively saying they don’t think a certain selection will win, and they offer odds to anyone who wishes to accept the bet.


So, if you placed a lay bet of the above selection, Cleonte, at odds of 4.8, you would state how much money you’re willing to lay. For this example, lets that that’s just £10.


If Cleonte won the race, as you’re playing the role of the bookmaker, you are liable to pay out £48 to the winner on the other side of the bet. If you were correct, and Sir Titan failed to win, you would get to keep their £10.

So how does the betting exchange make their money? Well, they take a small commission of between 2% & 5% on all winning bets.


Commission v's Over-round

In real life terms, a correct book percentage should add up to 100%. This is because the probability of one of the horses winning a horse race (should it be completed) is 100%. Odds are representative of the percentage chance each horse has of winning a race. However, using the same race,and now showing the William Hill odds:


Adding up the implied probability of each selection in the above (100 / odds price) = 128.1%.


This is because the above book is one created by a bookie. The ‘over-round’ of 28.1% means that the bookmaker expects to make a profit of 28.1% for the total amount of bets placed on the market. So if they take £1,000 in bets on the market, they expect a profit of £281.


To achieve this over-round number, the bookmaker is offering you odds that are less than actual probability your chosen horse has of winning the race.


In comparison, the probability of all of the odds on the Betfair example adds up to 101.5%. And as a result, some of the odds available on the betting exchange are much higher (although remember, if you win, your winnings will be subject to a commission of between 2 & 5%, depending on the betting exchange).


As an example:


  • You place £10 on Paddy's Motorbike at William Hill (odds of 41), and at also Betfair (odds of 55)

  • If the horse wins, you have a return of £410 at William Hill v's £550 at Betfair (minus the 5% commission = £522.50).

  • Take off your original £10 stake, the profit difference between Betfair & William Hill is £112.50 - from the same horse and the same race


Account restrictions


Bookies often use big wins as marketing material to encourage others to bet with them, but the fact remains that if the bookmaker deems you to be an unprofitable customer, they will potentially do one of a few things:

1. Restrict the amount of money you can place on a bet

3. exclude you from all future promotions & bonuses (n.b. you still may receive all of the promotional emails, but when it comes to claim your bonus, they will deny you - be warned)

3. close your account completely (in extreme cases)


Each bookmaker platform has an algorithm which rates the behaviour of each player. It applies a score to each bet, with weighting given to lots of different factors. These are things like stake, price of the bet compared to the rest of the industry, how popular the bet is, whether it was a winner, and so on. They are trying to eliminate the professional, or shrewd gamblers that recognise the importance of value betting.


Most bookies therefore only like gamblers that bet purely for entertainment. So when your algorithm score rates you as a good gambler and unprofitable for their business, then your account is likely to be flagged - but not with exchange betting.


A betting exchange wants players to win. They receive a commission no matter what the result, and if you’re winning, you’re more likely to keep using their platform.


Betting Options


One of the key things to consider when deciding whether to use a bookie or an exchange, is if it provides you with the capability to place the type of bet you’re looking to do. There are 2 types of betting for which your option is limited to a particular platform, and 1 type of bet where you can choose between either option. We’ll run through each of these three.


1. Multiples

If you are someone who likes betting on multiples/ACCAs, then your only real choice is to place those bets via a bookie. This is because the bookmaker supplies the odds. As a result, they can multiply your bets placed on each market and pay you out at the accumulative odds should every selection win. An exchange doesn’t have this capability because you’re placing a bet with a range of different people, rather than the bookmaker.


2. Trading

Trading is a very in-depth topic to cover, and there are thousands of different strategies, but it is one of the main benefits of exchange betting.


So what is trading? Trading is when you back and lay selections within the same market to reduce risk, create a no lose situation, or maybe even win no matter the outcome. You can take advantage of price movements within a market to lock in guaranteed profit. Think of exchange trading as like trading the stock market.


With a stock market, you buy stock low and sell high. The aim is to take advantage of a movement in price to get a profit. The same goes for exchange betting.


As an example, if you were to 'back' Chelsea to win at odds of 3.0 for a stake of £10, normally you would have to wait for them to win the match before you could be sure of a profit. However, if they go 1-0 up early in the match, their odds to win are likely to decrease, say to 1.5. If you were to then place an opposing bet, by 'laying' them to win the match for £20, you have created a situation where you will win no matter the result - i.e. if Chelsea win, your initial 'back' selection wins giving you a profit of £30 minus the £20 that you 'layed'. If Chelsea go on to lose, then your 'back' selection of £10 loses, but your 'lay' bet of £20 wins. This gives you a profit no matter the outcome.


3. Singles

You can bet on singles with both an exchange and a bookie, and really, this choice should be made depending on the price of your chosen selection. It’s advisable that you shop around and don’t stay chained to one bookmaker or an exchange because of convenience.


There are excellent price comparison tools such as oddschecker & betbrain which allow you to pinpoint who has the best odds. Over the long term, the small differences really add up and can making the difference between being at a loss or in profit.


Free Bets And Bonuses


One of the biggest areas in which bookmakers and exchange products differ is with their free bets and bonus schemes.


The reason for free bets and bonuses is to keep you entertained and coming back for more, and to continue your play and enjoyment of their product. So it is logical that this is a marketing strategy used by bookies, yet very rarely by exchanges.


Both bookmakers and Exchanges would like you to come and try their product. So they offer welcome bonuses in the form of free bets when you sign up. For exchange products, this is where the promotions start to dry up. Of course, they would like you to continue to use their platform. But there is far less competition, with just a few major exchange platforms to choose from (Betfair, smarkets, matchbook, Betdaq).


Compare that to bookies, who are at a point of saturation - in terms of the sheer number of bookies in the UK market, and by the size of their products (thousands of sports and betting options). The power is therefore held by the customers, so the only thing many bookies have to differentiate themselves is their marketing and promotions.

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