Betfair Exchange Review
When you begin your career in sports betting, it’s important to understand exactly how betting exchanges work. They are a critical part of your trading toolbox, and ideally the platform on which your profit is banked.
Betfair is one of the largest betting exchanges, together with Smarkets, that many traders use on a daily basis. In this post, we’ll look at Betfair exchange in more details and see how it works and what it can be used for. Without further ado, lets jump right in.
What’s a Betting Exchange?
This refers to is a platform that allows sports traders to bets against other sports betters; not against the bookmaker as with the traditional betting sites. Basically, the bet exchange allows you bet on or against an event (usually in sports) with a chance to place your bet in-play.
For instance, you can place a bet on a football team before the match starts at a sports betting exchange such as Betfair, and you can change your position while the game is in play, if you do change your mind. This way, you’ll be able to reduce losses or lock in profits as the game progresses.
One key benefit of an exchange as Betfair’s is that they generally offer much better odds compared to the traditional bookmaker, which is vital for traders who want the best possible odds for a bets. Studies have actually shown that betting exchanges can offer up to 20% more value overall, which can make a huge difference in your long-term profitability especially if you’re placing a lot of bets.
How does Betting Exchanges Work?
Betting exchanges are online platforms where sports fans can bet against each other on various global sporting events. The exchange serves as a middleman that allows users to set the price of their bets (lay bet) and take the price that the other users are offering (back bet).
Since punters are laying and backing bets against each other, the exchange doesn’t care much about who’s winning or losing. This allows for much better odds and a more efficient book than you can find with the traditional bookies who have to include a profit margin. But how do these exchanges generate revenue? Well, they do charge commissions on bets instead of adding a profit margin.
Another great thing about betting exchanges is that you are able to back and lay at the same time, while at a normal betting sites, you are only allowed to back an outcome, which is quite limiting.
Now, let’s look at Betfair…
What is Betfair Exchange?
Betfair is an online betting exchange and sportsbook. Although they tend to focus more on their sportsbook business in their recent TV ads, it’s their exchange that made them and brought them to where they are today.
Betfair exchange was founded in June 2000, and became the first online exchange that paved the way for others. Back in 2000, it was simply impossible to do sports trading unless you were working for a bookmaker. With the inception of Betfair, sports traders had the option to trade against other users through a third party marketplace instead of having to use the traditional bookie.
At this point, you already have a good grasp of what Betfair Exchange is, but you might be wondering, what is Bbetting exhange Betfair Sportsbook? Well, the simple explanation is that a sportsbook is a platform where traders can place bets against a bookmaker. These are traditionally known as back bets.
In a back bet, you’re wagering on something to happen. For instance, you can place a bet on a certain horse to win the race. When that horse wins, the bookmaker will pay you the winnings. Quite straightforward, right?
Along with being able to place back bets, you can also place lay bets, which is basically matching other people’s back bets. This effectively lets you play bookie. In a lay bet, you’re saying that something will not happen. For instance, if you lay a horse to win the race, you win the bet if the horse doesn’t win the race. When any other horse wins, you will be paid by whoever matched your bet.
We’ll look at this more in depth below.
Subscribe To Our Newsletter
Get updates and learn from the best
Lay and Back Betting Explained
The ability to place lay and back bets is one of the key differences between the traditional bookmakers and betting exchanges.
In simple terms, a back bet is when you bet on something to happen, while a lay bet is betting on something not to happen. For instance, if you think Liverpool is going to win in their next match, you could place a back bet on the win. But if you’re convinced they are not going to win, you could lay the match win. In this scenario, your bet wins as long as Liverpool doesn’t win – if the match ends in a loss or a draw.
On betting exchanges like Betfair, lay betting is where the sports traders play the bookmaker, offering odds to sell a bet rather than backing a bet. This is one component of matched betting, where the punter can both back and sell bets on the same game to guarantee their winnings. It’s essentially the kind of bet that’s placed when you’re selling a bet instead of buying a bet, and is generally used by punters who want to play the role of a bookmaker. Lay betting is often used in systems as sports arbitrage and matched betting.
How You can use Lay and Back Betting
Let’s say at the start of a football match, Liverpool, your assumed favorite team have a price of 5.0. as a trader, you know this is a great value and place a $10 bet on them to win. You expect a profit of $38 after commission.
After the first half, Liverpool takes a 1-0 lead, and you notice the odds dropping to 2.0. at this point, you can use some of your $38 profit potential to lay the team at 2.0. if you choose to lay them for $25, you will have a guaranteed profit of $14.25 for either a win, a draw, or a loss at the end of the match.
Matched betting is a wagering system that involves both lay and back bets. As the name suggests, matched betting involves matching both lay and back bets. This can be a great way of making guaranteed profits.
How to Trade with Betfair
As mentioned before, all exchanges have to charge a commission to make their piece of the cake, often on the winning bets only. They all have their in-house ways of calculating the commission payments.
With Betfair, if you make a net profit, you will be charged a percentage of your profit as commission. For example, if you back a home win and the game ends in a 2-0 win, a percentage of your profit will be charged as commission. But if the game ends in a draw, you’ve lost your bet and you won’t have to pay commission.
If you choose to back a home win and then “green up” the market at 1-0 in order to protect your profits, you can use some of your potential profit to cover the other outcomes in the Match Odds Market as explained above. Since your net profit will be lower, you will therefore pay less commission.
Betfair usually calculates is commissions by multiplying the net profit by the current Market Base Rate. From there on, they may apply a discount based on how much you’ve placed bets for.
Currently, the Betfair Market Base Rate is around 5%, and this is the amount you’ll be charged as a new customer. However, the more experienced trader who put much larger stakes can get their commissions rates lower to around 2%, which as you can imagine, will have a great impact on the profit margin.
The Discount Rate, which is the term Betfair uses to refer to the size of the commission discount will depend on how many points you have accumulated on your Betfair Exchange account. Therefore, the more you trade on the Betfair platform, the more points you receive. This will not only improve your Discount Rate, but also reduce the amount of commission you have to pay on your winning bets.
The exchange points are calculated as follows:
- You will earn 1 point for every 10 pence of commission paid for any net winnings from your account
- This same rate will apply for the implied commission in the event that you have a net loss
Betfair Premium Charge
Premium Charge is an additional Betfair Tax on winning, which according to Betfair, only 0.5% of users with an accounts are affected by. Nonetheless, considering that there are millions of people who use the exchange, this could work out to be quite a significant number.
The charge is applied on accounts that make persistent profit and meet given criteria. In general, you will be considered a potential partaker of the premium charge if you meet the following conditions:
- Your account has been in net profit over the course of its lifetime
- Your account has bet on 250 separate exchange markets
- The total charges that your account generates are less than 20% of your gross profits
If your account has met the above conditions, it’s likely that Betfair will deem you eligible to pay the Premium Charge, and they will inform you promptly. No charges will be applied onto your account before you have been informed of this change to your account by Betfair themselves.
No need to panic though. You will only have to pay the Premium Charge if you’re consistently winning on Betfair, which by itself is quite an achievement. Once you’re informed that you need to pay the Premium Charge, it will automatically be deducted from your accounts every Wednesday in order to have your total charges in line with the 20% profit benchmark.
How to Avoid Betfair’s Premium Charge
As you would expect, the Premium Charge is one controversial subject. For some, the Premium Charge is a sign of corporate greed to make more profit as a betting exchange market leader. On the other hand, some think it’s a deterrent for market makers to prevent them from using bots that can siphon profits, and that it’s fair for those who are extremely profitable to pay more.
Whatever you view might be, it’s not such a big issue as many people make it out to be, especially considering that in its home country, the UK, profits from wagering are tax free. And if you object strongly, you can always close your Betfair account.
One way to avoid the Premium charge is using different exchanges whenever you can. Nonetheless, you should note that your favorite trading software might be incompatible with other exchanges and you might have to trade manually.
Some suggest looking for arbs opportunities to lower your profits at Betfair. However, this inevitably requires so much time and effort, and you might soon find your accounts gubbed or closed. It’s simply not worth it and you’ll be better off spending the time honing your trading.
Betfair Holiday Explained
Keep in mind that your Betfair Exchange Points will reduce by 15% every week you don’t trade on the exchange. Fortunately, you can prevent this by taking a Betfair Holiday, which works by freezing up your points for one week.
Every new customer will receive one free Betfair Holiday as soon as they join, and an additional week will be added every 3 months, but is limited to 4 weeks’ (maximum) worth of holiday. Note that if you trade during the Betfair Holiday, your points will still be frozen and you won’t see any points added to your account.
Betfair Exchange is still the best exchange for sports trading at the moment. The sheer size of the markets and the range of markets that are available on Betfair stand way above the competition. There are also many different kinds of trading possibilities that you simply can’t find on other exchanges.
Nonetheless, although it’s the market leaders, it’s far from perfect. The Premium Charge for instance discourages and deters many people and the commission isn’t ideal. Fortunately, Betfair doesn’t seem to be making profits by playing against their customers, which makes it the ideal exchange for any would-be winner.