Bookmakers vs. Betting Exchanges

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One of the first steps for any punter is to select a betting agency. Australia Sports Betting has an entire section dedicated to betting services that are suitable for Australians. This section will simply discuss the differences between a bookmaker and a betting exchange.

Agencies fall into two categories: bookmakers and exchanges. Bookmakers offer odds and you bet against the agency. With exchanges, the odds are determined by fellow users within a marketplace and you bet against fellow users. Bookmakers are recommended for beginners because they are easier to learn. Exchange memberships are a must have for serious enthusiasts because they enable you to bet both for and against outcomes.

Back vs. lay betting

If you have a membership with a bookmaker you can only back outcomes. To back an outcome is to bet that the selected outcome will occur. For example, if you bet on Arsenal to beat Chelsea, you are backing Arsenal.

If you hold an exchange membership you also have the ability to lay a bet against an outcome. A lay bet wins if the selected outcome does not occur. For example you could lay a bet against Hay List to win a horse race. Your lay bet wins if anyone except Hay List wins, and loses if Hay List does win. Unlike back bets, you double your money (minus commissions) if you are correct, and have to pay out at the agreed odds if you are wrong. For this reason with a lay bet you are essentially playing the role of the bookmaker.

Below is the discussion of the possible outcomes for placing a back or lay bet on Aston Villa in the following fixture. The odds provided have been taken from Betfair, which is the most popular betting exchange for Australians.

Sample Betfair odds

The shaded boxes represent the marginal odds to back and lay each outcome. The dollar values below the odds show the amount of money you can bet at those odds. The white boxes provide an insight into the market depth. In the market shown above, only $747 in wagers can be accepted at 3.40 odds if you want to back Aston Villa to win. If you placed $1,000 on Aston Villa at the best available odds, you would get $747 at 3.40 odds and $253 at 3.35 odds.

So how do back and lay bets on Aston Villa compare?

  • Back: Suppose you back $100 on Aston Villa. If Aston Villa wins you would receive $340 for a $240 profit (minus commission). If Liverpool wins or the result is a draw then you would lose $100.
  • Lay: Suppose you lay $100 against Aston Villa. If Aston Villa wins you would lose $240. If Liverpool wins or the result is a draw you would win $100 (minus commission). Note that you lose $240 and not $340, because you only lose the net profit, not the total payout. This is because $100 of the backer’s payout is their original wager. This example shows that for odds over 2.00, you need more than $100 in your account balance to lay $100. Conversely, if the odds are, say 1.10, you can lay $1000 against an outcome with only a $100 account balance, because your potential loss is only $100.

The above example highlights the difference between a back and lay bet. With a back bet your potential payout depends on the wager multiplied by the odds (minus commission), while your potential loss equals your wager amount. With a lay bet your potential profit equals your wager amount (minus commission), while your potential loss equals your wager multiplied by the quoted odds minus one, i.e. loss = wage * (odds – 1).

Matched and unmatched bets

In a betting exchange you can select from the available odds, or you can offer new odds of your own. If you are paired up against another punter your bet is said to be matched. If no punter elects to take the opposite position on your bet then your bet is said to be unmatched. In the example odds above, the dollar figures for each odds box represents how much money is unmatched at those odds. For example, there is a combined $170 in unmatched bets at 3.50 odds for Aston Villa. This represents punters who wish to back Aston Villa to win at 3.50 odds, but haven’t yet found a punter willing to lay a bet against Aston Villa at those odds. At the same time, there is a combined $747 in unmatched bets at 3.40 odds for Aston Villa. This represents punters who wish to bet against Aston Villa at 3.40 odds but have yet to find a punter willing to bet on Aston Villa at those odds.

If you select a bet at the available odds you are automatically paired up with one or more other punters. Any money you win/lose corresponds to a loss/win for the other punter(s). Your bet has been matched, which means the bet is confirmed, and money will change hands at the conclusion of the event. Using the example above, if you submitted a $50 bet at 3.40 odds on Aston Villa your bet would immediately be matched up and confirmed. The available amount for the 3.40 back bet (blue box) would drop from $747 to $697. This reflects that there is now $697 in unmatched bets at those odds.

Now suppose you would rather get 3.50 odds for backing Aston Villa. If you input a $50 bet at 3.50 odds it would show up in the pink box for Aston Villa and the amount available for that those odds would increase from $170 to $230. Your bet would initially be unmatched, and therefore unconfirmed. If no one is willing to lay a bet against Aston Villa at 3.50 odds before the event then your bet will be refunded once the game has commenced. You are able to cancel any unmatched bets prior to the event.

In an exchange you can offer odds of your own. Suppose you wish to back Aston Villa at 3.45 odds. If you wagered $100 a new pink box would appear in the odds display with 3.45 for the odds and $100 for the available funds at those odds. The 3.50 odds box would be shifted to the right, and would now be shaded white.

Often you’ll find that part of your bet will be matched at part will be unmatched. If you submitted a $800 bet on Aston Villa to win at 3.40 odds, $747 would be matched at $53 would remain unmatched.

Tournament betting

If you enjoy hedging your bets when odds move in your favour, then an exchange membership is highly useful. For a simple head to head bet, the betting agency type makes little difference. Hedging with a bookmaker is easy because you can simply bet on the opposing outcome at the new odds. For tournament betting, however, hedging with a bookmaker becomes difficult because this would involve backing every other outcome. With an exchange membership you can hedge your bets by simply placing a lay bet on the previously selected outcome.

For example, suppose you place a $100 bet on Na Li to win the French Open at 31.00 odds. After the third round she is still going strong and her odds have dropped to 15.00. If you wanted to lock in a profit you could lay a bet against Na Li at 15.00 odds. If she doesn’t win the tournament you will double up through your lay bet. If she does win your losses on the lay bet are outweighed by your winnings on the initial back bet. Below is an example of hedging your bets in this scenario to guarantee a profit:

Initial bet: $100 to back Na Li at 31.00 odds
Hedge bet: $200 lay bet against Na Li at 31.00 odds

  Profit if Na Li Wins Profit if Na Li Loses
Back $100 @ 31.00 $100*(31-1) = $3,000 -$100
Lay $200 @ 15.00 -$200*(15-1) = -$2,800 $200
Total Profit: $200 minus commission $100 minus commission


Pros and cons: bookmakers and exchanges

Below is a summary table of the pros and cons for bookmakers and betting exchanges.

  Bookmaker Exchange
  • Easy to learn
  • No commission fees – bookmaker margins are already factored into the odds
  • Can bet for and against outcomes
  • Easy to hedge your bets on tournament betting
  • Cannot bet against outcomes
  • Harder to hedge your bets on tournament betting
  • More difficult to learn
  • Commission fees can be complicated to calculate


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