Forget the recent furore over the role of betting exchanges in race fixing – they are a fantastic tool for gamblers and are here to stay. Over the course of this article we give you the goods on this exciting way to bet. Which are the best exchanges, how can you get the edge when using them and what are the pitfalls you should be wary of? Betting expert Paul Kealy reports.
The emergence of betting exchanges is probably the most staggering success story of the new millennium, with Betfair, the leading exchange, now matching in excess of £50 million in bets every week and at busy times processing 12,000 bets per minute.
That’s an astonishing number, yet there are still thousands of regular punters who either have no idea how an exchange works or are afraid of the concept, at least partly because of the scare stories bandied around by self-interested bookmakers trying to knock the new kid on the block down to size. It’s a battle they will lose.
As an exchange convert, I’m no longer so interested in how it works, but as to why the hell someone had to wait to invent it until after I’d spent nearly 20 fruitless years betting against bookmakers who have not only expertise on their side but also punter-crippling margins that render profit-making impossible to all but the shrewdest of operators.
And if you think about it for a moment, you will quickly realize that we have been but a whisker away from punting nirvana for almost 100 years. Of course, we had to wait for computer technology to allow punters to bet from their living rooms first (or at the office behind the boss’s back), but the advent of exchanges was clearly inevitable.
I’m talking about Tote betting, a form of wagering just a few mutational steps from what is now known as a betting exchange.
The first automatic totalisator machine was installed at Ellerslie Racecourse in New Zealand in 1913 and was quickly copied around the world. The French call it pari-mutuel, the literal translation of which is bet-mutual or, in other words, betting amongst each other.
And that is what an exchange is (with several added advantages): a website that allows you, the punter, to back your opinion against that of another punter who disagrees with you. You get rid of the bookmaker, who slowly bleeds you dry thanks to his horrific percentages.
Of course, this is all written with perfect hindsight, because if I possessed just half of the foresight required it would be me supping champagne and watching horses in my colours winning Newmarket’s July Stakes rather than those of Andrew Black (co-owner of Captain Hurricane), who is the man responsible for the birth of Betfair, on Oaks Day in June 2000.
Tote-al toss
Back then, Betfair matched barely £50,000 of bets in a week, but the growth since has been almost exponential, and the figures mentioned at the start of this article will probably seem pretty small just a year from now.
Why? Because exchange betting is the best, some would say only, way to bet. The advantages over a run-of-the-mill Tote operation that you will find at any British racecourse are enormous. Most readers should have a basic understanding of how the Tote works but, to summarize: you make a selection and hand your money over to a third party, who then redistributes the winnings after taking a hefty cut for themselves. The amount of money you receive upon a successful wager depends entirely on how much of the pool was bet on your selection.
And there’s problem number one: no price control. On an exchange you know the odds before the event takes place, the price you receive being mutually agreeable with the other party taking your wager. If the price on offer is not acceptable to you, you simply put in an order and leave it on the exchange, hoping someone will take it. If they don’t, you’re at least safe in the knowledge that you have not struck a wager that would have been unacceptable had you known the price in advance.
But that’s enough of the analogy with the Tote, because there are several other advantages to talk about without the need to refer back to the obvious failings of an outdated system of wagering. The following is a short list, with an explanation of the main benefits of exchange betting over all other forms.
VALUE
Whenever you take a price on an exchange, the chances are that price is the best around. Why? Because the bookmaker, who builds in his own profit-margin so that he wins if he lays every runner in the field, has been taken out of the equation. An exchange is a super-competitive marketplace, where the percentages for layers only just scrape above break-even point. In short, bookmakers, with overheads to consider, simply could not afford to offer you prices that are freely available on an exchange.
This is not always the case, so it is advisable that you still search around for the best odds, and factor in the rate of commission that you are asked to pay. Commission rates vary from firm to firm. Betfair charges on a sliding scale from 5% to 2% depending on how much you bet (the more money you turn over, the lower the rate will be), while others like Sporting Options and Betdaq charge less, but have a smaller share of the market. Commission is charged only on the profit that you make on any particular market, not the total stake. In other words, if you back two horses in a single race and one wins, you pay commission on the return less your total stake on both runners.
LAYING
Rather like in spread betting, every runner in a field – whether it is horses, dogs or football matches – is a two-way book. You can back it win or lay it to lose. If your one strong opinion is that the favourite is bad value, you no longer have to spend hours trying to unravel the rest of the puzzle. You simply lay the favourite.
‘Play bookmaker’ is a term often used, but not one that is encouraged by the exchanges themselves, who prefer to regard it as a bet on a selection to lose rather than a practice of bookmaking. It could be argued, for instance, that a bet on the winner of a two-runner event, such as a tennis match, is effectively a lay of the other runner.
TRADING
The ability to back and lay has opened up a whole new world and, to an extent at least, all-out punting is going out of fashion. The concept of closing out for a profit irrespective of end result will not be new to spread punters, but with spreads you normally have to wait for a big market move as you have to pay the bookmakers’ margin twice, although this has changed with the arrival of Cantor Sport’s spread betting exchange Spreadfair (click the ‘How To’ button).
On an exchange, just a tiny move can see you lock in a profit. A perfect example is the recent Poland vs England football match. Having thrown away a 2-0 lead against Austria, England were available at 1.96 (a shade under evens) for much of the time leading up to match day in Poland. However, the predictable flood of money for Sven’s boys came in on the day and England were around 1.89 at the off.
A trader could have had £100 on England at 1.96 and laid £100 at 1.89 for a guaranteed no-lose profit of £7 if England won. That’s a trivial sum, but the amount of money generated on a big football match means it would have been just as easy to have £10,000 at 1.96 and lay £10,000 at 1.89 for a free £700 bet. Alternatively, you could have laid back £10,375 at 1.89 and switched your computer off safe in the knowledge that you have just made around £370 irrespective of what happens in the match.
That, of course, is a rather simple example (though in the majority of England matches you will be able to do just that) and in practice it is not so easy – otherwise nobody would lose. But if you have the ability to successfully predict a market move in either direction, you have a licence to make money without any risk at all. And what bookmaker would want to let you do that?
BETTING IN-RUNNING
Not the newest concept in the world, but one revolutionised by exchanges, particularly Betfair’s in-running horse race markets, as Betfair is the only place you can bet after the off since there isn’t the required liquidity on the other exchanges yet.
Possibly the biggest key to betting in-running on a horserace is to do the opposite of what your mind is telling you. It sounds daft, but if you are sitting in front of your TV and you notice a horse travelling extremely well, everyone else is likely to notice it as well. A mad rush to get on ensues and the price collapses so much it becomes a value lay. The shortest price at which you can bet on an exchange is 1.01 or 1/100, and long odds-on shots (even sometimes those at 1/100) in-running get beaten every day.
You can bet in-running on virtually every live (and some non-live) sport and the demand for this facility should not be underestimated. In the recent US Open tennis tournament, the women’s semi-final between Jennifer Capriati and Elena Dementieva attracted minimal pre-match interest (women’s tennis is hardly a popular betting medium), with barely £20,000 matched by the early evening. It was different once this Sky-televised match got under way, though, and by the end of the three-setter Betfair had recorded in excess of £4.5m of matched bets.
ANTI-CORRUPTION
You can’t discuss exchanges without bringing up the subject of corruption, because nowadays it seems that all exchange publicity is bad publicity. This is largely because bookmakers, with more regard for their own profits than the actual integrity of betting mediums, continually stir up a hornet’s nest.
Yes, it is possible to influence results and profit from them should you so wish, but that has always been the case. However, if you do so on an exchange you are more likely to get caught. That’s because all transactions are traceable directly to you and, thanks to the Memoranda of Understanding that both Betfair and Sporting Options have with the Jockey Club and most other sporting governing bodies, those details are available to be scrutinised.
Don’t be a Luddite
And the transparency of markets also acts as a warning sign for punters. The best example of this is non-runners in ante-post horse races. Whenever a horse incurs an injury, that information stays out of the public domain for some period of time. It may be just a few minutes, but it could be days (the owner could be out of the country and trainer wants to inform him/her first).
In pre-exchange days, bookmakers (with moles in every yard) would lengthen the price sufficiently enough to attract bets, but not to attract suspicion. These days, greed dictates that those immediately in the know (not necessarily connections) snap up every penny they can get on an exchange and the horse drifts markedly, sometimes out to 1000. If that happens, you know not to bet.
The same sort of thing happens with injuries to sportsmen. Employ the simple golden rule that if the price looks too good to be true, it probably is, and you won’t go far wrong.
But the advantages for bettors as a whole outweigh the negatives by such a margin that any forward-thinking punter cannot afford to live without an exchange. It’s time to log on.
Paul Kealy is the Racing Post’s Deputy Sports Editor.
BETDAQ.CO.UK
Contact
helpdesk@BETDAQ.co.uk / 0870 178 10 21 / To bet: 0870 178 12 21
Mobile users
http://mobile.BETDAQ.co.uk
Who is Betdaq?
Betdaq was launched in September 2001, with its UK brokerage coming online six months later. Wholly owned by Irish financier Dermot Desmond (the man behind London City Airport and Celtic FC), Rob Hartnett (ex- Ladbrokes and ex-Tote) runs its UK operation.
Sports/markets covered
American football, cricket, Gaelic football, golf, greyhound racing, horse racing (UK and Ireland), football (all major UK, European leagues and internationals), special bets, tennis, motor sport, rugby league and rugby union.
Number of customers
In excess of 50,000 customers from over 110 countries around the world.
Turnover overall and by sport
Betdaq claims to be averaging in the region of £40m-50m turnover per week (this would make them as big as Betfair, which seems unlikely). Split roughly 48% on football, 42% horseracing, 5% golf, 3% tennis, 1% NFL and 1% Other
Average bet per customer
Minimum bet is £1 on the internet, £20 on the telephone. Average bet is £106
Levels of liquidity
Betdaq benefits from plenty of liquidity across the majority of football markets, with racing growing at a steady pace. Major events on other markets are also pretty well supported, although there’s not much happening elsewhere.
Commission levels on winning bets
Starting rate is 3%, down to 2% depending on the volume of bets matched.
Sign-up promotions and incentives
Refer a friend to the Betdaq service and you both get £20 when they match their first £100. Betdaq offers periodic sign-up promotions around specific events, but nothing regular.
Help guides
Thorough, taking you through the whys and wherefores of this betting phenomenon.
General comments
Betdaq’s principal strength is in football. Its early success was in Asian markets and it continues to lead the way in volumes from the Far East. Indeed, as far as Asian handicaps are concerned, it appears to have the upper hand on Betfair, in terms of both liquidity and commission rates. Betdaq’s horse racing service has picked up considerably in the last year, but still has a long way to go. In the short-term, their target customers are those using Betfair out of habit but possibly missing out on the benefit of having multiple exchange accounts.
RATING 8/10
BETFAIR.COM
Contact
helpdesk@betfair.com / 0870 90 80 121
Who is Betfair?
Betfair.com, the brainchild of former professional punter and derivatives pricing modeller, Andrew Black, was launched in June 2000. Black founded the firm alongside now Director Edward Wray, a former Vice-President at JP Morgan. In its first month, Betfair matched less than £50,000 of bets a week. Within a year that weekly figure had risen to over £1 million, and by August 2002 that passed £50 million.
Sports/markets covered
American football, Aussie rules, baseball, basketball, boxing, chess, cricket, cycling, Gaelic football, golf, greyhound racing, handball, horse racing (UK, Ireland, US, France, Germany, Hong Kong, South Africa, Australia, New Zealand), ice hockey, motor sport, poker, rugby league (UK, Australia), rugby union, football (UK and major European leagues and cups), special bets (politics, financial markets, TV, weather), tennis.
Number of customers
250,000
Turnover overall and by sport
£50 million per week.
Average bet per customer
Minimum bet is £2 on the internet, £50 on the telephone.
Levels of liquidity
The world’s leading betting exchange, so there’s liquidity in abundance on almost every market you can think of. The volumes on UK football and horse racing have to be seen to be believed, and it’s fair to say liquidity on the US racing alone each evening is often more than many of the other exchanges total liquidity put together. In the final few hours of the Ryder Cup, over £10 million had been matched on the outright winner.
Commission levels on winning bets
Between 2%-5% of net winnings – the more you bet, the less commission you pay. All new account holders start off at 5%, and apart from the high-rolling winners, this is around about where most people stay.
Sign-up promotions and incentives
Betfair doesn’t offer specific sign-up promotion if you visit directly, but if you sign-up via a selected number of partner sites such as betrescue.com, deposit and bet through £20, Betfair will credit your account with a £20 free bet. It also has a refer-a-friend scheme; when your friend has earned four commission points (about the same as matching £100 worth of bets at evens), you both receive a free £15 bet. Account holders who haven’t used the site for a month are emailed with a ‘bet £20, get £20’ offer aimed at getting you back on board.
Help guides
Betfair is thorough in everything from its market offerings to its help guides, providing an interactive demo with step-by-step instructions into the betting exchange experience, along with detailed links on all aspects of betting and explaining terminology.
General comments
Betfair is the grand daddy of all betting exchanges in every sense, claiming 90% of global market share. Almost everything about Betfair is class, from the markets it offers to the enormous liquidity, which not only provides great odds but also means there is a very close spread for the would-be bookmaker to lay at a decent price. Recent rebranding has improved the look and feel of the site.
The only negative to report is the high level of commission on offer from fair weather to mid-rolling punters. As the sector gains further momentum and competitors attain that all-important liquidity, we will surely see punters bet across the exchanges and take advantage of the value on offer elsewhere. That said, a betting man wouldn’t put his house on Betfair getting complacent now, would he?
RATING 9/10
BETONBET.COM
Contact
support@betonbet.net
Who is BetOnBet?
BetOnBet was established by the Norwegian company BetOnBet Holding AS, which consists of 150 Norwegian shareholders, most of which are active punters, who wanted a tailored betting exchange for both professional and recreational punters. Betonbet.net is the same outfit.
Sports/markets covered
American football, baseball, financials (stock exchanges and interest rates), football (most European leagues, cups and internationals), golf, handball, ice hockey, motor racing, tennis, politics.
Number of customers
BetOnBet claims to serve in excess of 5,000 customers.
Turnover overall and by sport
Overall turnover so far is about £1 million a month, mostly on football.
Average bet per customer
£10-20
Levels of liquidity
There’s not much money in evidence for the high roller or professional bookie, but certainly enough to test it out, and signs are fairly encouraging so far. Not much action outside the major football leagues.
Commission levels on winning bets
BetOnBet charges commission on a scale from 1.5%-3% on net winnings. The more you bet (and win), the lower commission levels.
Sign-up promotions and incentives
Nothing right now. There will be one incorporated via a sign-on bonus by mid-October. It has a fairly attractive refer-a-friend scheme giving you 25% of the commission income BetOnBet makes from these customers for two years.
Help guides
There’s a farily comprehensive help section and how-to-bet guide, which is more than adequate.
General comments
BetOnBet has some way to go in making the grade and improving liquidity levels. For the time being there’s enough there to back and lay in small lumps, but give this site a chance – it’s still in its infancy and it offers some better-than-average prices on UK football, beating Betfair et al. by a good 10% on the recent Man Utd v Liverpool game.
RATING 5/10
IBETX.COM
Contact
info@ibetx.com / 0208 599 4334
Who is iBetX?
iBetX is the brainchild of entrepreneur Imraan Malik. Conceived in September 2002, it was soft launched seven months later, in time for the start of the Cheltenham Festival.
Sports/markets covered
Horse racing (UK, Irish and US), football (UK, Spanish, Italian, French, Champions League, UEFA Cup, European Championship, World Cup), golf (US PGA Tour and European Tour, majors), basketball, baseball, American football, ice hockey, special bets, tennis, motor sports, cricket, financials.
Number of customers
Over 10,000 with a heavy UK bias.
Turnover overall and by sport
Overall turnover is in excess of £7-£10 million per week. By sport is believed to be heaviest in horse racing.
Levels of liquidity
Claiming turnover upwards of £10 million per week, it’s difficult to see where it all goes.
Commission levels on winning bets
Commission rate starts at 3% and drops to 1% depending on betting volume.
Sign-up promotions and incentives
Periodically, iBetX offers £20 free bet promotions, but there’s nothing currently on offer, nor is there a refer-a-friend scheme.
Help guides
A professional and understandable demo within their help section.
General comments
iBetX.com launched the first European betting exchange handicapping championships in June 2004. The winner walked off with a cool £10,000 first prize (although rumour has it that iBetx originally hoped it would be £1 million) and the championship is sure to grow in years to come. Despite its claims, liquidity is on inspection incredibly low – enough to place a wager but not nearly attractive enough for high rollers. Surely a sustained sign-up incentive is needed with which to build a more significant – and fluid – customer base. In keeping with other exchanges with liquidity deficiencies, while back prices remain reasonable, layers will surely look elsewhere for value.
RATING 5/10
PARBET.COM
Contact
support@parbet.com / info@parbet.com
Who is Parbet?
Launched in 2000, in early 2004 Parbet was re-organised with the aim of adding new energy to maintain momentum from earlier efforts. New MD, Carl Jurell, is from the media and music industry. The site has just undergone a major overhaul.
Sports/markets covered
Football (English Premiership, and major leagues in Sweden, Norway, Poland, Germany, Spain, Italy and South America, plus internationals), tennis, hockey, basketball, American football, baseball, Swedish trotting, specials, politics.
Number of customers
Around 10,000.
Turnover overall and by sport
Matching bets for around £350,000 a week. Believed to be heaviest in horse racing.
Average bet
£30
Levels of liquidity
There’s a large stack of cash kicking around in parts of this site, especially on tennis. The major European and UK football leagues are also fairly well supported, along with golf and trotting.
Commission levels on winning bets
This has recently been lowered from a standard 5% to a range. You start with 4% and work your way down its loyalty programme based on how much you bet.
Sign-up promotions and incentives
No sign-up promotions at the moment.
Help guides
No demo or help section on offer, but it looks like there’s an interactive demo coming soon, along with live chat support.
General comments
Parbet is not a bad looking site at all. There’s reasonable liquidity and enough for the layers out there to get on with a reasonable bet. The odds being set are slightly lower than the bigger exchanges, but it does appear to have strength in depth on tennis. Along with a number of other exchanges featured, for the more discerning gambler it’s always worth having more than one punter versus punter account, and there’s no reason why Parbet shouldn’t be part of the crowd.
RATING 6/10
SPORTINGOPTIONS.CO.UK
Contact
Helpdesk – UK only: 08700 11 66 42 / Rest of world: (+44) 1444 237237 / To bet: 08702 07 07 07
PDA users
http://mobileSO.co.uk
Who is Sporting Options?
Launched in May 2002 by Kevin Griffiths and Robert Byrn, two former derivative traders, Sporting Options claims to be the world’s second busiest betting exchange, processing over a million bets per day.
Sports/markets covered
Horse racing (UK and US racing), football (UK, and major European leagues and internationals), tennis, cricket, golf, greyhound racing, American football, baseball, basketball, boxing, darts, financials, F1, ice hockey, rugby league, rugby union, snooker, specials.
Average bet
£45.
Levels of liquidity
Very busy on UK horse racing, with plenty for the high roller and fair weather punter to have a go at. Similarly, the leading football matches and other major sporting events are more than liquid enough, but outside the big leagues there isn’t much value.
Commission levels on winning bets
Between 1% and 3% commission, with periodic levels of 0% for new and dormant customers.
Sign-up promotions and incentives
Sporting Options doesn’t generally offer a free bet or specific sign-up promotion, possibly because its commission level is so low. However, it does have an exclusive deal for (you guessed it…) betrescue.com customers, who will receive a £10 cash credit when you open an account and back or lay a matched £20.
It also has a refer-a-friend scheme where you can earn a £15 bonus for each friend that you recommend to Sporting Options. Once your friend has earned two commission points – equivalent to placing £50 of matched bets at even money – Sporting Options will credit your account with £15.
Help guides
It doesn’t exactly offer an interactive demo but the comprehensive guides to using an exchange service are easy enough to grasp the basics and begin your betting exchange adventure.
General comments
Sporting Options clearly pitches itself as the horse racing alternative to Betfair – and with good reason. There’s plenty of liquidity, and its commission levels can be up to 40% less than its goliath rival. For example, a Sporting Options 1.6% commission client would pay 2.7% at Betfair, which translates into an approximate annual saving of £8,000. If it is to make similar in-roads into other sports, and indeed other countries, it should surely look at offering more football markets. Still, a likeable site which is easy to use and well worth a visit.
RATING 8/10
SPREADFAIR.COM
Contact
cs@spreadfair.com / 08000 111 441
Who is Cantor Spreadfair?
Cantor Spreadfair is the world’s first spread betting exchange that allows clients to bet directly against each other. Clients choose the prices and the stakes that they wish to bet at. Bets are matched between people with opposing views.
Sports/markets covered
Football, cricket, politics, rugby union, golf, athletics, American football, rugby league. Racing will come on stream at a later date.
Sign-up promotions and incentives
There aren’t any at the moment.
Help guides
Unlike its more established sister site, cantorsport.com, Spreadfair does have a basic yet easy-to-follow help guide, with illustrated instructions taking you through step by step.
General comments
Although it has a way to go in establishing true liquidity and more extensive market coverage, Spreadfair is the greatest innovation in the betting market this year. At the moment it’s the only dedicated spread betting exchange, a somewhat cheeky move by Cantor in stealing Betfair’s thunder – even down to a blatant capitalisation of its brand name.
RATING 8/10
TRADESPORTS.COM
Contact
help@tradesports.com / (+00)3531 6200 300
Who is TradeSports?
Launched in February 2003, although TradeSports immediately acquired Intrade plc, which had been trading since January 2002.
Sports/markets covered
All major US sports, golf, American football, basketball, ice hockey, football (European, Premiership, Bundesliga, Serie A, La Liga), US horse racing, major UK horse races, politics, financials, legal (Michael Jackson etc), specials (movies, award ceremonies etc).
Number of customers
Over 35,000 members in over 125 countries.
Turnover overall and by sport
Since inception TradeSports has traded $500 million.
Levels of liquidity
Heavy liquidity is present on US sports, financials and political markets in particular, but there’s very little on global sporting events.
Commission levels on winning bets
Fees charged for all trades is 0.04c per ‘lot’ traded (an alternative way of raising your stake).
Sign-up promotions and incentives
TradeSports currently offers new account holders 50 commission-free trades regardless of the number of ‘lots’ bought, along with various deposit bonuses where you can get up to $100.
Help guides
An unbelievable help section, made so entertaining with its flash movie demo that is so typically American, but certainly gets the concept across and is easy to follow.
General comments
TradeSports is a betting exchange with an extremely heavy Ammerican focus, which it claims has given it a major competitive edge. Recent trading activity on the US Presidential elections has seen over $11m staked on the outcome of the race, with nearly $5m of that being traded on the outright winner market.
As well as its in-depth US election markets, TradeSports lists all major US sports with greater liquidity and activity than any other global exchange, and while the mechanism may not be as familiar as some other exchanges, if the US market place is where you want to trade then this site is well worth a visit. The ability to trade in and out of the same bet, taking profits and reducing losses (much like you do with shares) without having to stake more is a major attraction to TradeSports members. If, however, you’re looking for an alternative to the big three in the UK (ie Betfair, Betdaq and Sporting Options), for proper sports betting such as horse racing, football, rugby league and darts, stay well away, as you’ll find more liquidity in Baring’s current account.
RATING 7/10
