Lesson 4: Exchange Platforms

Exchanges allow this whole process to work!

A betting exchange is essentially a platform similar to that of a bookmaker, but rather than betting against a cooperation, we bet against other people. This is a major positive as we can actually offer odds/prices to people - essentially playing the role of the bookmaker. Furthermore, as individuals, we do not have to worry about thousands of employees or marketing budgets – so we can offer a better price. In the broadest sense, we can play the role of the bookmaker and also the punter.

Here’s the logic! Let’s say you walk into a betting shop and ask to put £10 on an enhanced price of Manchester City to win (the betting company are offering this at odds of 2.0, or as otherwise known 1/1). There are two possible outcomes. Firstly, your bet wins and you receive a £20 return (£10 profit + £10 stake back). If the bet does not win, you will lose your £10 stake.

Now imagine that you have just jumped over the counter (we do not recommend this…it may not end well). Somebody else walks into the shop, and asks you if they can have £10 on the exact same boost. As you are now the bookmaker, you are responsible if they win the bet. So if the bet win's, you will have to pay them £20 back (£10 profit + £10 of their initial stake). In total, you have risked £10, so your liability here is £10. If the bet does not win, you will be rewarded with the customers £10 stake.

In short, you aim to win the customers stake if their bet losses (Manchester City win). If they do not you have to pay them their winnings (this is your liability). The reason you would place a bet like this is because elsewhere you would have a corresponding bet on Manchester City to win!