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Betting exchanges are the electronic marketplace for bets on sports events. The first betting exchange was formed in the early 2000s and was made possible by the real-time capabilities of Internet technology. A Xgtiger Casino betting exchange works in a similar way to a traditional commodity exchange.
The format of the modern exchange marketplace evolved from the sale of state loan stocks in Renaissance Italy to an active trading venue as realized by the Amsterdam Stock Exchange, founded in 1602 by the Dutch East India Company. Products offered for sale, and purchased, through the exchange are shares in merchant ventures and trading companies. Selling prices vary based on demand and availability but they are recorded and verified by the exchange’s official bookkeeper.
Bookmaking began in the world of racing in the late 1700s when Richard Tattersall and Harry Ogden began taking bets on horse racing. Tattersall was a self-made man who amassed enough wealth to start a horse auction business in London that was favored by royalty and wealthy families because of his honesty and the quality of the horses he acquired. Tattersall kept two rooms for wealthy patrons who enjoyed betting on horse races.
Ogden announced one day at Newmarket Heath that he would take bets against every horse in the race. He is widely regarded as the first professional bookie or bookmaker. Like the bookkeeper for a stock exchange, Ogden and his successors kept records of who bet against whom and they ensured that losses were collected from and winnings were paid to their respective gamblers. Bookmaking although eventually banned (outside racing venues) in the United Kingdom spread to other countries and adapted itself to other sports.
The early English bookmakers assisted in handicapping until it became necessary to separate that work from the people handling the money. However, bookies continue to calculate odds (how much bets pay) for their customers. Bookmakers can cancel bets against each other to improve their balance of bets. The real interest of the bookmaker is to collect a fee (the vig, from vigorous) or percentage of the money wagered. The rest of the money just flows between bettors (aka punters). The less the bookie has to dig into his own pockets to cover bets, the simpler his life is.
The difference between a bookmaker and someone who only offers bets against other gamblers is that the bookmaker is not trying to bet on any specific outcome of the sporting event. A rich gambler may offer 10-to-1 odds to everyone in the room on the outcome of an exciting game but he is only gambling. A bookie can offer 10-to-1 odds if he can balance that bet against other bets so that after he pays the winners he has a payout left over.
A betting exchange essentially removes the bookmaker from the process and gives gamblers a way to offer odds on all outcomes. In other words, if a gambler were to use an exchange entirely he would be his own bookie but outsource the record-keeping to the exchange. This is much like an investor buying and selling his own goods or securities directly through an exchange instead of going through a broker. A bookie therefore acts like an investment broker in facilitating transactions between opposing bettors, although in practice betting brokers are agents who represent bettors at multiple bookies through a single account.
Betting Terminology Used by Bookies and Exchanges
Exchanges use the same terms as bookmakers to describe the bets placed by members. Here is a selection of phrases and terms common to bookmakers and exchanges.
Arbitrage
Bettors who attempt to cover all possible bets on a sporting event are called arbitrageurs.
Come back
The bettor “backs” the team, animal, or athlete he thinks will win the event by placing a bet on that outcome. To “back the winning team” used to mean that you bet on the team and therefore your bet won, although the expression has now changed to the more general meaning of “expressing support for the team that won the event ”. “Back” is often called “buy”. Backers say “It will happen”.
Handicap
An adjustment to the odds offered by a bookmaker or exchange to equalize the outcome of a side event for bettors. Handicapping is a predictive measure, especially in horse racing where different handicappers can offer different predictions about which horses are most likely to win. You can also have a disability in sports like college football.
In-play Betting
These are bets made while a sporting event is underway. These types of bets are also called in-running bets. This is also called live betting.
Lay or Lay Betting
The bookmaker who takes your bet places the odds or places a bet against you. In other words, he is betting that the event will have a different (often opposite) outcome from whatever you bet. “Lay” is often called “sell”. The layers say “this is NOT going to happen.”
Lay off
The bookmaker may find that he has covered too many bets on one side of an event, so he turns to other bookmakers to “leave” some of his action, making similar bets to cover the bets of his customer. With a betting exchange, you can go back and lay on the sporting event, so getting rid of it isn’t really an option on an exchange.
Multiple
Bookmakers may allow bettors to bundle several bets, offering higher odds. Since the bettor’s prediction must be correct for all events, multiple bets have a higher reward for less risk.
Net winnings
When a bettor makes more than one bet on a sporting event, his net winnings are whatever is left after deducting his losses from his total winnings.
Odds
In all forms of gambling the odds represent how much you will win and not the chances or probability of the outcome of a particular event on which bets are made. In sports betting, it indicates which competitors are favored by the betting masses, not which one is most likely to win. In the movie “Let It Ride”, when Richard Dreyfuss’ character Trotter makes a big bet on a horse in the racetrack counting room, the horse’s odds drop from 40-to-1 to 8-to-1 because of his bet changes how much money is distributed to winning bettors regardless of who wins the race.
Lugar
In any competition where multiple winners may be identified, such as 1st place, 2nd place, and 3rd place, place is the relative position among the winners. In dog and horse racing, place is the second-rate winner (as in “betting on a horse to win, place, or show”).
Stake
The Value of Your Bet
Merchants
Bettors who arbitrage their bets on events with no chance of profit may attempt to eliminate some of the bets when the odds change so they give themselves a chance of profit. In-play trading is riskier than pre-event trading. Traders favor exchanges over bookies because exchanges only deduct fees from net winnings.
True Odds
This is called an “efficient market” because all bets cancel each other out. No one takes commission or profits as a third party in the market. You will never get real odds with a bookmaker because they support themselves by deducting fees from bets. Therefore, bookmakers calculate the probability of leaving a little extra for themselves when all bets are settled. However, betting exchanges are considered efficient markets because they only deduct fees from net winnings.
The Betfair Betting Exchange Model
Although there are several betting exchanges, Betfair is considered the largest and most active betting exchange in the world. Andrew Black realized that back and lay bets can be combined like buy and sell orders on the stock exchange. Along with Edward Wray, he launched Betfair in the early 2000s.
To use Betfair bettors must set up individual accounts and deposit funds into the accounts. Bettors then use the Betfair system to find events on which other members of the exchange are placing bets.
Betfair allows members to place back or place a bet. The bettors decide what odds they are willing to give each other. So, there are no potential limits to the odds you can get on an exchange because each bettor decides what he wants to offer individually.
All unpaid or unsettled bets are considered exposure and are money you have deposited into the Betfair system committed. You cannot rebet exposed money or withdraw it. Betfair sets an exposure limit to prevent members from betting an unreasonable amount of money within a specified period. Members can ask Betfair to increase their limits.
The customer dashboard provides a simple Account Statement showing deposits, withdrawals, losses, winnings and commissions paid to Betfair. Betfair commissions are based on a point system. All markets (see below) have a Market Base Rate (MBR) for calculating commissions. Most MBRs are 5%. All Betfair customers (members) have an assigned Discount Rate. The Discount Rate increases as you use the system and earn Betfair Points. The commission a member pays on any win is (MBR less DR) times profit (net winnings for that market).
Member funds, while managed through a single account, are spread across wallets for each of the different types of gambling, as well as for the UK and Australian markets. An important feature of the account management system is that members can set limits on their deposits and losses. These limits work similarly to stop-loss limits on stock exchanges.
The system tracks thousands of “markets” where bets can be placed. The system provides lists of interests for members to choose from and provides clear rules for the bets that can be made. In other words, the exchange decides which types of bets can be made. Members can propose new bet types to the exchange but they may not be added to the list of available options. While most of the bets offered on Betfair cover sporting events, the exchange also facilitates bets made on reality TV shows, corporate financial reporting, politics, and special or “one-off” bets. event.
Markets are also divided into categories such as Place Markets (which allow for multiple results) and Handicap Markets. Betfair’s handicapping may include Asian Handicapping, where rational number handicaps (eg, -2.5) are used to reduce the chances of a draw score in a soccer (football) match and whole number handicaps are used to allow draws (void all bets). Betfair can sometimes assign two handicaps to a team, thus splitting all bets between the two handicaps.
Betfair members can also buy and sell Multiples, Ranges and Line bets. The system also offers In-play betting on many events, but betting will be suspended for penalties, injuries, and other delays in events.
The system sets default odds for members. Backers decide how much they are willing to bet at the current odds. The layers decide how much of the backer’s stake they are willing to accept at the given odds. Backers can request better odds and the system will determine if any other members are willing to place those odds. Conversely, members can offer reduced odds and the system will determine if there are other members willing to bet at lower odds.
When the system matches the bets they can be placed against one or more members depending on the amount bet or played and the playing odds. Unmatched bets result in no win or loss.
All bets have a Starting Price set by Betfair. Members can set limits when they make their bets. Backers can specify the minimum price and bet for the bet; layers can specify the maximum price and liability (how much they want to lose) for the bet.
What Differences Can You Find Between Betting Exchanges?
The Betfair model has set the standard for the industry. Because it is based on how stock exchanges work, Betfair has an advantage over other market-making innovators because it can follow many of the practices of stock exchange markets. To compete with Betfair, other exchanges need to offer similar services, which facilitate the buying and selling of bets on a wide range of sporting and non-sporting events that people are interested in betting on.
Therefore, the differences between any two betting exchanges come down to key points such as:
- Member perks like bonuses
- Commissions and other fees
- Software interface
- Calculation of base odds
- Selection of markets
- Service stability and availability
The individual preferences of the gambler can decide the issues. One interface may work better for you than another. The absence of specific markets may decide the issue.
Conclusion
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