As mentioned previously, when you use an exchange there is often little or no over round, the bookmaker’s margin, in the market.  This is because people are matching bets with each other rather than odds being made by a bookmaker. If the odds were made by a bookmaker we would expect to see a spread, that spread would be the theoretical profit margin of the bookmaker. So how do the exchanges make money? Exchanges make their money by charging commission on your positions at the end of an event. Commission rates vary across exchanges but general are between 2-5% depending on the volume of business you are doing with them.

There are some oddities on exchanges that work in your favour. The most notable is that they only charge commission on your winning bets, Losses attract no commission. The net effect of this settlement method is to reduce your overall commission rate. The only way this could not happen is if you won every bet you ever placed which, of course, is not realistic. So the actual commission rate you pay will always be lower than your quoted commission rate. Some exchanges have a higher volume of matched bets and therefore better prices on certain events, so don’t just use an exchange based on the commission rate. Bets can be placed on exchanges over the phone, minimum bet £50, or over the internet, minimum bet size £2.

Placing a bet or order on a Betting Exchange

When you look at the screen on the exchange you are looking at the odds available on this particular market for any specific selection. Each market is defined as an event and each event has a number of selections. If the event is a win only market and it is a soccer match then the selections will be the possible outcomes of that soccer match. A soccer match can be won by either of two teams or the match can end in a draw, there will be three possible selections to bet on.

Image from a football match

On a horse race win market you will have all the horses that could possibly win, typically many more that the three possible winning selections in a soccer match. If it is a win only market you need to find the winner out of the mass of selections presented to you.

Image from horse race