Bookmakers can not win against Betting exchanges

A bookmaker's over round is only a theoretical over round as most of the money they receive is placed on favourites. If a heavy odds on (Less than 2.00 digital odds) favourite loses the bookmakers can rub there hands. However, if a favourite wins then the bookmakers are likely to be out of pocket. Over time we know the odds are created fairly accurately. Therefore if you are a bookmaker you will have periods where lots of favourites win and you will be out of pocket and other times when none win and you start planning the cruise to the Bahamas. Overtime though you will win.

However because of the lack of a balanced book and the likely hood of good and bad runs against your bank balance bookmakers need a wider over round. By doing this they ensure that if there is a bad run they will not go out of business. Because a lot of large bookmakers are listed companies with shareholders they are expected to report a steady earnings stream. If bookmakers changed there odds and reduced the over round to the sort of prices available on Betfair their profit margins would be killed. Also because they can not ensure a balanced book they could have a very bad run against them which could cost them a lot of money at best and at worst, if they didn't limit there exposure, there business. A lot of smaller bookmakers have gone this way.

There has been a lot of publicity about betting exchanges, a lot of it negative, the big bookmakers and people with seeking to protect the current status quo and there interests have been waging a war against the betting exchanges. Here is a typical example: -

"British Horseracing Board chairman Peter Savill agrees that globally racing faces a mounting crisis with the spread of on-line exchanges. 'Betting exchanges have suddenly enfranchised 30 million plus people in Britain to make money out of horses losing a race. When you add to that figure every other person in the world with the desire to make money out of horses in Britain losing races - including, possibly, illegal Far East bookmakers and even organised crime - you have to wonder whether the decision [to allow franchises] was reached after appropriate research.' "

This is simply a stupid and crazy statement, so obvioulsy a red herring to support the failing case of people who oppose exchanges. If you wanted to lose money on horses you have been able to do this for decades. You could approach somebody to the lay the horse. If no one will you lay the horse you simply back all other horses other than the one you want to win in direct proportion to the odds available. If your horse loses you will win on any of the others. Not strictly laying but a modfied form and exactly the same result is ensure as laying. Indeed people have done this for decades so this accusation that exchanges increase the level of corruption in the sport is a null argument. In fact exchanges probably help as they provide a clear audit trail. If you have a wedge of cash on the course that is not possible to trace but placed through an exchange you have a near perfect audit trail.

Pari-mutuel or totalisator system

Look up the definition in a dictionary and the following description appears roughly along these lines - "A system of betting on races whereby the winners divide the total amount bet, after deducting management expenses, in proportion to the sums they have wagered individually."

This system cannot lose, since it operates on the same principle as a lottery, returning to winners a proportion of the total stakes. It is the system used to bet on a lot of horse races in most parts of the world. It was invented in Paris in 1865 by Pierre Oller. In France it is called the pari-mutuel, in English-speaking countries usually the tote, short for totalisator, the equipment used to register and indicate the bets and dividends. The football pools operates on this system.

The only hope for winning any sum of this money on this system is to guess that the betting has been very badly performed by the pool which leaves you margin to gain, even after the pool has subtracted its commission.

The operation of this works as such. Fundamentally all bettors submit their stakes to a pool. When the results are in the company that is running the pool takes a percentage from the pool for running expenses, profit and state taxes.

For Example:-

A British football pool works on a similar basis to the above, but there is a large government tax on the total pool and the pools company takes a further commission to cover expenses and profits of around 30-35%. The share-out for winners is only probably about 30% of the total pool. The odds on the football pools are not great. For a worse example of share out you can look at the national lottery.

It is not difficult to work out exact probabilities on soccer matches as you are able to make first hand judgment on the outcome of a variety of games, all judgments though are somewhat complex and still require an element of subjectivity. Using such information people have now and again been able to use to turn fantastic odds against in their favour by correctly reading distortions in the underlying market.