How a betting exchange works: back, lay and liability

On a betting exchange you don't bet against a bookmaker: you bet against other users. Those who think an event will happen back it, those who think it won't lay it, and the exchange only acts as the middleman, taking a commission on winnings. The odds are not set by the operator: they come from offers meeting each other.

Back: betting that it happens

Backing is the classic bet. Example: you back Over 2.5 for 10 euros at odds of 2.00.

• if the match ends with at least three goals: +10 euros gross (+9.55 net with 4.5% commission);
• if not: −10 euros.

The maximum risk is the stake.

Lay: betting that it doesn't happen

Laying means being the bookmaker: you accept someone else's bet. If you lay Over 2.5 for 10 euros at 2.00:

• if the match ends with two goals or fewer: you collect the other person's 10 euros (+9.55 net);
• if it ends with three goals or more: you pay their winnings, −10 euros.

What you risk when laying is called liability:

At odds of 2.00 it equals the stake, but it grows fast: laying 10 euros at 5.00 means risking 40 to win 10.

Matched and unmatched offers

When you place an order, the exchange looks for someone willing to take the opposite side at your odds. The part it finds is matched and counts as a bet; the rest stays unmatched, waiting, and you can cancel it whenever you like. At the same odds, offers are matched in order of arrival.

In the odds grid you see the best prices available to back and to lay, with the amount available at each price. If you back at the best price in the BACK column (or lay at the best in the LAY column) you are matched straight away, up to the available amount; if you ask for a better price, your offer waits until someone accepts it. During live matches, orders are usually held for a few seconds before they go in: this protects everyone from people who see a goal before others.

Commission

The exchange earns through a commission charged only on the net winnings of a market: if you have both wins and losses in a market, the balance is what counts. The percentage depends on the operator; in the examples on this blog we use 4.5%. It sounds small, but it changes the odds from which a trade is worth it: we look at this in fair odds and expected ROI.

Minimum stakes and steps

Every exchange has its own rules on stakes. On the Betflag exchange, for example, the minimum stake is 0.50 euros and stakes go up in steps of 0.50 (0.50, 1.00, 1.50…): amounts like 12.35 are rejected. Always check your operator's rules, especially when you split a stake across several outcomes.

Back and lay together: trading

Being able to both back and lay lets you close a position before the end: you back at some odds, lay later at lower odds and the result is fixed whatever happens. That's cash out, and it also works on a single outcome of a larger position.