Betting exchanges are simply market places that allow people to bet for and against an event to happen. Usually this takes the form of betting for or against sports teams or horses from winning.
This is slightly different from placing bets at a bookmaker. When you are making bets either for an event (known as "backing) or against an even (known as "laying") you are betting with other peers rather than a company.
For the purposes of matched betting we are almost always going to be Laying, which means betting against an event.
Let's use an example of what is happening when we lay a bet in a betting exchange.
Imagine a horse called Rock Star. The odds of it winning in the next race are 4.0 (4/1).
This means if Person A was to bet for the horse (back it) with £10, then they would make £40 profit plus their initial stake if the horse won.
On the other hand, if Person B bet against the same horse (lay it), they would bet betting against with Person A
If the horse wins Person A makes £40 profit and Person B makes £50 loss.
If the horse loses, Person A makes a £10 loss and Person B makes a £10 profit.
There are 3 main betting exchanges that make it possible for these transactions to take place:
Each have different commission rates between 0.85% and 5%. Smarkets is by far the most profitable for us to use as matched betters as they only charge 2% on net profits of winning bets.
When you are laying bets with these betting exchanges for matched betting, make sure you do so within the "Exchange" section of the web site and not the Sportsbooks. The Sportsbooks operate as a normal bookmaking web site.