Bookmakers are often very quick to limit stakes and/or close accounts of successful customers, or void individual bets or even whole markets if their books do not balance as they would like.

Image: NatUlrich (Shutterstock)

Don’t kid yourself – Bookmakers make a living from selling bets and to stay in business they need to ensure that more money is retained by them than is paid out to their punters. Why, therefore, should bookmakers welcome professional gamblers on their books?

On the other hand, betting exchanges profit from charging commissions. They do not care who wins or loses. In addition, the odds available are usally better than with a bookmaker.

It is therefore no surprise that professional punters use exchanges for most of their betting transactions.

However, the big question for newcomers is which exchange to choose?

This article examines the liquidity levels offered by the range of betting exchanges currently available to serious gamblers and traders.

Betting Exchanges with the best Liquidity

The selection of betting exchanges is limited. At the time of writing there are only five exchanges worth comparing: Betfair, Betdaq, Smarkets, Matchbook, and WBX.

You will also find that Matchbook and WBX are fledglings when compared to the others and thus are currently of little or no interest to professional bettors.

(1) Popular Markets in European Premier Leagues

Here are screenshots from each firm’s full-time 1×2 odds for the EPL match between Manchester United and Liverpool on 14 December 2014 – probably the biggest league game in the English football calendar each season:

EPL - Man Utd v Liverpool - match odds 14.12.2014 - Betfair

EPL - Man Utd v Liverpool - match odds 14.12.2014 - Smarkets

EPL - Man Utd v Liverpool - match odds 14.12.2014 - Betdaq

EPL – Man Utd v Liverpool – match odds 14.12.2014 – Matchbook

EPL – Man Utd v Liverpool – match odds 14.12.2014 – WBX

These images were captured around GMT 09.30 hours (four hours before kick off) and show Betfair head and shoulders above the rest with £812,639 already matched.

Next in the list were Smarkets with a traded volume of £178,294, then Betdaq with £74,074, and WBX with matched amounts of £10,414 (back) and £15,620 (lay).

Although Matchbook’s platform is very well designed and easy to navigate, it does not display how much money has been already matched on an event. However, what you can see from our excerpt is that Matchbook showed an amount of €25,357 waiting to be matched for punters wishing to back the home team which was above the amounts displayed at Betfair and Smarkets.

For this popular market, Betfair was most definitely the winner, closely followed by Smarkets.

(2) Less Popular Markets in major European Premier Leagues

It gets trickier to find significant liquidity in less prominent markets, such as “over/under 1.5 goals”.

Below are screenshots from the same game as above, taken around the same time. Although this match was certainly followed by a massive number of fans, it is obvious that the market for over/under goals is far less popular than the full-time home, draw, or away bets.

EPL - Man Utd v Liverpool - OU 1.5 odds 14.12.2014 - Betfair

EPL - Man Utd v Liverpool - OU 1.5 odds 14.12.2014 - Smarkets

EPL - Man Utd v Liverpool - OU 1.5 odds 14.12.2014 - Betdaq

EPL – Man Utd v Liverpool – OU 1.5 odds 14.12.2014 – Matchbook

You can spot the lack of popularity for this type of bet with Betfair; only £13,052 matched between three and four hours before kick-off. Smarkets just about troubled the scorers with £187 matched, however there was a good amount of money on offer to backers and layers – indeed, close to the amounts waiting in Betfair.

Betdaq showed no matched money at all and the gaps between the back and lay odds were huge. Although Matchbook also offered this market there was no money waiting to be matched, and for WBX, this was a market they were not offering at all.

Although Betfair was for this market the clear winner in regards of money matched, Smarkets and Betdaq had good amounts of money waiting and can be considered as serious competitors for the less popular markets in major European premier leagues.

(3) Less Marketed European Premier Leagues

Whilst Betfair is the clear leader for all major European leagues such as the EPL, Smarkets has a healthy market share in the less prominent leagues and is an attractive betting exchange for people wishing to avoid the mainstream.

Greece Super League - PAOK v AOK - match odds 14.12.2014 - Betfair

Greece Super League - PAOK v AOK - match odds 14.12.2014 - Smarkets

Greece Super League - PAOK v AOK - match odds 14.12.2014 - Betdaq

Greece Super League – PAOK v AOK – match odds 14.12.2014 – WBX

For the Greek Super League game between PAOK and AOK Kerkyra, £6,829 was matched on Betfair around three hours before kick off; £503 waiting for backing the home win and £89 for laying it.

In contrast, Smarkets showed £246 waiting for backing the home team and £138 for laying. Unfortunately, there was no information on the amount already matched in Smarkets.

In Betdaq, although only £860 was matched at this time, £112 was waiting for backers and £212 for layers. You can see the odds were about the same in all three betting exchanges.

For WBX, this game was also offered but the gaps between the back and lay odds clearly indicate that liquidity levels for this match were far below its rivals.

Although less matched, this snapshot shows Smarkets with greater liquidity than either Betfair or Betdaq; there was more money waiting to be matched on the outcomes.

Essential Betting Exchange Accounts

From the liquidity perspective, Betfair is an absolute must for major leagues. Not only do they have a huge number of games on offer, but also almost every conceivable bet type, which is not the case for the other betting exchanges. Not yet.

Following closely on Betfair’s heels is Smarkets, whose liquidity is getting better all the time, not only on the big games in major leagues but, especially so in less prominent leagues. There, they may even be challenging the market leaders at the time of writing.

The lion’s share of liquidity and bets struck with exchanges is commanded by Betfair, often closely followed by Smarkets and then Betdaq, with Matchbook and WBX lower down the pecking order.

However, even if Matchbook and WBX are far smaller than the other three and have a limited range of available markets, they are competitive on the more popular bets in the larger leagues, such as the full-time 1×2 market.

Image: Nagy-Bagoly Arpad (Shutterstock)

Betting Exchange Basics

A betting exchange site is a platform allowing you to place bets that are matched-up with other users’ bets on the opposite outcome to your selection. Placing a bet in this fashion is like a virtual hand-shake on a wager with an unknown opponent (or group of persons if portions of your proposed wager are accepted by different people).

A betting exchange is not a bookmaker. They simply provide the Web site (platform) to allow logged-in members to bet against each other.

A bookmaker’s business is out and out gambling, hoping to recover more money from losing bets than they have to pay out to winning clients. They achieve this by being more statistically astute than the vast majority of their customers and also, by virtue of the fact that they are able to offer a book containing thousands of available markets at any one time. For a bookmaker, profit is just a numbers game and achieved by selling a huge portfolio of bets, spreading their risk.

It can be even argued that bookmakers are more vulnerable to fixed matches as anyone can walk into a bookmaker’s shop and place an anonymous bet. With an exchange every transaction is performed online by logged-in, registered users whose identity is captured through the signing-up procedure.

Bookmakers need reserves of money to maintain solvency margin and also have to worry about balancing their books.

A betting exchange has none of this operational worry as it is more of a ‘sausage machine’ and remuneration comes far easier in the form of a commission rate applied only to the winning amount of every bet won by every user.

The standard betting exchange commission rate is 5% although some are lower; for example, Smarkets is a relatively new entrant to the industry and is thus seeking market share by charging its customers for the privilege of using its betting platform a competitive rate of only 2% commission on winning bets.

Some exchanges have a tiered commission rate structure offering lower charges in return for a user’s loyalty. However, this is a dubious reward. You also need to be aware that the Betfair exchange (the world’s largest) levies ‘premium charges’ on the winnings of their more successful customers. This charge can be as high as 60%!

The ability to ‘lay’ an outcome is the major advantage of a betting exchange. If the outcome of a particular event is ‘layed’, you are betting on it not to win. For example, the result of a football match can be a home win, away win or a draw. By placing a single lay bet against one of these three outcomes not to win you are actually ‘backing’ the other two to win, providing in numerical terms (not actual probabilities) a two in three chance of success.

For the full-time home, draw and away market this is the betting exchange equivalent of a bookmaker’s ‘double chance’ bet.

However, a ‘lay’ bet is more useful in event markets where there are numerous outcome possibilities (e.g. half-time or full-time correct score markets, half-time/full-time result combination bet, etc.). For example, the half-time/full-time market has nine possibilities and laying one of these would mean winning the bet if any of the other eight possible outcomes were to happen.

Of course, if the outcome you have ‘layed’ wins, then the bet is lost.

Because of the application of a commission charge on winnings, the back prices found in betting exchanges are higher in order to compete with bookmakers. If this were not the case, then there would be no compulsion for anyone to use a betting exchange ante post (i.e. placing a bet before the event). It is the customers who decide the prices they are willing to buy (back) and sell (lay), not the betting exchange.

Traders or arbitrage bettors profit from price changes either before an event has started or whilst it is in-play.

When a goal is scored or another major event potentially affecting the outcome of a game occurs (e.g. a sending-off, penalty award, etc.), the betting exchange prices are temporarily ‘frozen’. The market is then said to be ‘suspended’.

The market switches ‘live’ again once the goal or other occurrence has been confirmed as a permanent event in the match. At this point prices will have dramatically altered allowing profitable trading situations for those currently in a winning position. For those on the other side of the coin, trading out of a losing position for profit is not possible but, of course, they can consider trading out for a loss in order to cut their overall potential loss.

Trading in-play is available for the entire duration of a game. Extra time, if applicable, is treated as a separate event.

When a bet is placed, the credit in a user’s account is reduced by the amount of the potential liability (even if it is not yet matched). Only the unmatched portion of any bet can be cancelled by the bettor at any time and the applicable stake/liability is immediately credited back to his account balance.

When a match is finished the betting exchange automatically credits the winning bettors. Some exchanges credit winnings as soon as the bet is won, which might be at any point in a match if, for example, an over 2.5 goals bet is selected and the third goal is scored.

Betting exchanges offer a far more ‘exciting’ interactive experience than live, in-play betting with a bookmaker where selections are limited to back bets only.

But beware, exchanges can become far more addictive to use especially where they also offer live streaming video of events to heighten the suspense and to encourage you to bet with your eyes, not your head!

At best, ‘greening-up’ is a means of making a profit whatever the outcome of the match or, the same method can be used to cut losses should the match not pan out as hoped.

Image: nulinukas (Shutterstock)

Greening-Up In-Play Example

Chelsea are playing a home league fixture against Aston Villa and their odds to win the game settle in a betting exchange at 1.29 just before kick-off. They are heavy favourites at home to beat Villa, who have been on a bad run of results due to many squad injuries and a new manager settling in, although many of their injured players are returning to full match fitness at the time of this fixture.

Backing Chelsea in an exchange with 100 units at this price would see a profit of just 29 units (gross of commission) if they win or, a total loss of the 100 unit stake if they lose or draw. From a purely numerical perspective, the chance of winning the bet on the home win is one in three.

Chelsea’s form has been disastrous in their previous six or seven games but, playing at home, they are traditionally difficult to beat…

Laying Chelsea (effectively backing them not to win) means backing two of the three total outcomes (laying the home team means backing the draw and the away win), which is exactly the same principle as a bookmaker’s ‘double chance’ bet.

With a lay bet the liability (risk) is reversed and on the basis of the same 100 units stake and 1.29 odds the risk (loss) is just 29 units should Chelsea win the match; of course, the possible profit from laying Chelsea is now the stake of 100 units (gross of commission) should they draw or lose. Before the game kicks off, Aston Villa’s price to win the match reaches 14.5, with the draw at 6.2.

Okay, choosing Chelsea’s dominance in home fixtures, we are seeking to back them to win the match with a stake of 100 units. Not so many games have a goal in the first few minutes and usually the price rises a little as each minute ticks by. Waiting five minutes before placing a bet of this nature is always a good strategy and by the time we place the bet Chelsea’s price to win has risen three points from 1.29 to 1.32.

Shortly afterwards, Chelsea score. Just twelve minutes are on the clock but now is the time to think about hedging the bet.

With a goal already in the bag, Chelsea’s price is now at a very thin 1.16 to win the match but, there is still a large portion of it left to be played. As their price to win has dropped by 50%, this is an ideal situation to ‘lay’ them not to win for instant guaranteed profit from this event.

Using a lay stake of 115 units at a lay price of 1.16, the potential win is obviously 115 units (gross of commission). The 100 unit stake is at risk from the first bet which promises 29 units (gross) should it win. Ideally, the lay bet stake should be calculated to recover the back bet stake plus half of the potential back bet winnings so that the same amount is won regardless of whether the match finishes in a home win (back bet) or draw or away win (lay bet).

Thus, the lay bet stake of 115 units recovers the 100 unit back bet stake plus 15 units on top of that (roughly half of the 29 units that could be won if Chelsea hold on for victory)…

The Case: Match abandoned in the second half

Image: Stanislav Komogorov (Shutterstock)

When this article was originally written, our last bet of the day was ‘laying’ Mallorca in their La Liga trip to Granada. Before retiring to bed, we checked the score, 2-1 to Granada, with around 30 minutes to play.

Upon checking our Betfair account the following day we were concerned to find the bet had not been settled!? A quick search confirmed fears that the match had been abandoned.

Usually, it’s fog or a floodlight failure, or where the match officials are concerned, a pulled groin muscle, an errant or out of control flag, a clumsy fall, or a slide-tackle from an over-enthusiastic defender.

But no, bizarrely, this abandonment was caused by a flying umbrella, which struck a referee’s assistant in the face and drew blood from his cheek.

After the referee had called a stop to the game the manager of Granada explained in the press conference that it was an unfortunate ‘accident’ and that the poor youth in the Granada section of the crowd was still holding the handle as he was arrested by police.

Much sympathy for the scarred linesman, his apparently innocent assailant and other fans deprived of the result, but where did this leave our bet? We were now in the land of limbo and searching through Betfair’s Terms and Conditions.

Which rules apply?

Like all UEFA leagues, we knew La Liga was faced with 3 options for concluding the affair:

1. replaying the whole match;
2. arranging for the last 30 minutes or so to be played out (probably behind closed doors); or,
3. as it was a Granada fan to ‘blame’, awarding of the match to Mallorca with the customary 3-0 score line.

But how are bets affected by these options and what is the range of different terms and conditions employed by the bookmakers and exchanges in such situations?

Ensure that abandonment and postponement rules are clear before betting

When betting you need to ensure that abandonment and postponement rules are clear especially before embarking on strategies such as cross-market trading, arbitrage or accumulators.

No two bookmakers’ Terms and Conditions are ever identical and for arbitrage or trading it is better to use markets with similar rules for postponement and abandonment or, to know the rules instinctively before making bet selections which could otherwise be detrimentally affected by things such as inclement weather.


The next page concentrates on the different attitudes taken by bookmakers and exchanges…

Every serious football bettor should have several bookmaker accounts at his disposal in order to pick and choose the best available prices. Having invested so much time and effort in producing a match selection system which brings consistent profits, it would be churlish not to spend just a little more time seeking out the best possible reward.

At Soccerwidow we are great advocates of the much maligned bookmakers, which have seemingly had their gloss taken away from them by the trendier and seemingly more flexible betting exchanges. But of course, there is a price to pay for the convenience of using exchanges, and the more successful your system becomes, the more commission you may be liable to pay to these trading platforms.

(2) Getting the most from 1X2 markets:

Let’s have a look at Betfair’s main attraction to bettors: the opportunity to lay an event.

Using bookmaker markets there are three alternatives available to gain a financial advantage over Betfair’s home, draw or away lay prices: Asian Handicap +0.5; Double Chance; “Dutch” Back (click to enlarge; opens in a new tab):

German Bundesliga Matches 26th-28th October, 2012

Here, you can see a few more red figures in the right-hand columns than we saw in the back bet comparison article, but still, 21 out of 27 (77.8%) Betfair lay prices were beatable during this round of matches.

However the extent of advantage the bookmakers have competing with lay options is far smaller than backing; purely because when laying an event two results are effectively ‘backed’ rather than just one when backing outright:

• 11.03% bookmaker advantage laying the draw in the Augsburg vs. Hamburg match was only worth 0.40 units more than Betfair’s return with a fixed liability/stake of 10 units.
• 11.62% bookmaker advantage laying the draw in the Mainz vs. Hoffenheim match was worth the same 0.40 unit advantage.
• 9.47% bookmaker advantage laying Bayer Leverkusen away at Bayern Munich was worth just 0.07 extra units than with Betfair.

In conjunction with the table above, the following table shows the best alternative options to laying each event in Betfair during this round of matches (click to enlarge; opens in a new tab):

German Bundesliga Matches 26th-28th October, 2012

In fact, if you want to back the draw in a game, over 95% of the games we have analysed this season would have had financially greater benefits available in the bookmaker market.

Taking into consideration the standard Betfair commission rate of 5%, the bookmakers who wish to compete have to offer something more attractive but this is a balancing act if they want to avoid the risks of an arbitrage situation. The margins are therefore very fine but over the course of a season, you will undoubtedly be at least 5% better off placing your back bets in the bookmaker market rather than at Betfair.

Comparing Bookmakers’ Odds with Exchanges’ odds

Below, is a tiny extract from a huge Soccerwidow exercise comparing Betfair prices across many European top-flight football leagues with the best available odds offered by a selection of online bookmakers (click to enlarge – opens in a new tab):

German Bundesliga Matches 2nd-4th November, 2012

For consistency, our exercise uses odds available 24-hours in advance of each match.

The calculations above take into consideration Betfair’s 5% commission charge, and you can see straight away that just one event marked red in the extreme right-hand column provided a better financial return with Betfair (the possibility of Augsburg winning at Hannover). Otherwise, 26 out of 27 events (96.3%) were better off backing in the traditional bookmaker market.

The extent of the bookmaker advantage in all of the 1X2 match event possibilities is also shown and here are a few examples:

• Freiburg to beat Moenchengladbach was priced at 3.50 in the bookmaker market, thus providing a financial advantage of 11.98% over Betfair’s price. In effect, for a 10 unit stake the bookmaker return is 2.68 units better off than with Betfair.
• The draw in the Bayer Leverkusen vs. Fortuna Dusseldorf was priced 9.25% better with the bookmaker market offering 3.25 units more return for a 10 unit stake.
• Backing Werder Bremen to beat Mainz provided a return 7.21% better with the bookmakers rather than with Betfair.

With the spread of results during this round of matches in the Bundesliga, it is evident that every HDA result which happened (cells highlighted in dark blue) was more profitable as a back bet in the bookmaker market. Even with some exchanges offering lower commission charges than Betfair, bookmaker prices are on the whole still more financially rewarding.

Successful Gamblers ‘Plan’ to Win – They Never ‘Hope’ to Win

An amount as small as 5% may not sound large, but 5% is a huge amount when considering factors such as eventual yield and return on investment.

If you have found what seems to be a successful selection system but lack the discipline not to attend to details when running your betting venture then we suggest that you are not serious enough about it. It follows that if you are not serious enough about your gambling then be honest with yourself and please do not bet.

A Trader’s Point Of View – Day 3: 3 October, 2012

On 3rd October the Widow posted the following bets on the German Betfair blog:

Value bet recommendations:
Back FT: Manchester City (odds: 1.97; ‘true’ odds: 1.88, probability: 53.3%)
Back FT: Under 3.5 goals (odds: 1.55; ‘true’ odds: 1.52, probability: 65.8%)

…but she also posted some stats to back these recommendations up

Man City’s last 30 home games (all competitions)
Man City wins: 24 (80%), Draws: 4 (13.3%), Away Wins: 2 (6.7%)

The early goal didn’t come so there was no value for me in backing under 3.5 goals. So, when the German side took the lead on 60 minutes, I saw my opportunity to lay them cheaply @ 1.50, giving me 30+ minutes for Man City to draw level or go on to win.

As a trader I’m more inclined to lay a team rather than back one, but only if the price is right. My reasoning behind this is that if I lay a team, it keeps the draw on my side and I then have two chances of a winning trade. But I’m not adverse to backing a team either.

On the 89th minute the Widow’s stats, showing only 6.7% of recent games lost at home by Man City didn’t disappoint, as the blue side of Manchester were awarded a penalty and ultimately drew the game.

My patience was rewarded and I closed the trade out for a profit:

Until next time.
Keep it green!

Every bettor should try to optimise the financial return from his/her risk, which means finding absolutely the best prices available.

Of course, depending upon the betting exchange employed, profits are eroded by up to 5%, or more if you are subject to premium charges with certain firms.

The time it takes to analyse a match and formulate value bets would be wasted to some degree if you then neglected to tie in the best possible reward on offer.

With a little imagination it is fairly easy to contrive several alternatives to laying certain outcomes within a betting exchange when faced with any lay bet opportunity. The question before committing to a lay bet is whether the same outcome can perhaps be achieved using a different market on the same match?

For example, betting against a team to win a match would usually mean laying them in an exchange, but how about the ‘Double Chance‘ bookmakers’ market favouring the draw and the other team? What about an ‘Asian Handicap +0.5‘ back bet on the other team, or a ‘Dutch‘ back bet on the draw and the other team, possibly even using two different bookmakers?

As ever, the best way to guide you and explain things as simply as possible is using an example and we have chosen the German Bundesliga 1 game between Borussia Moenchengladbach and Hamburger SV (M’gladbach v Hamburg) on 26.09.2012.

Firstly, let us assume we wish to bet against a home victory:

(1) The Obvious Approach: Laying the Home Team at a Betting Exchange

M'gladbach's Lay Price 5 Hours Prior to Kick-off was 1.83 (Betfair)

Laying 10 units at a price of 1.83, provides for a loss of 8.30 units if M’gladbach win the game but 10 units of profit if they don’t win. Including the typical 5% betting exchange commission however, the net financial gain for winning the bet is 10 units minus 5% = 9.50 units.

9.50 divided by 8.30 = 1.145, which equates to a back-betting price of 2.145.

Those back odds (2.145) provide a benchmark against which to compare the various back bet alternatives.

However, it is also necessary to find the equivalent (adjusted) lay odds which take the betting exchange commission into consideration. These adjusted lay odds are the basis for calculating the stake needed to achieve a return of 10 units. This is again crucial to allow comparisons and for this some further reverse engineering is needed:

Back Odds Converted to Lay Odds

The corresponding “adjusted” lay odds to win 10 units can be calculated using three simple steps:

• 1 divided by 2.145 (see above: corresponding back odds) = 0.4662
• 1 minus 0.4662 = 0.5338
• 1 divided by 0.5338 = 1.873

Alternatively, you can also adjust the lay betting odds using a simpler formula:

Divide (Lay Odds minus 1) by (1 minus Commission) plus 1

Illustration:

(1.83-1) divided by (1-0.05) +1 = 1.873


What do these ‘adjusted’ odds mean?
To win 10 units you need to calculate your stake (risk) based on a lay price of 1.873 rather than the price on offer of 1.83.

8.73 units divided by (1.83 -1) = 10.52 units, minus 5% commission (0.526) = 10 units return.

This effectively means risking 5.18% more than the price of 1.83 suggests.

Divide (1.873 minus 1) by (1.83 minus 1) = 1.0518

Therefore, to win exactly 10 units you must risk 8.73 units at lay odds of 1.83.

Multiply 10 units by (1.873 minus 1) = 8.73 units.

Phew, are you still with me..?

Summarising the results:

• Adjusted back-betting price: 2.145 – used to compare the lay price equivalent with the bookmakers’ back bets
• Adjusted lay odds: 1.873 – used to calculate the lay stake to win exactly 10 units
• Necessary stake to win 10 units at lay odds of 1.83: 8.73 units

To maximise the output of this powerful tool, it is advantageous to have some grounding in mathematics plus an ability to use formulas in Microsoft Excel; thinking logically will also come in handy.

With this one article I can only scratch the surface of MarketFeeder, but anyone who is genuinely committed to making money with betting should seriously consider purchasing a ‘bot’ such as this.

What is a Bot?

Bots are software products developed to automatically carry out designated tasks, for example, automated gambling with Betfair.

Image: Ociacia (Shutterstock)

To put a long story sideways, your bot can log into Betfair and constantly download the current odds to your computer at home. This happens over API and it is therefore possible to use a bot nearly everywhere in the world, so long as the Internet connection is good.

Bot software permits the observation of selected markets without having to log in manually to Betfair through Betfair’s log-on procedure. In addition, MarketFeeder logs and records everything so that afterwards market odds and movements can be evaluated in detail.

However, the pinnacle of MarketFeeder’s functionality is its ‘triggered’ betting function, which means the computer executes betting instructions automatically based on the criteria programmed into it and thus, you can instruct your bot to play selected markets according to the criteria you have set, whilst you go out for a nice walk in the countryside…

What is a ‘trigger’ and how is a trigger developed?

A trigger is an individual setting or programming of MarketFeeder telling it which parameters need to exist in order to activate and execute a bet (lay or back bet).

MarketFeeder logs into Betfair and loads markets in real time. So long as no triggers are ‘live’ nothing happens. In order to demonstrate what I mean let us look at an example. Say we would like to develop a trigger for football in the ‘over 2.5 goals’ market. For this, I can get MarketFeeder to load all of Betfair’s football markets for a particular day and concentrate on the odds for the over 2.5 goals market.

You may have observed that the odds in Betfair rise perhaps 5 minutes before the beginning of a game and then tend to dip slightly as soon as the game begins (before rising again until the first goal is scored). It is impossible using a browser and logging manually into Betfair to monitor and observe all the match markets at the same time but MarketFeeder will do this for you.

You can set MarketFeeder to log all games of a certain group (e.g. by odds). Afterwards, you can evaluate these logs and after just one weekend you should have dozens of different data sets to analyse.

In this example the initial observation was that odds rise 5 minutes before the beginning of a game and after kick-off they drop. This could mean the possibility of backing at a high price and trading out with little risk by laying lower at kick-off. With logs, you can check your theory exactly.

The reason is simple: If the ‘back’ price for an event with a bookmaker is higher than the ‘lay’ price in a betting exchange the opportunity of an arbitrage transaction becomes possible.

This simply means that by ‘backing’ the outcome with the bookmaker and immediately placing a counter bet in the betting exchange (a ‘lay’ bet), risk-free profit can be generated from the event no matter what the outcome.

Since there are now many software applications which automatically monitor price fluctuations in the markets and immediately react (and much faster than a mere mortal can type the word Betfair or Betdaq into their browser window), prices in betting exchanges are ‘by definition’ higher than at bookmakers.

Only in fringe markets and/or those with low liquidity (i.e. not frequented by bots), does it sometimes occur that a bookmaker temporarily offers a better price than in a betting exchange. However, in these cases arbitrage is rarely viable because of the difficulty in getting a lay bet matched in a stagnant market.

How are prices set at betting exchanges?

Prices on the betting exchanges always ‘follow’ the prices of the bookmakers. There is no other way purely because arbitrage opportunities would immediately open up should anyone be foolish enough to offer a bet at a lower price than the best bookmaker’s offer.

Compiling odds works as follows:

Large bookmakers have their own analysts departments; smaller bookmakers use the services of odds compiling bureaux. There are hundreds of mathematicians and statisticians employed to calculate bookmakers odds. The calculations are performed using statistical and mathematical methods such as those described in this blog and especially Soccerwidow’s Fundamentals of Sports Betting.

Depending on the popularity of a match and the expected demand for bets that it will create, bookmakers publish their odds in plenty of time before the game. Smaller leagues have a lead time of approximately one week or so; bets on more prominent matches are often published a whole month in advance and sometimes even earlier.

Betfair opens up its markets around a week before kick-off and if you have time to check the virgin markets, you will find them completely empty, without any back or lay-offers. As a rule, betting exchange markets ‘wake up’ about 2 days before kick-off. Before this time, professional market traders are busy with other things.

Image: Dragana Gerasimoski (Shutterstock)

The first people to offer bets on the betting exchanges are the ‘Arbers’. The odds they offer for backing outcomes are generally far below the bookmaker prices. Lay odds are also extremely excessive. In ‘Betfair speak’, at this stage there are many ‘ticks’ between the back and lay prices.

Only about 24 hours before kick-off do back and lay prices close-up to each other. The situation is often then just the one necessary ‘tick’ between the back and lay prices. This does not necessarily mean that any bets have been matched, but more that the market has ‘settled’.

Serious price fluctuations are not expected until 2-3 hours before kick-off and hit their peak activity in the hour before the start when team news is made public. The ‘bookmakers margin’ (overround) evaporates and the odds in the betting exchanges are now likely to be considerably higher than the odds of the best bookmakers.

Are Betfair’s prices ‘fair’?

The prices on betting exchanges do not necessarily reflect the true probabilities (= expected outcomes). They are certainly ‘fair’ in relation to the prices in the market, but inevitably do not represent the true zero odds. They are often close, but not always.

The reason for this is that bookmakers set their prices taking into account the expected demand and odds at betting exchanges follow bookmaker prices (as explained above).

For example, bookmakers have the habit of under-pricing emotionally favoured or heavily supported teams, whilst underdogs are often offered at odds which are far too high. However, beware! This example is a very, very rough rule of thumb. Ultimately, it is always necessary to recalculate all odds yourself.

Summary

At betting exchanges you will find higher odds almost without exception. The overround is no longer part of the equation, and betting exchange odds cannot be lower than bookmaker odds due to arbitrage.

Betting odds at betting exchanges do not necessarily represent ‘true’ probabilities (= expectations) because prices at betting exchanges follow bookmaker odds, which in turn are ‘profit-optimised’ in their favour.

We hope you now understand the pricing mechanism in the market a little better and it would be great if you would leave a comment.