Betting exchanges explained: backing, laying and commission

What is the difference between backing and laying on an exchange?

Backing a horse means betting that it wins; laying means betting that it does not. Every matched back bet on an exchange has a layer on the other side.

On a bookmaker's site you can only back, and the bookmaker is always the layer. An exchange removes the bookmaker and lets anyone take either side. The exchange's job is to hold the money, match the two sides and settle the market, charging commission to whoever wins.

Prices are quoted in decimal odds. For each runner the screen shows the best prices available to back and the best prices available to lay. When a backer accepts a layer's offer, or the other way round, the bet is matched.

How do you calculate a lay bet liability?

Liability is the backer's stake multiplied by the decimal odds minus one. Laying £10 at 5.0 carries a liability of £40, which is lost if the horse wins.

The formula shows why laying short priced horses is cheap and laying outsiders is expensive. Laying £10 at 1.5 risks only £5. Laying £10 at 21.0 risks £200 to win £10. Most exchanges let you enter either the backer's stake or the liability you are willing to accept, and work out the other figure.

A common mistake is to treat the lay stake as the amount at risk. The stake is what you win; the liability is what you can lose, and it is held from your balance until the market settles.

How does exchange commission work on net winnings?

Commission is charged as a percentage of net winnings in each market, not on every bet. A £10 back bet at 4.0 wins £30 before commission, so the return after commission is slightly less.

Net winnings means the total won minus the total lost across all your bets in that one market. If you backed two horses in a race and one won, commission is taken only on the overall profit from that race. The rate depends on the exchange and the account, so compare prices after commission, not before.

That is why a raw exchange price of 5.0 is not directly comparable with a bookmaker's 4/1. Once commission is taken from the £40 profit, the effective price is a little under 5.0.

What happens to unmatched bets when a race starts?

Unmatched bets are cancelled at the off by default. Persistence options let a bet be kept in play or converted to a Betfair SP bet instead.

An unmatched bet is an offer nobody has yet accepted, for example asking to back at 6.0 when the best available is 5.5. Before the off it sits in the queue. At the off it lapses unless you chose to keep it, in which case it stays live during the race, or to take the starting price, in which case it is matched at the exchange's own starting price.

Why are exchange prices often bigger than bookmaker prices?

Exchange prices carry no built-in bookmaker margin, so the back prices in a busy market add up close to 100 on the percentage book. The gap with bookmaker prices is usually largest on outsiders.

Bookmakers shade the prices of long shots more heavily because that is where casual money goes and where their risk is highest. On an exchange the price is whatever the last layer will accept. The live table on this page compares win rates by Betfair SP band with the chance each price implied, the fairest test of whether exchange prices are accurate.

Why do in running exchange markets move so fast?

In running prices change with every stride as positions change and backers and layers react. A price can move from 20.0 to 2.0 within seconds of a horse making ground.

Pictures reach viewers with a delay, and some traders watch faster feeds, so anyone reacting to a television picture is often behind the market. In running markets also punish mistakes quickly: a lay at a short price on a horse that then rallies can cost many times the stake in seconds. Anyone new to exchanges is better off learning with pre-race markets and small stakes first. Liability on an in running lay is held from your balance just as it is before the off, so a set of open lays can tie up far more money than the stakes suggest.

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