Sports bets can be placed electronically on betting exchanges. The real-time capabilities of Internet technology enabled the creation of the first betting exchanges in the early 2000s. A traditional commodities exchange and a betting exchange operate in very similar ways.
The fact that a bookmaker does not attempt to wager on any particular result of the sporting event distinguishes them from those who merely offer bets against other gamblers. A wealthy gambler may give everyone else in the room 10-to-1 odds on the outcome of a thrilling game, but he is still only gambling. If a bookmaker can balance that wager against other bets so that, after paying out the winners, he still has money left over for his commission, he may offer 10-to-1 odds.
Bookmakers and Exchanges use Specific Terms for Betting.
The bets that members place is referred to by the same terms that bookmakers use. Here is a list of words and phrases that are used by both bookmakers and exchanges.
Arbitrage - The term "arbitrageur" refers to bettors who make an effort to cover every wager that could be made on a sporting event.
Back - The bettor "backs" the group, animal, or sportsperson he believes will triumph by making a bet on that result. Although the phrase has evolved to mean more broadly "expressing support for the team that wins the event," to "back the winning team" means you bet on the team and as a result won your bet.
Handicap - is a change to the odds provided by a bookmaker or exchange to balance a lopsided event's result for the bettors. In horse racing, where various handicappers may offer varying predictions on which horses will most likely win, handicapping is a predictive measure.
In-play betting - Betting placed during a sporting event. In-running bets are another name for this category of wager. Also known as live betting, this is.
Lay off - If a bookmaker finds that he has taken on too many bets on one side of an event, he may ask other bookmakers to "lay off" some of his action by placing similar bets to cover those of his clients. Laying off is not really an option on a betting exchange because you can both back and lay on the sporting event there.
Multiples - Bookmakers might let gamblers combine several bets, which would result in much better odds. Due to the requirement that the bettor's predictions, be accurate for every event, a multiple bet offers a higher reward for a lower risk.
Net winnings - When a gambler places multiple bets on a single sporting event, his net winnings are the sum of his winnings after subtracting his losses.
Odds - In all forms of gambling, the odds indicate how much you will win rather than the likelihood that an event will occur in the way that is predicted by the odds. Sports betting odds show which competitors are favored by the betting public, not which are most likely to win.
Place - The place is the relative position among the winners in any competition where more than one winner may be recognized, such as first, second, and third place. The second-tier winner in dog and horse racing is called place (as in "bet on a horse to win, place, or show").
Stake - The amount of your wager.
Traders - Bettors who arbitrage their bets on events where a profit is unlikely may try to lay off some of those bets when the odds change, giving themselves a chance to make a profit. Compared to pre-event trading, in-play trading is riskier.
The Betting Exchange Model used at Betfair
Despite the fact that there are many betting exchanges, Betfair is thought to be the biggest and busiest in the world. As with buy and sell orders on stock exchanges, Andrew Black realized that back and lay bets could be matched up together. Early in 2000, he and Edward Wray founded Betfair.
Individual accounts must be opened, and funds deposited in order for bettors to use Betfair. Then, the traders use the system at Betfair to look for sporting events on which other traders are hedging their bets.
Members of Betfair are able to back or lay wagers. The odds that each bettor is prepared to offer the other are decided by the bettor. As a result, since each bettor chooses what he is willing to offer individually, there are theoretically no restrictions on the odds you can get in an exchange.
All unfinished or unpaid wages are regarded as exposure, which represents committed funds that you have deposited into Betfair's system. Exposed funds cannot be withdrawn or bet again. To stop members from placing wagers for an excessive sum of money in a short amount of time, Betfair establishes an exposure limit. Betfair's limits can be increased upon request from members.
All betting exchanges must support the sports betting standards, even though sports betting can be much more complicated than what is discussed in this article. It's possible that true innovation in betting procedures takes longer to manifest than innovation in customer service.