The creation of exchange betting is the most amazing gaming story of the
21st century, with Betfair leading the way,
matching over £50 million in wagers weekly and, at times,
processing 13,000 bets a minute.
That's an amazing number, yet there are still thousands of regular
gamblers who either have no idea how an exchange works or are afraid of the
concept, at least partly because of the scare stories bandied around by
selfish bookies trying to knock the new kid on the block down
to size. It's a battle they will lose.
As an exchange convert, I'm no longer so interested in how it works,
but as to why the hell someone had to wait to invent it until after I'd
spent nearly 20 fruitless years betting against bookmakers who have not
only expertise on their side but also punter-crippling margins that render
profit-making impossible to all but the shrewdest of operators.
And if you think about it for a moment, you will quickly realize that
we have been but a whisker away from punting nirvana for almost 100 years.
We had to wait for today's computer technology to allow gamblers to bet
from their living rooms first (or behind the boss's back, at the office ),
but the arrival of exchanges was clearly inevitable.
I'm thinking of Tote betting, a form of betting just a couple of
mutational steps short from what is now known as a betting exchange
Ellerslie Racecourse in New Zealand saw the first automatic totalisator
machine used in 1913 and it was quickly copied around the world. The
French know it as "pari-mutuel", the translation of which is - to bet
amongst us.
And that is what an exchange is (with several added advantages): a
website where you, the gambler, wager your opinion against that of
another gambler who disagrees with you. You get rid of the bookmaker, who
slowly drains your cash thanks to his horrific percentages.
This is all written in hindsight, of course. If I
possessed just half of the foresight required, I would be sipping
champagne and watching a horse in my colours winning Newmarket's July
Stakes on Oaks Day in June 2000 rather than those of Andrew Black (co-owner of Captain Hurricane),
the man responsible for the creation of Betfair.
Tote-al toss
In the early days, roughly £50,000 of bets was all Betfair matched in a
week, but the growth since has been almost exponential, and the figures
mentioned earlier will probably seem pretty small just a year from now.
Why? Because exchange betting is the best, some would say only, way to
bet. The advantages over a standard Tote operation that you will find at
any British racecourse are enormous. Most of you will have a
basic understanding of how the Tote works but, to summarize: you make a
selection and hand your money over to a third party, who then
redistributes the winnings after taking a hefty slice of the wagers for themselves. The
amount of money you win from a successful wager is dependant on
how much of the pool was bet on your selection.
And there's problem number one: no price control. At an exchange
website you
know the odds before the start of the event, the price you are given being mutually acceptable with other party taking your wager. If the price on
offer is not acceptable to you, you simply put in an order and leave it on
the exchange, hoping someone will take it. If they don't, you're at least
safe in the knowledge that you have not struck a wager that would have
been unacceptable had you known the price in advance.
But that's enough of the analogy with the Tote, because there are
several other advantages to talk about without the need to refer back to
the obvious failings of an outdated system of wagering. The following is a
short list, with an explanation of the main benefits of exchange betting
over all other forms.
VALUE
Whenever you take a price on an exchange, the chances are that price is
the best around. Why? Because the bookmaker, who builds in his own
profit-margin so that he wins if he lays every runner in the field, has
been taken out of the equation. An exchange is a super-competitive
marketplace, where the percentages for layers only just scrape above
break-even point. In short, bookmakers, with overheads to consider, simply
could not afford to offer you prices that are freely available on an
exchange.
This is not always the case, so it is advisable that you still search
around for the best odds, and factor in the rate of commission that you
are asked to pay. Commission rates vary from firm to firm. Betfair charges
on a sliding scale from 5% to 2% depending on how much you bet (the more
money you turn over, the lower the rate will be), while others like
Sporting Options and Betdaq charge less, but have a smaller share of the
market. Commission is charged only on the profit that you make on any
particular market, not the total stake. In other words, if you back two
horses in a single race and one wins, you pay commission on the return
less your total stake on both runners.
LAYING
Rather like in spread betting, every runner in a field - whether it is
horses, dogs or football matches - is a two-way book. You can wager to win
or lay it to lose. If your one strong opinion is that the favourite is bad
value, you no longer have to spend hours trying to unravel the rest of the
puzzle. You simply lay the favourite.
'Play bookmaker' is a term often used, but not one that is encouraged
by the exchanges themselves, who prefer to regard it as a bet on a
selection to lose rather than a practice of bookmaking. It could be
argued, for instance, that a bet on the winner of a two-runner event, such
as a tennis match, is effectively a lay of the other runner.
TRADING
The ability to back and lay has opened up a whole new world and, to an
extent at least, all-out punting is going out of fashion. The concept of
closing out for a profit irrespective of end result will not be new to
spread punters, but with spreads you normally have to wait for a big
market move as you have to pay the bookmakers' margin twice, although this
has changed with the arrival of Cantor Sport's spread betting exchange
Spreadfair (click the 'How To' button).
On an exchange, just a tiny move can see you lock in a profit. A
perfect example is the recent Poland vs England football match. Having
thrown away a 2-0 lead against Austria, England were available at 1.96 (a
shade under evens) for much of the time leading up to match day in Poland.
However, the predictable flood of money for Sven's boys came in on the day
and England were around 1.89 at the off.
A trader could have had £100 on England at 1.96 and laid £100 at 1.89
for a guaranteed no-lose profit of £7 if England won. That's a trivial
sum, but the amount of money generated on a big football match means it
would have been just as easy to have £10,000 at 1.96 and lay £10,000 at
1.89 for a free £700 bet. Alternatively, you could have laid back £10,375
at 1.89 and switched your computer off safe in the knowledge that you have
just made around £370 irrespective of what happens in the match.
That, of course, is a rather simple example (though in the majority of
England matches you will be able to do just that) and in practice it is
not so easy - otherwise nobody would lose. But if you have the ability to
successfully predict a market move in either direction, you have a licence
to make money without any risk at all. And what bookmaker would want to
let you do that?
BETTING IN-RUNNING
Not the newest concept in the world, but one revolutionised by exchanges,
particularly Betfair's in-running horse race markets, as Betfair is the
only place you can bet after the off since there isn't the required
liquidity on the other exchanges yet.
Possibly the biggest key to betting in-running on a horserace is to do
the opposite of what your mind is telling you. It sounds daft, but if you
are sitting in front of your TV and you notice a horse travelling
extremely well, everyone else is likely to notice it as well. A mad rush
to get on ensues and the price collapses so much it becomes a value lay.
The shortest price at which you can bet on an exchange is 1.01 or 1/100,
and long odds-on shots (even sometimes those at 1/100) in-running get
beaten every day.
You can bet in-running on virtually every live (and some non-live)
sport and the demand for this facility should not be underestimated. In
the recent US Open tennis tournament, the women's semi-final between
Jennifer Capriati and Elena Dementieva attracted minimal pre-match
interest (women's tennis is hardly a popular betting medium), with barely
£20,000 matched by the early evening. It was different once this
Sky-televised match got under way, though, and by the end of the
three-setter Betfair had recorded in excess of £4.5m of matched bets.
ANTI-CORRUPTION
You can't discuss exchanges without bringing up the subject of corruption,
because nowadays it seems that all exchange publicity is bad publicity.
This is largely because bookmakers, with more regard for their own profits
than the actual integrity of betting mediums, continually stir up a
hornet's nest.
Yes, it is possible to influence results and profit from them should
you so wish, but that has always been the case. However, if you do so on
an exchange you are more likely to get caught. That's because all
transactions are traceable directly to you and, thanks to the Memoranda of
Understanding that both Betfair and Sporting Options have with the Jockey
Club and most other sporting governing bodies, those details are available
to be scrutinised.
Don't be a Luddite
And the transparency of markets also acts as a warning sign for punters.
The best example of this is non-runners in ante-post horse races. Whenever
a horse incurs an injury, that information stays out of the public domain
for some period of time. It may be just a few minutes, but it could be
days (the owner could be out of the country and trainer wants to inform
him/her first).
In pre-exchange days, bookmakers (with moles in every yard) would
lengthen the price sufficiently enough to attract bets, but not to attract
suspicion. These days, greed dictates that those immediately in the know
(not necessarily connections) snap up every penny they can get on an
exchange and the horse drifts markedly, sometimes out to 1000. If that
happens, you know not to bet.
The same sort of thing happens with injuries to sportsmen. Employ the
simple golden rule that if the price looks too good to be true, it
probably is, and you won't go far wrong.
But the advantages for bettors as a whole outweigh the negatives by
such a margin that any forward-thinking punter cannot afford to live
without an exchange. It's time to log on.
Paul Kealy is the Racing Post's Deputy Sports Editor.
BETDAQ.CO.UK
Contact
helpdesk@BETDAQ.co.uk / 0870 178 10 21 / To bet: 0870 178 12 21
Mobile users
http://mobile.BETDAQ.co.uk
Who is Betdaq?
Betdaq was launched in September 2001, with its UK brokerage coming online
six months later. Wholly owned by Irish financier Dermot Desmond (the man
behind London City Airport and Celtic FC), Rob Hartnett (ex- Ladbrokes and
ex-Tote) runs its UK operation.
Sports/markets covered
American football, cricket, Gaelic football, golf, greyhound racing, horse
racing (UK and Ireland), football (all major UK, European leagues and
internationals), special bets, tennis, motor sport, rugby league and rugby
union.
Number of customers
In excess of 50,000 customers from over 110 countries around the world.
Turnover overall and by sport
Betdaq claims to be averaging in the region of £40m-50m turnover per week
(this would make them as big as Betfair, which seems unlikely). Split
roughly 48% on football, 42% horseracing, 5% golf, 3% tennis, 1% NFL and
1% Other
Average bet per customer
Minimum bet is £1 on the internet, £20 on the telephone. Average bet is
£106
Levels of liquidity
Betdaq benefits from plenty of liquidity across the majority of football
markets, with racing growing at a steady pace. Major events on other
markets are also pretty well supported, although there's not much
happening elsewhere.
Commission levels on winning bets
Starting rate is 3%, down to 2% depending on the volume of bets matched.
Sign-up promotions and incentives
Refer a friend to the Betdaq service and you both get £20 when they match
their first £100. Betdaq offers periodic sign-up promotions around
specific events, but nothing regular.
Help guides
Thorough, taking you through the whys and wherefores of this betting
phenomenon.
General comments
Betdaq's principal strength is in football. Its early success was in Asian
markets and it continues to lead the way in volumes from the Far East.
Indeed, as far as Asian handicaps are concerned, it appears to have the
upper hand on Betfair, in terms of both liquidity and commission rates.
Betdaq's horse racing service has picked up considerably in the last year,
but still has a long way to go. In the short-term, their target customers
are those using Betfair out of habit but possibly missing out on the
benefit of having multiple exchange accounts.
RATING 8/10
BETFAIR.COM
Contact
helpdesk@betfair.com / 0870 90 80 121
Who is Betfair?
Betfair.com, the brainchild of former professional punter and derivatives
pricing modeller, Andrew Black, was launched in June 2000. Black founded
the firm alongside now Director Edward Wray, a former Vice-President at JP
Morgan. In its first month, Betfair matched less than £50,000 of bets a
week. Within a year that weekly figure had risen to over £1 million, and
by August 2002 that passed £50 million.
Sports/markets covered
American football, Aussie rules, baseball, basketball, boxing, chess,
cricket, cycling, Gaelic football, golf, greyhound racing, handball, horse
racing (UK, Ireland, US, France, Germany, Hong Kong, South Africa,
Australia, New Zealand), ice hockey, motor sport, poker, rugby league (UK,
Australia), rugby union, football (UK and major European leagues and
cups), special bets (politics, financial markets, TV, weather), tennis.
Number of customers
250,000
Turnover overall and by sport
£50 million per week.
Average bet per customer
Minimum bet is £2 on the internet, £50 on the telephone.
Levels of liquidity
The world's leading betting exchange, so there's liquidity in abundance on
almost every market you can think of. The volumes on UK football and horse
racing have to be seen to be believed, and it's fair to say liquidity on
the US racing alone each evening is often more than many of the other
exchanges total liquidity put together. In the final few hours of the
Ryder Cup, over £10 million had been matched on the outright winner.
Commission levels on winning bets
Between 2%-5% of net winnings - the more you bet, the less commission you
pay. All new account holders start off at 5%, and apart from the
high-rolling winners, this is around about where most people stay.
Sign-up promotions and incentives
Betfair doesn't offer specific sign-up promotion if you visit directly,
but if you sign-up via a selected number of partner sites such as
betrescue.com, deposit and bet through £20, Betfair will credit your
account with a £20 free bet. It also has a refer-a-friend scheme; when
your friend has earned four commission points (about the same as matching
£100 worth of bets at evens), you both receive a free £15 bet. Account
holders who haven't used the site for a month are emailed with a 'bet £20,
get £20' offer aimed at getting you back on board.
Help guides
Betfair is thorough in everything from its market offerings to its help
guides, providing an interactive demo with step-by-step instructions into
the betting exchange experience, along with detailed links on all aspects
of betting and explaining terminology.
General comments
Betfair is the grand daddy of all betting exchanges in every sense,
claiming 90% of global market share. Almost everything about Betfair is
class, from the markets it offers to the enormous liquidity, which not
only provides great odds but also means there is a very close spread for
the would-be bookmaker to lay at a decent price. Recent rebranding has
improved the look and feel of the site.
The only negative to report is the high level of commission on offer
from fair weather to mid-rolling punters. As the sector gains further
momentum and competitors attain that all-important liquidity, we will
surely see punters bet across the exchanges and take advantage of the
value on offer elsewhere. That said, a betting man wouldn't put his house
on Betfair getting complacent now, would he?
RATING 9/10
BETONBET.COM
Contact
support@betonbet.net
Who is BetOnBet?
BetOnBet was established by the Norwegian company BetOnBet Holding AS,
which consists of 150 Norwegian shareholders, most of which are active
punters, who wanted a tailored betting exchange for both professional and
recreational punters. Betonbet.net is the same outfit.
Sports/markets covered
American football, baseball, financials (stock exchanges and interest
rates), football (most European leagues, cups and internationals), golf,
handball, ice hockey, motor racing, tennis, politics.
Number of customers
BetOnBet claims to serve in excess of 5,000 customers.
Turnover overall and by sport
Overall turnover so far is about £1 million a month, mostly on football.
Average bet per customer
£10-20
Levels of liquidity
There's not much money in evidence for the high roller or professional
bookie, but certainly enough to test it out, and signs are fairly
encouraging so far. Not much action outside the major football leagues.
Commission levels on winning bets
BetOnBet charges commission on a scale from 1.5%-3% on net winnings. The
more you bet (and win), the lower commission levels.
Sign-up promotions and incentives
Nothing right now. There will be one incorporated via a sign-on bonus by
mid-October. It has a fairly attractive refer-a-friend scheme giving you
25% of the commission income BetOnBet makes from these customers for two
years.
Help guides
There's a farily comprehensive help section and how-to-bet guide, which is
more than adequate.
General comments
BetOnBet has some way to go in making the grade and improving liquidity
levels. For the time being there's enough there to back and lay in small
lumps, but give this site a chance - it's still in its infancy and it
offers some better-than-average prices on UK football, beating Betfair et
al. by a good 10% on the recent Man Utd v Liverpool game.
RATING 5/10
IBETX.COM
Contact
info@ibetx.com / 0208 599 4334
Who is iBetX?
iBetX is the brainchild of entrepreneur Imraan Malik. Conceived in
September 2002, it was soft launched seven months later, in time for the
start of the Cheltenham Festival.
Sports/markets covered
Horse racing (UK, Irish and US), football (UK, Spanish, Italian, French,
Champions League, UEFA Cup, European Championship, World Cup), golf (US
PGA Tour and European Tour, majors), basketball, baseball, American
football, ice hockey, special bets, tennis, motor sports, cricket,
financials.
Number of customers
Over 10,000 with a heavy UK bias.
Turnover overall and by sport
Overall turnover is in excess of £7-£10 million per week. By sport is
believed to be heaviest in horse racing.
Levels of liquidity
Claiming turnover upwards of £10 million per week, it's difficult to see
where it all goes.
Commission levels on winning bets
Commission rate starts at 3% and drops to 1% depending on betting volume.
Sign-up promotions and incentives
Periodically, iBetX offers £20 free bet promotions, but there's nothing
currently on offer, nor is there a refer-a-friend scheme.
Help guides
A professional and understandable demo within their help section.
General comments
iBetX.com launched the first European betting exchange handicapping
championships in June 2004. The winner walked off with a cool £10,000
first prize (although rumour has it that iBetx originally hoped it would
be £1 million) and the championship is sure to grow in years to come.
Despite its claims, liquidity is on inspection incredibly low - enough to
place a wager but not nearly attractive enough for high rollers. Surely a
sustained sign-up incentive is needed with which to build a more
significant - and fluid - customer base. In keeping with other exchanges
with liquidity deficiencies, while back prices remain reasonable, layers
will surely look elsewhere for value.
RATING 5/10
PARBET.COM
Contact
support@parbet.com / info@parbet.com
Who is Parbet?
Launched in 2000, in early 2004 Parbet was re-organised with the aim of
adding new energy to maintain momentum from earlier efforts. New MD, Carl
Jurell, is from the media and music industry. The site has just undergone
a major overhaul.
Sports/markets covered
Football (English Premiership, and major leagues in Sweden, Norway,
Poland, Germany, Spain, Italy and South America, plus internationals),
tennis, hockey, basketball, American football, baseball, Swedish trotting,
specials, politics.
Number of customers
Around 10,000.
Turnover overall and by sport
Matching bets for around £350,000 a week. Believed to be heaviest in horse
racing.
Average bet
£30
Levels of liquidity
There's a large stack of cash kicking around in parts of this site,
especially on tennis. The major European and UK football leagues are also
fairly well supported, along with golf and trotting.
Commission levels on winning bets
This has recently been lowered from a standard 5% to a range. You start
with 4% and work your way down its loyalty programme based on how much you
bet.
Sign-up promotions and incentives
No sign-up promotions at the moment.
Help guides
No demo or help section on offer, but it looks like there's an interactive
demo coming soon, along with live chat support.
General comments
Parbet is not a bad looking site at all. There's reasonable liquidity and
enough for the layers out there to get on with a reasonable bet. The odds
being set are slightly lower than the bigger exchanges, but it does appear
to have strength in depth on tennis. Along with a number of other
exchanges featured, for the more discerning gambler it's always worth
having more than one punter versus punter account, and there's no reason
why Parbet shouldn't be part of the crowd.
RATING 6/10
SPORTINGOPTIONS.CO.UK
Contact
Helpdesk - UK only: 08700 11 66 42 / Rest of world: (+44) 1444 237237 / To
bet: 08702 07 07 07
PDA users
http://mobileSO.co.uk
Who is Sporting Options?
Launched in May 2002 by Kevin Griffiths and Robert Byrn, two former
derivative traders, Sporting Options claims to be the world's second
busiest betting exchange, processing over a million bets per day.
Sports/markets covered
Horse racing (UK and US racing), football (UK, and major European leagues
and internationals), tennis, cricket, golf, greyhound racing, American
football, baseball, basketball, boxing, darts, financials, F1, ice hockey,
rugby league, rugby union, snooker, specials.
Average bet
£45.
Levels of liquidity
Very busy on UK horse racing, with plenty for the high roller and fair
weather punter to have a go at. Similarly, the leading football matches
and other major sporting events are more than liquid enough, but outside
the big leagues there isn't much value.
Commission levels on winning bets
Between 1% and 3% commission, with periodic levels of 0% for new and
dormant customers.
Sign-up promotions and incentives
Sporting Options doesn't generally offer a free bet or specific sign-up
promotion, possibly because its commission level is so low. However, it
does have an exclusive deal for (you guessed it...) betrescue.com
customers, who will receive a £10 cash credit when you open an account and
back or lay a matched £20.
It also has a refer-a-friend scheme where you can earn a £15 bonus for
each friend that you recommend to Sporting Options. Once your friend has
earned two commission points - equivalent to placing £50 of matched bets
at even money - Sporting Options will credit your account with £15.
Help guides
It doesn't exactly offer an interactive demo but the comprehensive guides
to using an exchange service are easy enough to grasp the basics and begin
your betting exchange adventure.
General comments
Sporting Options clearly pitches itself as the horse racing alternative to
Betfair - and with good reason. There's plenty of liquidity, and its
commission levels can be up to 40% less than its goliath rival. For
example, a Sporting Options 1.6% commission client would pay 2.7% at
Betfair, which translates into an approximate annual saving of £8,000. If
it is to make similar in-roads into other sports, and indeed other
countries, it should surely look at offering more football markets. Still,
a likeable site which is easy to use and well worth a visit.
RATING 8/10
SPREADFAIR.COM
Contact
cs@spreadfair.com / 08000 111 441
Who is Cantor Spreadfair?
Cantor Spreadfair is the world's first spread betting exchange that allows
clients to bet directly against each other. Clients choose the prices and
the stakes that they wish to bet at. Bets are matched between people with
opposing views.
Sports/markets covered
Football, cricket, politics, rugby union, golf, athletics, American
football, rugby league. Racing will come on stream at a later date.
Sign-up promotions and incentives
There aren't any at the moment.
Help guides
Unlike its more established sister site, cantorsport.com, Spreadfair does
have a basic yet easy-to-follow help guide, with illustrated instructions
taking you through step by step.
General comments
Although it has a way to go in establishing true liquidity and more
extensive market coverage, Spreadfair is the greatest innovation in the
betting market this year. At the moment it's the only dedicated spread
betting exchange, a somewhat cheeky move by Cantor in stealing Betfair's
thunder - even down to a blatant capitalisation of its brand name.
RATING 8/10
TRADESPORTS.COM
Contact
help@tradesports.com / (+00)3531 6200 300
Who is TradeSports?
Launched in February 2003, although TradeSports immediately acquired
Intrade plc, which had been trading since January 2002.
Sports/markets covered
All major US sports, golf, American football, basketball, ice hockey,
football (European, Premiership, Bundesliga, Serie A, La Liga), US horse
racing, major UK horse races, politics, financials, legal (Michael Jackson
etc), specials (movies, award ceremonies etc).
Number of customers
Over 35,000 members in over 125 countries.
Turnover overall and by sport
Since inception TradeSports has traded $500 million.
Levels of liquidity
Heavy liquidity is present on US sports, financials and political markets
in particular, but there's very little on global sporting events.
Commission levels on winning bets
Fees charged for all trades is 0.04c per 'lot' traded (an alternative way
of raising your stake).
Sign-up promotions and incentives
TradeSports currently offers new account holders 50 commission-free trades
regardless of the number of 'lots' bought, along with various deposit
bonuses where you can get up to $100.
Help guides
An unbelievable help section, made so entertaining with its flash movie
demo that is so typically American, but certainly gets the concept across
and is easy to follow.
General comments
TradeSports is a betting exchange with an extremely heavy Ammerican focus,
which it claims has given it a major competitive edge. Recent trading
activity on the US Presidential elections has seen over $11m staked on the
outcome of the race, with nearly $5m of that being traded on the outright
winner market.
As well as its in-depth US election markets, TradeSports lists all
major US sports with greater liquidity and activity than any other global
exchange, and while the mechanism may not be as familiar as some other
exchanges, if the US market place is where you want to trade then this
site is well worth a visit. The ability to trade in and out of the same
bet, taking profits and reducing losses (much like you do with shares)
without having to stake more is a major attraction to TradeSports members.
If, however, you're looking for an alternative to the big three in the UK
(ie Betfair, Betdaq and Sporting Options), for proper sports betting such
as horse racing, football, rugby league and darts, stay well away, as
you'll find more liquidity in Baring's current account.
RATING 7/10
