Exchanges and the Recreational Punter

Hard to believe that the betting exchanges are celebrating their 21st birthdays. They had the keys to the door some years ago.

The main betting exchanges available (legally) to UK based punters are Betfair (now owned by Flutter/Paddy Power), Betdaq (owned by Ladbroke/Coral), Matchbook and Smarkets.

Betfair still dominates (in terms of market share and liquidity) and when commentators say 'on the exchange' it is normally a reference to them. They cover more sports and offer more trades. Incredibly £600million was traded with them on the result of the last US Presidential election, and even on election night both Biden and The Donald were odds-on in running.

It is quite easy to do some basic research on the internet to compare the commission rates, liquidity, ease of use etc. of the various exchanges. There are positives and negatives for them all. I thought though it might be mildly useful to report my experiences as the recreational punter!

I opened my account with Betfair in 2002 and within a short period of time about 50% of my bets were with them. Indeed in those days I only bet in shops, on course and with the exchange. My biggest ever win  - in odds terms - was Spanish Don in the 2004 Cambridgeshire. The horse won at a starting price of 100/1, but I had obtained odds of 180/1 on the exchange (sadly only £10 actually wagered).

In those days the commission rate was 'around' 2%. I use the word around as there were already rumours of different commission rates for different clients, but since it was almost always possible to obtain higher prices on the exchange than with conventional bookies this was a small price to pay.

However over time Betfair got greedy. Commission rates went up to 5% plus and the conventional bookies - especially as they expanded online - got more competitive. As a result now 95% of my bets are with bookmakers and just 5% on the exchange.

What about the other exchanges? I have accounts with all 3 but cannot remember when I last bet with them. Matchbook lured me in with a zero commission offer. I found their website hard to navigate and then it got taken down by the Gambling Commission because their prevention of money laundering protocols were not good enough. They now have the all-clear on that front but charge commission on winning and losing bets. Ladbrokes show little enthusiam for Betdaq since they acquired the company and it suffers - along with Smarkets - with low liquidity on many markets.

I still use Betfair, but only in very specific circumstances. To make it pay you have to opt out of all their offers, free bets and reward schemes. That is the only way to be charged 2% commission. Even then they are often not as competitive as the on-line traditional bookmakers. Generally I find shorter priced horses - provided you shop around - are better value with bookmakers than on the exchange. Liquidity has also reduced, despite the US election experience. For most horse races the market only becomes interesting 10 minutes before the race. Better value early morning prices are nearly always with the conventional bookies.

However if you fancy an outsider to win (and it must be to win) you will almost certainly get a much bigger price with Betfair. Typically a 50/1 shot with a bookmaker will be 100/200 to 1 plus on the exchange. You do need to remember that this price will not be available each way. The place market will often have the 100/1 shot at only 10/1 to place. I still then tend to place most of my long shot wagers with a bookmaker. I might have £20 each at 50/1 with the bookie, and then put £3 to win at 200/1 on the exchange.

Betfair is the best place to bet in running but it is a minefield for us recreational punters. The 'professionals' have an in-built advantage. They pay to use corporate boxes with decent wi-fi at racecourses and can effectively see what is happening 5 seconds before us average folk. You might want to bet on a horse in-running because you can see it is going well but these professionals will happily lay you that bet because they know it has already fallen - the TV pictures at home have an in-built delay, as does the phone you are trying to use even on course. I have concluded it is almost impossible for the recreational punter to profit from in running bets on the exchange. At best it is the equivalent of cashing out and that is generally a mistake unless for a life changing amount.

To illustrate how far the in running professionals will go I know one who hides in the bushes around the 5 furlong marker at Lingfield so he can report to his accomplice - on high speed wifi in the corporate box - what the jockeys are shouting and doing as they go past. He may have been boasting but he drove off in a brand new BMW.