How a Betting Exchange Works, Told Through One Bet
Your £20 is in the market and nothing has happened. On an exchange a bet waits for someone who disagrees with you at your price, so here is one bet followed from both sides of the trade, with the arithmetic checked.
How does Betfair Exchange work? Two customers take opposite sides of one bet at one price. The backer bets that an outcome happens. The layer bets that it does not, and risks the backer's stake multiplied by the odds minus one. Offers wait in a queue at each price, first come, first served, and a bet is struck only when an opposing offer meets it. An offer nobody takes keeps waiting until you change it, cancel it or the market goes in-play. At settlement, exchange commission comes off your net winnings in that market, never off a market you lose, at a rate that depends on where you live, so check the current terms. The rest of this page follows one £20 bet from both sides.
How Betfair Exchange works, one £20 bet at a time
What an exchange is, and why its prices differ from a bookmaker's, is the job of the exchange primer. This page starts one step later, with a single bet.
Team A and Sam are invented (which spares us the arguments), and so are the prices and the amounts waiting at them. The arithmetic is real, and you can check every figure.
- Two people disagree.
You think Team A wins more often than the market says. Sam thinks it wins less often. You will back Team A, which means betting that it wins. Sam will lay it, which means betting that it does not. You and Sam are both customers of the exchange.
- Read the two queues.
At every price, offers wait in line. Layers who are ready to lay queue on one side. Backers who are ready to back queue on the other. The best price you can back at is the highest one a layer is offering: 2.98, with £85 waiting. The best price you can lay at is the lowest one a backer is asking for: 3.05, with £70 waiting. In between, nobody has agreed on anything. The drawing just below shows the seven prices around the gap.
- Take a price, or wait for yours.
Press back at 2.98 and your £20 matches at once, because £85 is waiting there. If Team A wins you make 20 × (2.98 - 1) = £39.60. Ask for 3.00 instead and the same win pays 20 × (3.00 - 1) = £40.00, which is £0.40 more, but only if somebody takes it. Patience has a price. You wait.
- Your offer joins the queue.
Your £20 at 3.00 sits between the two queues, and it is now the best price available to lay. It is an offer, not yet a bet: a bet is struck only when someone with the opposite opinion matches it. Nobody else was waiting at 3.00, so you are first in line, and anyone who asks for 3.00 after you joins behind you (first come, first served, at the same price). Until then you can change your offer or cancel it.
- Sam lays £20 and meets you.
Sam wants to lay Team A, looks for the best price to lay, and takes yours at 3.00. That is a match. Sam's liability is stake × (odds - 1) = 20 × (3.00 - 1) = £40.00, what Sam pays if Team A wins, against £20 won if it does not. Laying at 3.05 would have cost Sam a liability of 20 × (3.05 - 1) = £41.00, so meeting you saved Sam £1.00 and got you £0.40 more than 2.98. The gap paid you both.
- The market settles.
The result comes in and the money moves in one step: whatever one side wins, the other side loses, before exchange commission. The settlement section below runs both outcomes with the cost included.
Where the two queues meet
Your £20 sits in the gap between the two best prices, Sam arrives from the lay side, and 3.00 becomes the price both accept. A match is one offer that was waiting and one that arrived.
Schematic. Illustrative prices, not a live market, and the amounts are invented too.
Settlement, and what comes off the top
Settlement is the quiet part. One side wins what the other loses, then Betfair takes exchange commission from your net winnings in that market. Lose the market and you pay none.
The rate depends on where you live. In regions with My Betfair Rewards, which include the UK and Ireland, it follows the package you choose (Betfair's own example for the Basic package is 2%), and if you choose none you are eventually moved to the Rewards package. Elsewhere it is a Market Base Rate (6.5% for most countries by default) that a Discount Rate, earned from Betfair Points, can reduce. Exchange commission is worked out on your net winnings in the market, not your stakes, and we found no separate rate for back and lay bets. Treat every figure here as a snapshot and check the current terms for your own account. To see what a rate does to a price before you bet, work out the margin after exchange commission.
Put the whole case together at the example 2% rate. If Team A wins, you receive £60.00 (your £20 stake plus Sam's £40.00), exchange commission takes £0.80 from your £40.00 of net winnings, and you end with £59.20; if Team A does not win, you lose the £20, Sam collects it, and Sam pays £0.40 exchange commission on £20 of net winnings.
Why a bet may not fill
An offer is matched only against an opposing offer at your price or better, so the money waiting there decides whether it fills. Liquidity is finite, and thinner the further you get from the big events. For what limits do and do not mean on an exchange, read what betting limits really mean.
A bet that sits unmatched is not broken. It is waiting.
Say Sam wanted to lay only £8: £8 of your £20 is matched at 3.00 (a possible £16.00 of profit for you, before exchange commission), the other £12 stays at the front of the queue, and if the market goes in-play before anyone takes it, that £12 can lapse or stay depending on the option you chose. Check the matched amount before you walk away.
Every bet needs somebody who disagrees.
If your account cannot reach the ladder
All of this assumes you can open a market. That depends on where you live: Betfair publishes a list of Prohibited Territories, not a list of the countries it serves, and it has closed countries before, so check the current terms and your local law before you count on an account.
If you are stuck at the door, the step-by-step access guide takes the routes in order, and the route finder narrows them down. If your country is served, opening the account and passing the ID checks is the next job.
A broker's exchange tool can be one of those routes: a commercial arrangement between the broker and an exchange, not a Betfair account in your name. Each has a limit of its own on its published terms. BetInAsia excludes the UK and the USA. AsianConnect's Piwi247 has no lay betting on horse racing (which matters on a page about lay bets). MadMarket excludes the UK, the USA and Australia. Sportmarket, which runs FairExchange, excludes the UK, the USA and France. Check the current terms for the country lists, and expect all four to verify you before a withdrawal. For fees in full, see the brokers compared side by side.
Questions people ask
Does Betfair ever take the other side of my bet?
Only in limited cases, because Betfair says it acts as a facilitator and not as a counterparty when customers bet with each other. Its terms allow it to act as a counterparty on Australasian Tote and fixed-odds bets, to balance Betfair Starting Price bets, and occasionally on less liquid markets or to reduce the Betfair group's liability against an outcome.
What happens if my bet is only partly matched?
Only the matched part is a bet. The rest is an unmatched offer that stays in the queue until you change it or cancel it. When a market goes in-play, an unmatched offer can lapse, be kept, or be converted to Betfair Starting Price, depending on the option you set, so check your bet options before the off.
What are the Betfair Exchange rules on commission?
No commission is charged on a market you lose. On a win, exchange commission is worked out on your net winnings in that market, never on your stakes. The rate depends on where you live, and a Discount Rate (a percentage off the rate) can reduce it. Other charges exist, the Expert Fee for very profitable accounts among them. The access overview sets out the rates and that fee, and the tools section has the sums.
Is there a maximum bet on the exchange?
We found no fixed maximum stake in Betfair's published rules. Its terms cap a bet at the lesser of your Available to Bet balance and your Exposure Limit, a bet can only be matched against offers already in the market, and liquidity is finite. The minimum stake is £1 or €1 in Betfair's announcement, though minimums depend on the currency and can change.
Can I bet in-play or cash out on Betfair Exchange?
Yes to in-play, with a delay: Betfair says in-play markets usually carry a delay of 1 to 12 seconds, which lets customers cancel unmatched orders when conditions change. Cash Out exists on many markets but not all. It works per market, may be unavailable when liquidity is low, and a request can be refused or take longer in-play. Check the current terms for the market you want.