What are they?
Most savvy punters already know about the wonderful world of betting exchanges, but for those of you who don't this article will give you a brief introduction into this exciting new world.

Before the advent of online betting exchanges, if you wanted a bet you would have to go to your local bookie such as Ladbrokes or William Hill and he would give you the odds and you 'back' your fancies. The Internet has changed all that! The betting exchange removes the bookies (along with their built-in profit margins) from the equation and it's just punter v punter using the exchange as the go between. You get to be the bookie!

Act like a bookmaker (unless it's John McRirrick!)
The betting exchange allows Joe Bloggs to bet with John Smith enabling you to act just like a real bookmaker and offer odds yourself. (Known as laying). Laying is simply the opposite of backing. With traditional bookies you could only ever back your selections (ie to win or to place etc.) For the first time betting exchanges have allowed the general public to lay their selections (in other words bet them to lose!). When someone is backing something on an exchange, someone somewhere else is laying that same bet.

The whole process of betting and laying on an exchange is known as trading, just like on a stock exchange. (but using sports and events instead of stocks and shares). Whenever someones wins on betting exchanges, someone else loses.

Laying the odds
Laying the odds means you offer odds on the outcome of a particular event say, for example, on Germany to win the World Cup at 10. This translates to being 9/1 with traditonal fractional odds. Betting exchange prices are shown inclusive of the stake in decimal odds. So 9/1 (fractional odds) with Ladbrokes is shown as 10 on an exchange (decimal odds). There is an option for switching between fractional and decimal odds on Betfinder price charts in the bottom right of the page under 'Preferences'. If you are new to betting, it's probably best to stick to decimal.

So what happens when you LAY a bet?
If you LAY a £5 bet at 10.0 on Germany and Germany do not win the World Cup, the person who took your offer (and backed Germany) lost the bet and you keep the fiver. If however, Germany do win the World Cup you will have to payout at the odds of 9/1 that you offered, so you will stand to lose £45 (9 x the £5 stake) (Your liability). But because you can back and lay many times, it's possible to create no risk, or all win situations no matter what the outcome.

Creating risk free bets
If you back high and lay low for the same stake, you will have created a no risk bet. For example, backing a horse to win at 10/1 for £10 (potential winnings £100) and then laying it for the same stake at 8/1 for £10 (liability £80) will create a no risk wager. If it wins, you make £20 profit. (£100 won less £80 paid out), and if it loses you break even. (£10 lost and £10 won from the LAY bet). They key of course, is correctly predicting which way the market is going to go.
Remember though that betting exchanges charge a commission of up to 5% of any won amount.
There is no commission charged on losing bets. (Thank God!)

Creating win-win situations
Another advantage of the exchange is the ability to alter your position during a long term event (as well as some ‘live’ football matches). For instance, if you backed Chelsea to win the Premiership for £10 at 16/1 back in July 2005, you could then lay them in 2006 at 2/1 (bet against them winning the league) in order to guarantee a profit either way - you could offer £30 of your potential profit, in order to win £15 if they fail - thus covering you initial £10 stake.