Betting exchanges similar to stock exchanges and facilitate betting between the customers of an exchange. The exchange has a technological interface through which the placing of bets is made possible from the comfort of one’s home. Betting exchanges have become hugely popular worldwide due to their apparent ease of operation and are fast replacing traditional bookmakers.
These exchanges are especially popular with regards to most sporting activities like horse racing and motor sports activities. Realizing the increasing importance of betting exchanges traditional bookies are also hosting their websites in addition to their brick and mortar business.
Betting exchanges accept bets only from those persons who are adults and are from countries which legally allow betting. Most U.S. states with the exception of Nevada do not allow betting. U.K on the other hand had legalized betting with rules and regulations in place for monitoring online betting.
Though operating from various countries the basic working of a betting exchange is similar:
1. The exchange begins by registering the customer on its site with a username and password.
2. The customer has to place money with the exchange to begin his betting operations and cover the bets he places. He can either back or lay the bet.
3. Anonymity is an expected norm and clients do not know the persons they are placing the bets against.
4. All exchanges make their money from the net winnings or gains of the client and the winning transferred to the account of the client.
5. Betting exchanges offer a client the opportunity to take the traditional stand of a bookmaker of an event not happening.
6. The client never bets against the exchange. It is more of a peer to peer betting and the exchange only serves as a platform for two or more clients to meet and place their bets.
7. Betting exchanges operate on tight liquidity margins and hence do not extend credit to their customers.
8. The prices of bets are determined by free market forces unlike the traditional bookmaker who determines prices.
To be in business all betting exchanges need to be licensed by the government of the country they operate in. This means displaying their betting rules and keeping their books open to inspection by the authorities. The government has also taken it upon itself to freeze bets where there think manipulation like insider trading is involved. Betting exchanges are also expected to identify customers who heavily bet so that they are made to pay taxes over and above the commission they pay the exchange for their winnings.
Though a lot of speculation is on about the integrity of these exchanges and sometimes their workings questioned, the pace at which these exchanges are becoming popular places forth the fact that instead of trying to curb online betting, the regulators should keep fine tuning their rules to keep checks and balances.
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