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http://www.osga.com/artman/publish/article_9212.shtml
Excerpt:
Betting Exchanges Haven’t Lived Up to the Early Hype
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By Hartley Henderson - Exclusive to OSGA
Jun 17, 2011, 11:13
In 2000 Betfair started operations and the concept was expected to revolutionalize the way bettors wagered online. Unlike traditional bookmakers who would offer lines, Betfair allowed bettors to set lines and wager against each other. Bettors could either take the line offered to them by other bettors or they could offer odds themselves which other bettors could take. Moreover betting was allowed while events were occurring which was unique since bookmakers always close bets at the start of the event. Since bettors are wagering against each other, theoretically there is no vig incorporated into the bets and thus the odds to both sides of the bet are better than they can get with a traditional bookie. According to Betfair, odds are generally 20% higher than traditional bookmaker lines. The exchanges take a commission on winning bets and thus assume no risk themselves.
While Betfair is the largest betting exchange it wasn’t the first to offer a product where bettors could back or lay odds. World Sports Exchange (WSEX) put up markets where teams/contestants would have a buy and ask associated with them. Each bet was for $100 so if a team was listed at say 20-25 bettors could buy the team for $25 and if it won they would collect $100, so essentially they were getting 3/1 odds. Alternatively bettors could take the other side and risk $100 to win $20 so essentially bettors laying 1/4 odds. Most sporting events where the markets were offered were adjusted throughout the game/contest so bettors always had a chance to hedge. Naturally the difference in the bid and ask is WSEX’s commission. The concept came to the company’s founders while working on the Pacific Stock Exchange. The product was very successful and still is somewhat although WSEX has been affected greatly by the UIGEA. Volume for most markets has definitely decreased and WSEX will be the first to admit that fixed odds betting was still more popular than the markets on the site at any point.
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