Regulations governing the operation of betting exchanges in Italy became applicable on May 24. The market leader in this sector, Betfair, will be able to launch its platform after the completion of user-based testing which began in July. The new regulations will allow operators to charge up to 10% commission on matched bets which will be taxed at 20% by the Italian government.
New tax laws are being introduced for exchange betting as the stakes based regime would not be viable. However, conventional fixed odds bookmakers have complained that this to equates to a lower tax rate which will allow exchange operators to offer bettors more competitive prices. Exchange bookmakers make money from charging a commission, rather than losers incurred by the customer.
The fixed odds sports betting market has performed moderately in recent years due to the advantage enjoyed by offshore sites. The Italy based firms are also restricted by the limited choice of betting markets and events that can be offered to their customers. The strength of Betfair’s product in Italy may be hindered by the fact that dot.it operators can only do business with customers based in Italy.
Italian sports betting operators will soon be able to offer a more comprehensive product and that could attract customers who currently bet with offshore bookmakers. This could have the most significant effect on soccer betting as overseas operators currently offer as many as ten times as many soccer markets than their Italian based competitors.
BETTING EXCHANGE LIQUIDITY - The legalising of betting exchanges in Italy is the next stage in the global expansion of this form of betting. Flutter.com was the first company to offer exchange betting when they were formed in May 2000. Betfair appeared on the market in June of that year. Betfair developed a business model for exchange betting and soon took over Flutter. Betfair are now the clear market leaders in this sphere and controls over 90% of exchange business worldwide.
The key to providing a successful betting exchange is market liquidity. This means that there must be sufficient business to allow bets to be matched and the peer to peer element of the activity is available to backers and layers. The traditional fractional odds have been replaced by decimal odds as these are used more widely around the world.
The exchange operators have no interest in the outcome of an event. It is the commission on transactions that allows them to make profits. The traditional bookmaker was a middle man but that role is no longer required with exchange betting. Another key element of exchange betting is that the size of a bet is only limited by the availability of a matching bet.
BACKING - Customers who want to use the exchanges to back their selections have this facility. It’s possible to limit betting activity to backing on the exchanges and use them like traditional bookmakers. There is a wide selection of sports and markets available and now customers can take a price at the time of betting or the starting price.
LAYING - The major difference between traditional bookmakers and the betting exchanges is the opportunity to lay, which is to bet that an event will not occur. This is the position bookmakers or layers take when offering a bet to a customer that the outcome will win.
Every transaction requires a backer and a layer and the exchanges don’t get involved or take a view. They provide the technology for backers to meet layers and earn their money through the commission. A layer is betting that something will not occur. A backer is betting that an outcome will occur.
LIVE BETTING - Another attraction of exchange betting is that it allows for live-betting. This activity was initially restricted by events shown live on television. The exchanges now offer live betting on events streamed live on bookmaker’s websites and any event where there is an accurate and real time scoreboard.
There is a slight time delay on in-running bets so that bettors with an advantage in terms of events taking place can’t be unscrupulous in using this advantage. Betting markets are briefly suspended after each occurrence likely to cause a substantial change in the odds.
Betting exchanges have now given rise to a form of gambler called an arbitrager. This type of trader looks for marginal discrepancies in odds and takes advantage to guarantee a profit. There is just a small window of opportunity to do this as the odds on offer are quickly adjusted to prevent this form of betting.
DEVELOPMENTS - Exchange betting and increased trading opportunities have not been met with universal approval. The old style bookmakers claim that this form of betting is susceptible to corrupt practices. The exchange operators question the motives behind these claims and counter that the bookmakers are driven by commercial reasons rather than protecting the integrity of sport and racing.
The sporting event that really boosted the exchange format was the 2002 World Cup. All the matches were shown live and backers and layers relished the opportunity to bet in this unique way. Soccer is still the most popular sport for exchange betting. Televised matches see huge amounts traded on the exchanges and the markets available are countless.
Despite the conflicting opinions of stake holders with vested interests exchange betting will continue to grow. The scope of sports and markets is customer friendly. However much the traditional bookmakers complain bettors are sending a clear message to the operators. This form of betting is here to stay because it has been met with approval from the betting public.