A lot of white label exchanges have popped up in recent years. This is due to the fact that Betfair has to strictly follow laws and regulation, while the mirroring exchanges do not (or don’t care). I don’t know the conditions to be allowed to wear a “powered by Betfair” label, but Betfair itself will happily allow these exchanges to exist, because it brings some volume/liquidity to their markets and thus money in the end.
Betfair had to put a lot of geo-restrictions in place in the last years and as a consequence lost a lot of customers. All these customers – or those that are desperate enough – will have to go via these white label exchanges (WLE) now, in order to participate in trading on the biggest exchange in the world.
While the WLE make some money with commission and probably get a few bucks from Betfair, they have their very own and maybe risky business model. Betfair itself has no risk at all, since they just provide a platform, where interested people can bet against each other. But these WLE actually take some risk (20%) on their customer bets and trades.
Lets have a look and visualize. I placed a back for Bundesliga match Frankfurt – Augsburg on Friday in the HT/FT market at Orbit Exchange.
Back HT1/FT2 at odds of 1000 with a stake of 100,- Euro. Now what Orbit does, is, that they only send 80% of that bet to the Betfair market and take 20% of that bet for themselves.
Lets see how it looks at the Betfair market:
You can see my order for odds of 1000, but the stake is only 80,- Euro (some rounding differences I guess, thus it’s actually 81,- Euro).
Let’s assume that order gets matched and that game will indeed end HT1/FT2. Orbit will then credit 100,000,- Euro to my account and they would have to pay 20,000,- Euro of that from their money (since they took 20% risk on my bet themselves). If I lose the bet, 80,- Euro go to whoever actually matched my order and 20,- Euro will go into the pocket of Orbit Exchange.
Since most people lose with trading, this is a rather safe (additional) business model, but it can be exploited and you as a WLE operator better monitor closely what your customers do.
The business model of Trading exchanges is commission. They are providing a platform, where people can trade against each other with no house edge. After a market is settled, the exchange takes commission on net winnings – you don’t have to pay commission on losing bets/markets.
At Betfair the base commission is 5%. So, if you win 100,- in a market, Betfair will take 5,- of that and you will get 95,- net win in your account.
The good thing is, you can lower your commission by gaining Betfair points. You will get Betfair points for every bet you place, no matter if it wins or loses, it just has to be matched. The points you gain will determine your discount rate. Your discount rate can go from 2% up to 60%. Lets say we have a 60% discount rate with the above mentioned 100,- net win in a market. Our commission would then be:
100,- x 5% x (1-60%) = 2,-
So from previously 5% we managed to get our commission all the way down to 2%, which is the lowest it can get with Betfair to my knowledge.
The commission model gives the exchanges a safe way to earn lots of money, they just need volume/turnover (and that is what all other exchanges than Betfair are struggling with). On a Champions League match day, people will have millions of winnings and you can calculate for yourself what 2%-5% of commission means for Betfair then. And you have tennis, cricket, horse racing etc. running all day, where there is always good daily turnover.
Conclusion
Genuine exchanges will normally always pay you, because they take no risk themselves. You can compare it with a crypto currency exchange like Binance for example, who just provide a platform for traders to meet and take some fee for it from the trades.
The WLE’s – as explained – take some risk of course, but these 20% are still ok from a risk perspective I think and if they see you constantly taking advantage of it, they will surely not pay you. As long as you don’t try to cheat them, you should be fine and with them banning bad actors, they should also stay solvent.
Be Carefull & regularly withdraw the money you don’t need on a daily basis, you never know in this space and better be safe than .
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