Gamblers can buy (also known as "back") and sell (also known as "lay") the outcome, and they can trade in real-time throughout the event, either to cut their losses or lock in profit.
[6] Most exchanges make their money by charging a commission which is calculated as a percentage of net winnings for each customer on each event, or market.
The odds available on a betting exchange are usually better than those offered by bookmakers, in spite of the commission charged, because there are smaller overrounds.
Because exchanges seek to concentrate their liquidity in as few markets as possible, they are not currently suited to unrestricted multiple parlay betting.
Arbitrageurs (colloquially "arbers") attempt to simultaneously bet on all possible outcomes to make a guaranteed profit.
Occasionally though (especially in circumstances where odds are prone to change rapidly) exceptions will arise where offers to back or lay all selections will be made that if simultaneously and cumulatively accepted at exactly the right stakes would permit an arbitrageur to guarantee a profit.
However, such phenomena tend to correct themselves very quickly and exchanges generally try to dissuade customers from attempting to take advantage of such circumstances.
This suits the trader's high turnover, low profit strategy provided he bets exclusively with a single exchange.
However, Betfair's imposition of a premium charge in September 2008 was seen by some as being directed at the most skilled traders, whom it is speculated trade for a loss very infrequently and thus would otherwise pay little in the way of commission.
In response, rival exchanges have pledged not to introduce similar charges, perhaps in hopes of enticing traders to move their business (and capital) elsewhere.
The fact gamblers can lay outcomes on the exchanges has resulted in criticism from traditional bookmakers including the UK's "Big Three" - Gala Coral Group, Ladbrokes and William Hill.
Exchanges counter that, while corruption is possible on any gambling platform, the bookies' arguments are motivated not by concern for the integrity of sport but by commercial interests.
Some exchanges have signed agreements with governing bodies of sport including the Jockey Club, with whom they insist they will co-operate fully if the latter suspects corruption to have taken place.