The back lay spread is the gap between the best price you can back a selection at on a betting exchange and the best price you can lay it at. If a runner shows $3.40 to back and $3.45 to lay (illustrative prices), the gap between back and lay is 5 cents, which on that part of the price ladder is one tick. Its width is the quickest test of whether a market has enough money behind its prices.
The gap exists because an exchange only shows offers nobody has taken yet: layers offering up to $3.40 and backers asking $3.45 or more. The betting exchange guide covers the basics.
Counting the spread in ticks
A tick is one step on the exchange's price ladder, and the steps widen as prices lengthen. These are the steps commonly given for Betfair's standard ladder; the exchange's own rules set them, and some markets use finer steps, so check there:
| Price range | One tick | One tick as a share of the price |
|---|---|---|
| $1.01 to $2.00 | 0.01 | 0.7% at $1.50 |
| $2.00 to $3.00 | 0.02 | 0.8% at $2.50 |
| $3.00 to $4.00 | 0.05 | 1.4% at $3.50 |
| $4.00 to $6.00 | 0.10 | 2.0% at $5.00 |
| $6.00 to $10.00 | 0.20 | 2.5% at $8.00 |
| $10.00 to $20.00 | 0.50 | 3.3% at $15.00 |
A one-tick spread is as tight as the ladder allows, which is why spreads are counted in ticks, but at $15.00 even that is 3.3% of the price. Trading on the ladder is covered in exchange trading strategies. Bookmaker names are trade marks of their owners. B337 is not affiliated with them.
Why a wide spread signals a thin market
In a busy market there is money at every price near the top of the ladder, so the best back and lay meet one tick apart. When offers are few, the gap opens. With illustrative prices:
| Tight market | Thin market | |
|---|---|---|
| Best back | $3.40 | $5.00 |
| Best lay | $3.45 | $6.20 |
| Spread in ticks | 1 | 11 |
| Implied chance, back to lay | 29.4% to 29.0% | 20.0% to 16.1% |
From $5.00 to $6.00 is 10 ticks of 0.10, then one of 0.20 to $6.20: 11 ticks. The thin market only puts the chance somewhere between about 16% and 20%, too wide a range to call a price. Wide spreads are common early in the day, in small races and minor markets, and on long shots.
Using the midpoint
The midpoint is halfway between the best back and best lay prices: (3.40 + 3.45) / 2 = $3.425 in the tight market, which implies 1 / 3.425 = 29.2%. It is a common reference for the exchange's estimate of a fair price, and the method, commission included, is in exchange price as fair odds.
Test it by working the midpoint a second way, from the two implied chances instead of the two prices. In the tight market both ways give about $3.425. In the thin market the price average is (5.00 + 6.20) / 2 = $5.60, while (1 / 5.00 + 1 / 6.20) / 2 = 0.1806 implies 1 / 0.1806 = $5.54.
When the method moves the answer, the midpoint means little, and the last traded price is no better a guide, because it can sit at either end of the gap.
Risk: Betting involves risk. A midpoint is an estimate of a fair price, not a known chance, and a bet priced above it can still lose. See responsible gambling for limits and support.
Where the spread costs you
Getting in and out of a position costs you the spread. Back $50 at $5.00 in the thin market and change your mind a second later: the best you can lay at is $6.20. Laying 50 x 5.00 / 6.20 = $40.32 evens the position at a loss of 50 x (1 - 5.00 / 6.20) = $9.68 whichever way the race goes. The same round trip in the tight market costs 50 x (1 - 3.40 / 3.45) = $0.72.
A bookmaker price above the exchange's back price can still sit below the lay price needed to hedge it, which is why horse racing arbitrage is worked against the lay side. An arbitrage only works if every bet is accepted at the price shown, and bookmakers can limit stakes, void bets or close accounts under their terms.
A lay is struck on the longer side of the gap, so in a wide market its liability is bigger than the back price suggests, as lay betting explains.
On the Terminal, Betfair back and lay sit next to 40+ bookmakers, read on a repeating cycle, so check the exchange before acting on a narrow gap. B337 does not bet on the exchange.