Betfair odds are not true odds in the sense of a known chance. Close to the jump in a busy race, though, the midpoint between the best back and best lay prices is a sound estimate of a runner's fair price. Punters set both sides and no bookmaker margin is built in. With illustrative prices of $4.40 to back and $4.60 to lay, the runner's fair price is about $4.50, a 22.2% chance, and a bookmaker's $5.00 is about 11% above it.
The estimate is only as good as the money behind it. Commission alters the payout on an exchange bet but not the runner's chance, and a thin market can put the midpoint almost anywhere inside a wide gap. Fair odds compares the exchange with a model or a de-vigged bookmaker market, and lay betting explained covers the lay side of the same prices.
Back, lay and the midpoint
The back price is the best price you can back a runner at, made of layers' money waiting to be matched; the lay price is the best you can lay it at, made of backers' money. Between the chances the two prices imply lies the market's view of the runner's chance, and their midpoint is the usual single estimate of its fair value:
fair chance = (1 / back price + 1 / lay price) / 2
Example: made-up prices for a six-runner race in the last minutes before the jump, illustrative only.
| Runner | Back | Lay | Midpoint chance |
|---|---|---|---|
| Runner 1 | $2.24 | $2.28 | 44.251% |
| Runner 2 | $4.40 | $4.60 | 22.233% |
| Runner 3 | $5.60 | $5.80 | 17.549% |
| Runner 4 | $11.00 | $11.50 | 8.893% |
| Runner 5 | $19.00 | $20.00 | 5.132% |
| Runner 6 | $32.00 | $36.00 | 2.951% |
| Field total | 102.71% | 99.31% | 101.01% |
For Runner 2 alone: (1 / 4.40 + 1 / 4.60) / 2 = (0.22727 + 0.21739) / 2 = 0.22233, a fair price of 1 / 0.22233 = $4.498.
The totals are a check on the whole market. The back prices add up to a little over 100% and the lay prices to a little under, and the midpoints land at 101.01%, close to 100%, which is what a busy market with narrow spreads looks like. To use the midpoints as fair chances, scale them to exactly 100%: Runner 2 becomes 0.22233 / 1.0101 = 0.22011, a fair price of 1 / 0.22011 = $4.543. Totals far from 100% mean wide spreads somewhere in the field.
A bookmaker's $5.00 against $4.40 to back and $4.60 to lay
Bookmaker A offers $5.00 on Runner 2. Which exchange figure you treat as fair changes the edge, and edge = offered price / fair price - 1:
| Fair price taken from | Fair price | Edge of the $5.00 | Expected value on a $50 bet |
|---|---|---|---|
| The back price | $4.40 | 5.00 / 4.40 - 1 = 13.6% | +$6.82 |
| The midpoint of the two chances | $4.498 | 5.00 / 4.498 - 1 = 11.2% | +$5.58 |
| The midpoint, scaled across the field | $4.543 | 5.00 / 4.543 - 1 = 10.1% | +$5.03 |
| The lay price | $4.60 | 5.00 / 4.60 - 1 = 8.7% | +$4.35 |
Expected value here is stake x edge, so the midpoint row is 50 x 0.1116 = $5.58; the expected value calculator runs the same sum from any price and fair price. The back price flatters the bet, because it is the most a backer can get, not the market's view. The lay price is the strict test: a price still above $4.60 is longer than every price the exchange is trading at, back or lay. In a market this tight the simple average of the two prices, (4.40 + 4.60) / 2 = $4.50, gives almost the same answer as the midpoint of the chances.
The expected value only shows up across many bets like it. This one loses whenever Runner 2 does, and at a 22% chance that is about 78 times in 100; value betting on horse racing works through what that does to a run of bets.
Risk: Betting involves risk. The fair price is an estimate, a +EV bet can still lose, and often does, and there is no guarantee of profit. See responsible gambling for limits and support.
Adjusting the exchange price for commission
Commission is charged on your net winnings in each market, at a rate the exchange's terms set, so treat the rate as an input; exchange commission explained shows how it is worked out. Commission answers a different question from the fair price:
- Is the $5.00 value? Compare it with the fair price before commission. The exchange's fee is taken from winners after the race, so it tells you nothing about the runner's chance.
- Where should you back the runner? Compare the $5.00 with what backing on the exchange really pays: net back price = 1 + (back price - 1) x (1 - commission rate).
| Illustrative commission | Backing at $4.40 pays per winning $1 | The bookmaker's $5.00 pays more by |
|---|---|---|
| 5% | 1 + 3.40 x 0.95 = $4.23 | 5.00 / 4.23 - 1 = 18.2% |
| 7% | 1 + 3.40 x 0.93 = $4.162 | 5.00 / 4.162 - 1 = 20.1% |
| 10% | 1 + 3.40 x 0.90 = $4.06 | 5.00 / 4.06 - 1 = 23.2% |
Laying works in reverse: after commission, laying at $4.60 costs as much as laying at 1 + 3.60 / (1 - rate) with no commission, $4.87 at 7%. That gives the strict test a second form: a bookmaker price above $4.87 sits above any fair price the exchange's two sides allow once commission is counted. The $5.00 passes it, while a $4.80 would beat backing on the exchange without clearly being value.
Risk: Betting involves risk. A bookmaker price that beats the exchange after commission still loses whenever the runner does, and the exchange sets its commission and can change it. See responsible gambling for limits and support.
Liquidity: why thin markets mislead
A midpoint means something only when money backs it. Ninety minutes before the jump the same runner might show $4.40 to back and $6.00 to lay, with $40 waiting at the best back price and $25 at the best lay (illustrative). The midpoint chance is then (1 / 4.40 + 1 / 6.00) / 2 = (0.22727 + 0.16667) / 2 = 0.19697, a fair price of $5.077, and the bookmaker's $5.00 sits 5.00 / 5.077 - 1 = -1.5% below it. Close to the jump, with the spread down to $4.40 and $4.60, the same $5.00 is 11.2% above fair. The runner did not change; the market filled in.
Run these checks before you treat an exchange price as fair:
- Measure the spread in ticks. The exchange's own rules set its price steps, so check them; on a ladder that moves in 10c steps between $4 and $6, $4.40 to $4.60 is two ticks and $4.40 to $6.00 is 16.
- Set the money waiting at the best prices against your stake: a price backed by $40 can vanish on one bet.
- See how much has traded: the total matched on the runner and its last traded price show whether anyone has bet at these prices lately.
- Add up the field. Midpoints close to 100% suggest a sound market; a back side far above 100% means wide spreads.
- Allow for the time. An exchange race market can open thin and gather money towards the jump, so an early midpoint deserves less weight.
A workable rule: treat the midpoint as fair when the spread is one or two ticks and the money waiting is several times your stake; otherwise use the lay price as fair, or leave the bet. The liquidity entry shows what a thin ladder looks like.
Why exchange prices are often longer than bookmakers'
An exchange price has no margin built in. Punters set both sides and the exchange takes its commission later, from net winnings, so a race's back prices add up to little more than 100%, 102.71% in the example, while a bookmaker's field adds up to well over it. A margin taken as a share of each runner's chance also moves long prices by more dollars than short ones. For example, adding 10% to a 3.0% chance makes it 3.3%, which turns $33.33 into $30.30, while adding 10% to a 44.0% chance makes it 48.4%, which turns $2.27 into $2.07. A bookmaker can also put more of its margin on the longer runners, as Bookmaker A does in this illustration.
Example: illustrative prices for the same race, with an illustrative 7% commission.
| Runner | Bookmaker A | Exchange back | Exchange back after 7% | Pays more on a winning $1 |
|---|---|---|---|---|
| Runner 1 | $2.20 | $2.24 | $2.15 | Bookmaker A |
| Runner 2 | $5.00 | $4.40 | $4.16 | Bookmaker A |
| Runner 3 | $4.80 | $5.60 | $5.28 | Exchange |
| Runner 4 | $8.50 | $11.00 | $10.30 | Exchange |
| Runner 5 | $13.00 | $19.00 | $17.74 | Exchange |
| Runner 6 | $21.00 | $32.00 | $29.83 | Exchange |
| Field total | 110.51% | 102.71% |
Where a bookmaker beats the exchange on a racing bet:
- Short prices after commission. Runner 1 is longer on the exchange, $2.24 against $2.20, but commission takes it to 1 + 1.24 x 0.93 = $2.1532, so Bookmaker A pays 2.20 / 2.1532 - 1 = 2.2% more on a winner. That is not value: the exchange midpoint puts Runner 1's fair price at 1 / 0.442513 = $2.2598, and 2.20 / 2.2598 - 1 = -2.6%, so it only decides where to back a runner you have already chosen.
- A price out of line with the market. Runner 2's $5.00 beats every exchange figure, which is the value case above.
- Promotions already on your account. A money-back saver or a bonus bet a bookmaker has issued can lift a bet above the exchange; money back racing promos prices one against exchange win and place prices.
- Before the exchange fills. Early in the day a fixed price can be on offer while the exchange market is too thin to give a fair price at all, which says nothing about value either way.
The general case for and against betting on an exchange is in the betting exchange guide.
Risk: Betting involves risk. A price above the exchange's can still lose. A bonus bet that loses pays nothing. Bookmakers can restrict accounts that keep taking such prices, and there is no guarantee of profit. See responsible gambling for limits and support.
How B337's Terminal uses Betfair as its racing reference
B337's Terminal judges racing value against Betfair's own market. Betfair's back and lay prices sit beside prices from 40+ bookmakers across racing and sports, so you can see where each bookmaker's price stands against the exchange. EV overlays compare each price with an estimated fair price and show it as expected value.
That figure is an estimate, not a forecast, and a price above it can still lose. Prices are read on a repeating cycle, not tick by tick, so the gap you see may have closed at the bookmaker by the time you look: confirm the price in your bookmaker account before you bet. The edge and expected value maths is set out on positive EV betting.
Betfair prices, closing lines and EV overlays start at Terminal View, as plans and pricing shows, and a free account opens a limited view of the Terminal with live odds. B337 places no bets on the exchange. Bookmaker names are trade marks of their owners. B337 is not affiliated with them.
For free and confidential support call 1800 858 858 or visit gamblinghelponline.org.au.
Risk: Betting involves risk. An EV overlay rests on an exchange price that can be thin or out of date, and there is no guarantee of profit. See responsible gambling for limits and support.
Mistakes when using the exchange as a fair price
| Mistake | What it does in the example | The fix |
|---|---|---|
| Treating the back price as fair | Reads the $5.00 as 13.6% above fair, against 11.2% at the midpoint | Use the midpoint, and the lay price as the strict test |
| Trusting a wide, thin market | At $4.40 and $6.00 the midpoint moves to $5.077 and the edge disappears | Check the spread and the money waiting first |
| Judging value against the net back price | At 7%, judging the $5.00 against $4.162 inflates the edge to 20.1% | Use commission only to choose where to bet |
| Mixing markets | A place price set against a win midpoint means nothing | Compare win with win and place with place |
| Using prices from before a scratching | A late scratching changes every runner's chance | Re-check the whole market after any change |