Bookmakers set odds in three steps: they estimate the chance of every outcome, turn those chances into prices with a margin added, then move the prices as money, news and other markets change. The first estimate comes either from an odds compiler, a person or model that prices the market from scratch, or from a wider market the bookmaker follows, such as a betting exchange or another bookmaker.
For example, a team a compiler rates a 64% chance has a fair price of 1 / 0.64 = $1.56. With the margin spread evenly across a 105% market, it opens at about 1 / (0.64 x 1.05) = $1.49 (illustrative). How betting odds work shows where both numbers come from.
What an odds compiler does, and how trading the book differs
Odds compiling turns information into a market of prices before betting opens; trading the book starts once bets arrive. One person can do both in a small operation, and on some markets a model or a price feed does the compiling, but the two jobs answer different questions:
| Odds compiler | Trader | |
|---|---|---|
| When | Before the market opens, and whenever a new market is added | While the market is taking bets |
| The question | What is each outcome's chance, and what should the prices be? | What does the book stand to lose on each result, and what should change? |
| Inputs | Ratings, models, form, team news, other markets | Bets taken, liability, other bookmakers, the exchange, late news |
| Output | The tissue and the opening prices | Price changes, stake limits, decisions on large bets |
Step one: estimating each outcome's chance
A compiler starts from a view of the chances, not from prices. For a race that means rating each runner on form, the track and distance, the barrier and the weight, then turning the ratings into chances that add up to 100%, known as framing a market. Those chances, written as prices, are the compiler's tissue price for each runner: a draft market with no margin and no money in it yet.
For a match, the same step starts from team ratings, turned into an expected score or margin and then into a chance for each side. Every price that follows inherits the errors in those chances.
Example: an illustrative seven-runner race, not a real one. The compiler rates Runner 1 at 30%, Runner 2 at 22%, Runner 3 at 18%, Runner 4 at 13%, Runner 5 at 9%, Runner 6 at 5% and Runner 7 at 3%, which add up to 100%. The fair prices are 1 / chance: $3.33, $4.55, $5.56, $7.69, $11.11, $20.00 and $33.33.
Step two: adding the margin and shading popular selections
The opening market is the tissue with a margin added, and the compiler decides two things: how big the total should be, and which prices carry more than their share. One target is the popular selection. A runner or team the compiler expects punters to back heavily can be shaded: a well-known horse, a favourite in a big race or a club with a large following. Shading prices it shorter than an even share of the margin would, because that money is expected to arrive anyway.
The illustrative tissue as an opening market:
| Runner | Compiler's chance | Fair price | Opening price | Implied chance | Return per $1 on the compiler's chance |
|---|---|---|---|---|---|
| Runner 1 | 30% | $3.33 | $3.00 | 33.33% | 90.0c |
| Runner 2 | 22% | $4.55 | $3.60 | 27.78% | 79.2c |
| Runner 3 | 18% | $5.56 | $5.00 | 20.00% | 90.0c |
| Runner 4 | 13% | $7.69 | $7.00 | 14.29% | 91.0c |
| Runner 5 | 9% | $11.11 | $9.00 | 11.11% | 81.0c |
| Runner 6 | 5% | $20.00 | $15.00 | 6.67% | 75.0c |
| Runner 7 | 3% | $33.33 | $21.00 | 4.76% | 63.0c |
| Market | 100% | 117.94% |
The return column is chance x opening price: for Runner 2, 0.22 x 3.60 = 0.792. Runner 2 is the shaded runner. An even share of the 117.94% would open it at 1 / (0.22 x 1.1794) = $3.85; it opens at $3.60, so a backer gets 79.2 cents per dollar on the compiler's own estimate, against 90 cents on the favourite. The long shots carry heavy margin as well: Runner 7 returns 63 cents.
The total is a choice too, and a compiler unsure of the chances, as in an early market, has reason to open with a bigger one. Bookmaker margin compares margins across market types.
Why Australian corporate bookmakers often follow wider markets
A bookmaker does not have to compile a price to offer one. It can follow: take a reference price, such as an exchange's or that of a bookmaker that tends to move first, and add its own margin. For an Australian corporate bookmaker, meaning an online and phone bookmaker run as a company, following is often the cheaper choice, for four reasons:
- The number of markets. An online bookmaker can list every meeting across all three racing codes on most days, plus sport from around the world: far more than its compilers could price from scratch.
- Where the money is. An exchange market and the markets of the bookmakers that take the most bets carry more money and opinions than any one compiler's tissue.
- The cost of being the outlier. A price well away from the rest draws punters who compare prices, and a bookmaker standing alone has only its own estimate to say it is right.
- Shared platforms. Plenty of smaller brands sit on a betting platform they share with other brands, and the platform can feed one set of prices to all of them.
NSW racing's own official prices are built from the wider market, not one compiler. Since May 2017 the official flucs, starting price and top fluc at NSW TAB meetings have come from the NSW Official Price, calculated from the larger wagering operators' prices (Racing NSW, checked October 2026).
Following is not exact copying. A follower adds its own margin and shading and moves at its own pace. After the reference moves, the followed price can sit behind it for a while, which is one reason the same runner can carry different prices at different bookmakers at once. Sharp vs soft bookmakers covers who leads and who follows.
Step three: moving prices once bets arrive
Three things move prices, and why betting odds change covers how to read each kind of move:
| Cause | What the trader sees | An illustrative move |
|---|---|---|
| Money | Bets piling onto one outcome, raising what the book pays if it wins | $3,000 on Runner 2 at $3.60 is $10,800 to pay if it wins, so it is cut to $3.30 |
| Information | A scratching, a team change, a track rating change, an injury or the weather | A key player is ruled out and the team's head to head price drifts from $1.80 to $2.05 |
| Other markets | The exchange or a leading bookmaker moving first | A follower matches the exchange's new price a few minutes later |
A late scratching forces a full re-frame: the market is priced again without the runner, and winning fixed-odds bets struck before the scratching are paid less a deduction the stewards declare. Since 1 August 2011, NSW, the Northern Territory, Queensland and Victoria have set those deductions with an algorithm that restores the market percentage the race had before the withdrawal (Racing NSW, checked October 2026).
Limits and liability: what each result would cost
A price comes with a stake attached: how much the bookmaker will take at it. The less sure the compiler is of a price, the less a trader wants riding on it, so maximum bets have reason to be lower where information is thin, as on a player prop or an early race market. Limits are also set by account, and a customer whose bets keep beating the prices can be given a smaller share of the maximum.
When the liability on one outcome, what the book loses if it wins, gets too large, the trader can shorten it, lengthen the others, cut or refuse large bets, or lay part of the risk off elsewhere. How bookmakers work puts a lopsided book in dollars.
Racing adds one more constraint, from schemes that cover racing bets only. Racing Victoria and Racing NSW set minimum bet limits on their thoroughbred races, and Racing Queensland and Western Australia's Gaming and Wagering Commission on all three codes in their states (checked October 2026). These require the operators they cover to lay eligible fixed-odds bets to a set amount to lose at the displayed price, as minimum bet limits sets out.
What this means when you compare prices
Knowing how betting odds are set changes how you read a board of prices:
| Assumption | Why it misleads | What to do instead |
|---|---|---|
| Every bookmaker has its own opinion | Five bookmakers at $4.00 can be one price followed four times | Count a price as independent only when it moves on its own |
| The opening price is the bookmaker's real view | It is a tissue plus margin plus shading, set before most of the money and news | Give more weight to prices close to the start |
| Every move is informed money | A trader can move a price to manage liability, with no news at all | Check whether the exchange and other bookmakers moved too |
| A shaded favourite makes the rest of the field good value | Shading makes the popular side worse value; the rest can carry a little less margin, but in the illustrative race the best still returns only 91 cents per dollar | Measure the price you want against a fair estimate |
Risk: Betting involves risk. Knowing how a price was built does not tell you what will win, a price that looks generous can simply be stale, and a bet at a fair price still loses as often as its chance says. See responsible gambling for limits and support.
Watching prices move on B337's Terminal
On the Terminal, prices from 40+ bookmakers across racing and sports sit in their own columns, side by side, with Betfair back and lay, price history (flucs) for each price and closing lines. Lining up the flucs from several bookmakers shows whether a move happened at one bookmaker or across the market, a clue to whether a price is followed or set on its own. The board reads prices on a cycle, not tick by tick, so moves inside one cycle look simultaneous and a price can trail the bookmaker's own: confirm it with the bookmaker before you bet.
A free account opens a limited view of the Terminal with live odds, and Betfair prices and closing lines start with Terminal View. B337 does not take bets or set prices. Bookmaker names are trade marks of their owners. B337 is not affiliated with them.
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Risk: Betting involves risk. A price can change in the seconds before your bet is accepted, a bookmaker can limit your stakes or void bets under its terms, and there is no guarantee of profit. See responsible gambling for limits and support.