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## A Brief Analysis of Betfair Exchange Place Prices

A lot has been written about each way and place betting on the Betfair Exchange, and a little analysis (courtesy of someone else's efforts, of course!) gave me a better understanding of exactly how the Exchange matches up to traditional bookies for the classic each way bet.

The first thing to say is that the exchange doesn't offer you an each way bet in the same way your bookie will. With a traditional bookmaker an each way bet is actually two bets, one on the win market, and a second in a fabricated place market where all the prices are determined by a fixed factor of the win price (either 1/4 or 1/5th).

For instance, were you to put a £0.50 each way on a 10/1 shot (1/5 odds), that's £0.50 at 10/1 to win, and £0.50 at (10/1 * 1/5) == 10/5 === 2/1. So if you don't win but you place, you lose your 50p win bet, and get 50p at 2/1 returning £1.50. If you win, you win both bets which returns £5.50 (win) + £1.50 (place) = £7.

So that's ordinary each way betting covered, the way that the exchanges differ is that there is no implicit contract between the two markets, win and place are distinct markets in their own right. This means that place value can either be better or worse than the fixed 1/4 or 1/5th odds that the bookie will offer.

In the data that I collect, I record BSP (Betfair Start Price) and ISP (Industry Start Price) from public data, and I use this data when determining profitable systems. For ISP I can easily calculate the place price based on the industry standards (which are based on number of runners and a couple of other factors). However, when making the equivalent hypothetical bet on the Exchange, I don't know what the price place would've been.

I was aware, anecdotally, that the value of a place bet gets much worse than bookies as the BSP increases. A horse at 100.0 in the win market on Betfair Exchange is unlikely to offer anywhere near 20.0 or 25.0 on the place market. I wanted a way to make a reasonable estimate of what the Betfair Exchange place price would be.

A bit of googling and I came across a pretty nice article on just that subject. I whacked the table of data here in to a spreadsheet to have a play around and extract a few inferences from it:

- Place value varies from the equivalent of 1/2 to 1/8
- Average place value for win prices 1.02–100 is 1/4
- Average place value for win prices 9–100 is 1/6
- A decent logarithmic equation for calculating the place price value from the win price is:
**f(x) = -0.04 ln(x) + 0.3**

I hope that this shines a light on place betting on the exchanges.