A betting exchange works like a sport bet between two football fans who quarrel about the end result of an upcoming game. If the two want to bet against each other, a betting exchange takes over the function of a trustee. In case of a profit the betting exchange takes a small commission. The losing bettor loses his stake.
In comparison to classic bookies, at betting exchanges privat persons place their bets against each other. Bets can be placed on a result (Back) but also against a result (Lay).