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As an example, let’s say you want to lay a horse at 3.40. To win £10 your liability would be £24. In other words, you are offering odds of 3.40 to someone else who is backing the horse to win with a £10 stake. If the horse wins, you pay the backer £24, but If the horse fails to win, you win their £10 stake.

If I stake £10 at odds of 3.40, I have to transfer £34 of my money to the exchange, of which £24 is my liability and £10 is my stake. If I win, I get the other guy's £10 and the rest of my money, but if I lose, my £24 liability is lost, but what happens to my £10? Do I also lose it to the other guy or is it returned to me?

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If you want to win £10 by laying at odds 3.40, you are staking £24 (the amount you're prepared to lose), and that's the only amount of money that will be held by the exchange as liabilities (i.e. you only need to deposit £24 to make this bet).

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