rule 4 settling on the exchange (odds on)

bet the nipper at 1.6 the other day in the 3 horse race, the 2nd fav gets withdrawn and the bet gets settled at 1.05.  The reduction factor on the withdrawn horse was 34.48% so the odds should've been 1.39 but they've reduced the odds by working out 34.48% of the 1.6 and not .6.  Bet the same horse on sportsbook and the bet was settled properly.  All I'm getting is traders word is final.  Anyone else have this problem?