A-Book vs B-Book Brokers: What’s the Difference

When launching your brokerage services, you will need to determine your order execution model. You can either process trades externally on the interbank market or settle trades internally and take the counterparty side of each transaction. This is what we call A-book and B-book.

These two methods are two different ways to handle traders’ orders in the financial market, each with unique benefits and shortcomings. A/B-books determine your business model and the way your brokerage is making money from each processed order.

Let’s dive deeper into this topic, compare the two books, and decide which one you shall choose when setting up your brokerage firm.

Key Takeaways

• A-book brokers route orders to external liquidity providers, acting as intermediaries and earning through spreads or commissions.
• B-book brokers process orders internally, taking the opposite side of trades.
• A-books are more prevalent because they offer greater transparency and avoid conflicts of interest.
• Hybrid-book brokers determine routing based on trading account categorisation, trading strategies, lot size, and profitability.

A-Book Broker Model

When a broker uses the A-Book business model, all of its clients’ orders are transmitted directly to the Forex liquidity provider. Then positions are sent via the electronic communication network (ECN) or straight-through processing (STP) to the interbank market.

A-Book brokers are compensated either by a fixed amount based on the number of transactions or by a markup on the spreads they provide. As such, the broker is just acting as an intermediary, offering financial services.

The counterparty of the position is a group of traders placing matching orders in the market or a liquidity provider who supplies liquidity to the market. This approach eliminates the conflict of interest, focusing on transparency and direct access between the end-user and the market.

The business model is based on commissions that brokers earn regardless of the trading outcome. As such, the greater the number of transactions that traders complete, the greater the broker’s earnings are.

Although theoretically, the broker is not directly interested in successful trading, practically, delivering a user-focused trading experience attracts more clients to the platform.

In order to foster an A-book system, brokers must establish connections with liquidity providers, secure licenses, and set routing logic that determines which source processes which market position.

Benefits of A-Book

A-book brokers offer almost direct access to trading markets, ensuring minimal interference and maximum transparency in prices, execution times, and settlements. Their key features include:

• Greater transparency by routing trades to liquidity providers, ensuring true market prices with no dealing desk intervention.
• No conflicts of interest, as brokers do not interfere in pricing or profit from client losses.
• Ideal order execution that highlights reliable order filling, tight spreads, and consistent execution quality.
• Reduced legal risk for brokers and long-term client retention. Supporting sustainable, scalable operations targeting serious traders and institutional investors.

Who Uses A-Books?

This model is commonly used because it is straightforward and requires less legal and technical hassle. It is mostly used by the following entities:

• Regulated brokers, institutional trading firms, and brokers that cater to novice and professional online traders.
• High-net-worth trading desk that deals with VIP clients who prioritise transparency, execution practices, and global standards.
• Regulated entities under the FCA, ASIC, or MiFID regimes often prefer A-Book due to auditability and reduced conflict.
• Brokers who handle large trade volumes or serve algorithmic traders also benefit from access to deep liquidity pools.
• Firms seeking long-term client relationships and reputation-based growth.

B-Book Broker Model

When a Forex broker operates as a market maker, it is referred to as the B-Book execution. Orders are processed using in-house servers. In other words, orders placed by traders are not visible anywhere other than the broker’s trading platform—not even on an external liquidity pool.

In this case, there is a clear conflict of interest since the broker serves as a counterparty to the transaction rather than just as an intermediary. As a result, this concept is often incorrectly connected with fraud. In reality, Forex trading is very unpredictable, and this model is associated with both large gains and losses.

Since someone’s gains in the financial market are another’s losses, the broker earns when their client loses, and vice versa.

This gives rise to deceptive brokers who may be interested in putting up non-market quotations in the terminal, spying on the set client stops, and knocking them down using internal servers to make the traders lose money on their positions.

Brokerage firms that follow this concept for short-term gains are short-lived. Using B-books solely to gain from the trader’s losses will undoubtedly damage the business image and lead to closure if more users move away from the platform.

Benefits of B-Book

B-books are not inherently bad. It is a legitimate approach to reduce costs and minimise risks stemming from external market factors. Here are some key features.

• Maximising profitability by internalising trades and earning from unsuccessful traders rather than spreads.
• Full control over order flow, offering promotional bonuses, lower trading costs, or no-commission trading to attract retail clients.
• With proper risk management, brokers can maintain high profit margins while optimising client retention strategies.
• Reduced dependency on third-party liquidity providers, improving speed and platform stability.
• Faster scalability, flexible pricing strategies, and easier onboarding with lower operational costs.

Who Uses B-Books?

B-books are often used as a backup system or complement to the main A-book, especially during market uncertainty, technical challenges, or volatile market conditions. They are used by these entities:

• Retail-focused brokers operating in emerging markets or offering high-leverage trading products.
• Brokers who look for lower operational complexity and simplified trade execution without relying on external liquidity providers.
• Brokers supporting aggressive marketing campaigns, offering incentives, cashback, or zero-commission plans.

Hybrid Forex Broker Model

There are not only A-book or B-book brokerage models. Brokers devised a hybrid model in order to overcome the limitations of both methods.

One of the most popular alternatives among major brokers is to use a hybrid approach that combines the best of the two worlds. This enables brokers to handle minor transactions within internal servers, while processing big transactions through external liquidity providers on the interbank.

This balanced trading environment is the most optimal option for both brokers and traders, but it is also the most difficult to implement.

The most difficult task for a broker is correctly categorising traders in the first place. They must use special software to monitor the amount of a trader’s deposit, the employed leverage, the degree of risk associated with each transaction, and the usage or non-use of protective stops.

All of this information aids the broker in determining which of the two models (A-book vs B-book) to utilise for executing.

Who Uses Hybrid Books?

The benefits of hybrid books are obvious — more control and transparency, lower risk of reliance on external providers, and optimal trading conditions for end-users. These benefits make this combined model favourable for many financial institutions, including the following:

• Established financial institutions looking to expand their business line while utilising advanced risk management systems.
• Firms operating under regulatory oversight which require sophisticated compliance systems to be in place.
• Online trading platforms that serve a large user base, from beginners to retail and professional traders, involve varying risks.

Risk Management Models: A-Books vs B-Books

One of the key differentiators between A and B books is the risk control system. Each processing method dictates a distinct risk appetite that depends on the broker’s target, user profile, and monetisation model.

In the A-book model, the broker faces minimal market risk because client trades are passed directly to liquidity providers. The main risk lies in market execution quality, such as slippage, re-quotes, or insufficient liquidity from external venues.

Therefore, brokers must manage their LP relationships, ensure low-latency connections, and maintain robust trade-routing systems to avoid reputational damage and slippage issues. They rely more on operational performance and client volume than on client loss outcomes.

The B-book model, on the other hand, involves internalising trades, meaning that brokers are directly affected by the trader’s profits and losses. This risk management in this approach focuses on statistical modelling, client segmentation, and predictive analytics to separate high-risk clients from those with consistently unsuccessful trades.

Brokers often complement the B-book with a dynamic switch to the A-book for specific clients, or use internal hedging and set trading limits to manage their exposure.

A poorly managed B-book can lead to significant losses from a few successful traders, making strong technology and oversight essential.

Hybrid models integrate both risk management strategies, dynamically switching order routing based on real-time risk factors. Overall, while A-books focus on execution reliability, B-books prioritise behavioural risk profiling and internal exposure control — making their risk management models fundamentally different in nature and complexity.

The Business Model of A-Book and B-Book Brokers

There is no one-size-fits-all approach to building your revenue generation strategy. You may use one processing approach that suits your specific brokerage needs or combine both to enjoy the benefits of quick internal handling of orders with the transparency of direct processing through the interbank.

The profit margin of an A-book Forex broker is lower statistically, but it is steadier. In the Forex market, over 75% of traders engage in unsuccessful trading sessions, which works to the advantage of the B-book Forex broker. However, unanticipated events, which occur on a regular basis, can cause brokers to incur massive losses.

On the other hand, A-book brokers benefit largely from high trading volume and increased activity, where they can accumulate spreads. However, decreased investor confidence, low volumes, and surging volatility cause significant losses, especially since they rely on external LPs to process trading orders.

Therefore, none of the plans is a fool-proof strategy to succeed in the brokerage industry. You must assess your objectives and strategies and pick the model that aligns with your expectations and resources.

Both A-book and B-book models are only tools for doing business, and the extent to which you gain personally from them is solely dependent on your ability to apply them in a professional manner.

Final Takeaway: Which One Shall You Choose?

A-book and B-book are two models to process trading orders executed by traders. Each method has its advantages and disadvantages, and your choice depends on your business type and strategies.

If you are a regulated broker targeting professional or high-volume traders, you must use the A-book model because it offers transparency, regulatory compliance, and access to deep liquidity—essentials for building trust and long-term client relationships.

If you are focused on beginner or retail traders, B-books suit you better because they provide higher profit margins, full control over execution, and flexibility to offer aggressive pricing or promotions.

Ultimately, you may benefit from a hybrid approach, combining the strengths of both models for optimal performance.

Learn how to build an ideal liquidity infrastructure and order processing flow using B2BROKER’s market-leading solutions.