А Leading Liquidity & Technology Provider
Advanced White Label Solutions
Core products
Our core products are spearheaded by our dedicated team of engineers delivering ground-breaking solutions to FX/Crypto/Securities brokers and Spot/Margin exchanges.
Liquidity
We deliver one of the deepest liquidity pools for FX, Metals, Crypto and CFDs. Leading Crypto CFD liquidity provider based on market research with 100+ trading pairs.
Turnkey Solutions
Choose from our wide range of bespoke solutions designed for whatever type of financial business structure is required including brokerage, exchange and wallets.
Crypto Processing
We are experts in blockchain payments including white label crypto processing solutions and are recognised as one of the go-to providers in the industry.
Money Management
We offer a range of products enabling you to offer your clients a choice of proven money management solutions for investment or trading purposes.
About B2Broker
Leading Prime of Prime Multi-Asset Liquidity & Advanced White Label Solutions Provider.Established in 2014.
Market Maker vs Liquidity Provider
Forex brokerage business models usually take the form of Market Makers or Liquidity Providers.
The following examines how each model works and the advantages and disadvantages of each.
Author: Rosemary Barnes
Time to reading: 3 minutes
16.06.2020

A Forex brokerage firm can launch its operations according to the way it plans on running its business and can be involved in the trading process or as an intermediary. Brokers who are involved in trading against their clients generate income from actual trading rather than fees. Those who act as an intermediary, charge a fee for allowing traders to access liquidity.

These two Forex brokerage models are referred to as A-book and B-book processing.



Market Maker (B-book) Brokers

B-book brokers take the other side of their customer’s trades and do not pass the orders to a liquidity provider. In fact, some Market Makers also earn commissions by providing liquidity themselves to their clients' firms.

What this means is that Forex traders are trading against the broker, and any profits made by the trader equate to a loss incurred by the Forex brokerage. The brokerage’s opportunities to make a profit are high so many Forex brokerages opt for this model.

Nevertheless, brokerages set up as a B-book dealer incur high costs. These include setting up trading desks and algorithmic trading which automatically take the other side of customer’s trades. These costs must be deducted from the profits.



Liquidity Providers (A-book)

Liquidity providers, or A-book is an easier method to set up a brokerage and as the broker is just the intermediary, it allows the trader to access the interbank market by passing the orders to liquidity providers.

The best bid ask spread prevails and will be transmitted to the clients. This business model is called A-book processing or Straight Through Processing (STP) whereby the broker earns a fee based on the volume its clients generate.

Although it may not be as profitable as a Market Maker, this model of brokerage is more transparent and is held in higher esteem by market participants. The business model can also be a very successful one if profits from the brokerage are invested carefully with a solid plan that focuses on attracting as many active traders as possible and offering additional services to boost their income. For example, some people use liquidity providers as a data feed provider for getting forex data feed (historical or live) about currency pairs for online calculators.

Some brokerages are involved in both A-book and B-book processing known as a hybrid model . This can be determined by looking at the type of the trading conditions they offer. Brokerages operating this model will categorize traders into two groups based on factors such as the size of the trading account and how long they have been involved in the Forex market among other parameters. Hence, the brokerage offsets a percentage of the trade into the real market (A-book) and warehouses the remainder of the trade (B-book).

Practically, both Market Maker and Liquidity Provider models basically perform the same functions so when deciding what business model to choose, brokerages should consider the operational and regulatory aspects of each and decide which model provides better long-term profit-potential.

Read also
Read more
Articles
22.10.2020
B2BX ICO is finished!
In almost 2 months while our ICO lasted, 3743 participants w...
Read more
Articles
22.10.2020
B2Broker ICO will unite cryptocurrency world
Everybody noticed the booming of cryptocurrency market and m...
Read more
Articles
22.10.2020
B2Broker kicks off ICO pre sale for institutional Crypto exchange, B2BX
Nothing is hotter right now than the cryptocurrency market a...