A-book B-book brokers: what the difference is and how to make a right choice

ECN/STP brokers are the brokers that combine both models without prioritization, focusing on the speed of finding a matching trade. The advantage of the ECN model compared to the STP is the number of participants (both traders and liquidity providers). The more participants, the more liquidity (trade volumes) and the narrower is the spread. Each participant tries to offer the best price, and all traders get the best current Bid/Ask price. At the moments of the EURUSD highest liquidity, the spread could be around zero level, however, there can’t be literally zero spread.

Thus, the A-Book approach implies that orders are sent directly to the interbank market, where these orders are filled by liquidity providers. A-Book brokers profit by raising the spread or collecting https://www.xcritical.com/ fees based on the number of orders placed. Due to the fact that they profit the same amount from successful as well as unsuccessful traders, and there are no conflicts of interest.

Some people will say that this execution model generates conflicts between the client and the broker. However, there are some advantages to trading via B-Book brokers. This what is a book vs b book includes very competitive spreads (sometimes as low as zero), fast execution, and the ability to get an execution on all instruments (including exotic currency pairs).

I will explain A-Book and B-Book models, the difference between them, and why the B-Book is not always bad. You will also learn the difference between DD and NDD brokers and get acquainted with NDD order processing sub- types – STP, ECN, DMA, and MTF. And so high leverage, while useful under certain circumstances for professional traders, is typically a trap instead of a benefit.

a-book vs b-book brokers In forex trading

As for prohibiting inducements – this just means that brokers can no longer incentivize traders to trade more actively through offering prizes and gifts. Any broker that encourages you to take undue risk by trading larger or more frequently than you normally would is almost certainly a B-book broker who is profiting from your losses. If you are trading through a B-book trader and your account goes into the negative, it really means nothing. The broker hasn’t lost any money, because they never sent your trades to a third-party. They can simply reset your account balance to zero if they want to, and because they don’t owe anyone any money on your behalf, it’s basically a fake debt.

🔴 FUTURE of MONEY and PAYMENTS

Other brokers present themselves as STP, being in fact common Dealing Desks or kitchens. After all, a B-Book kitchen scheme does not always mean a scam, so do not hurry to put labels. I’m not being paid to say any of this – I just want to be transparent and open about my experiences as a trader. This is not a broker recommendation – depending where in the world you live, you might not even be able to use Global Prime since they are an Australian-based and regulated broker. This tool is already available to you in UpTrader Forex CRM. To begin broadcasting the feed, contact our support team, and you will gain access to an excellent tool for increasing sales and loyalty of your customers starting tomorrow.

Ultimately, the broker adopted the UpTrader withdrawal control system. It helped automate calculations, divide clients into groups, set conditions for calculating an affiliate program for different groups, and automate some of the withdrawals that do not require additional attention. A system of quick notifications pinging the team about new requests was set up, and the request statuses became visible in the CRM.

a-book vs b-book brokers In forex trading

So while I think it’s a bit of an over-reaction to the problem, it does make it harder for B-book brokers to let their clients blow up. The A-Book model is a fundamentally different model of work in which there is no conflict of interest between the trader and the company. In this scheme of work, all client’s positions are transferred directly to the liquidity provider, and the broker earns only on commission or markup to the spread.

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

This type of book is used by forex brokers to take the other side of their clients’ trades. This means that when a client places a trade, the broker will take the opposite position. The broker will then hedge this position in the market to ensure that they are not exposed to too much risk.

  • Any broker that encourages you to take undue risk by trading larger or more frequently than you normally would is almost certainly a B-book broker who is profiting from your losses.
  • An intermediate comparative analysis for three major NDD models (I will not include DD and B-Book models without passing orders to the external market) is presented in the table below.
  • For example, you can allow to withdraw all requests under $100 without additional checks.
  • If you are executing a long-term winning strategy, choosing a broker or exchange that 100% executes your trades in the A-book and connects you to quality external liquidity is crucial.
  • Assume the spread from the liquidity provider is 3 pips, your A Book broker may list it on their platform as 4 pips, guaranteeing them a 1 pip profit.

We come to the conclusion that none of the plans can be considered a cure for loss. After considering your company objectives and strategies, you must pick which business model is best for you to implement. A similar argument may be made for traders who choose their broker.

Fiat money: the power of banking

This article will tell you what A-book & B-book brokers models are all about. In addition, you will learn what advantages and disadvantages they have, as well as how they make money. This model is an optimal solution for both brokers and traders, but a tricky one. The main headache for broker is to categorize traders properly.

That’s where a special software comes into a play, tracking the amount of a trader’s deposit, the leverage used, the risk level of each transaction, the use or non-use of protective stops. All this data helps the broker to determine which of the 2 models (A-Book or B-Book) to use for executing an order. A-Book model is the business model of a broker where all trader’s orders are forwarded directly to the forex liquidity provider, who then redirects them to the interbank market. Many major Forex brokers use a hybrid methodology that involves entering transactions into either the A-Book or B-Book based on trader characteristics.

They do not take many risks, yet they may make less revenue since they solely gain on margins/commissions. That said, this concept acts as a go-between for the investor and markets. By interacting with an A-Book FX broker, the trader avoids both the market maker and their trading desk.

Conversely, in the STP model, the trader has to match the offer of a particular liquidity provider (only the one with which the broker has an agreement). This means that an A-book broker doesn’t want you to blow up your account. If you blow up, they don’t make any money – in fact, they lose a valuable client and source of revenue.

a-book vs b-book brokers In forex trading

I started this blog in 2017 to document my journey as a trader, and this shift from Oanda to Global Prime is as much a part of that journey as becoming consistently profitable was. Every day, market experts collect information, prepare materials, and publish technical and fundamental market analysis used by thousands of traders around the world. In this user case, we will talk about a medium-sized Ukrainian broker who has been working in forex for many years, has an extensive departmental network and a complex withdrawal control system.

A-Book and B-Book models of managing client’s orders

It is very important to verify your client with a KYC check, confirm payment details, to do this just direct all requests through a Compliance department. In some cases you might need requests approved by a phone call, so that you are sure that requests are submitted by a real client, not a scammer, so you can set up obligatory manager calls. Let’s find out what is the notion of liquidity risk, why should a trader get his orders executed instantly, and how to find and pick a reliable LP. For example, it’d prefer to have 100 customers all trade, on average, 5 mini lots than have 98 customers who trade 3 mini lots and then have 2 whale customers who trade 20 standard lots at a time. Brokers “B-Book” trades because it’s usually more profitable for them.

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