A B-book is a broker execution model in which the broker keeps client trades in-house and acts as the counterparty itself, instead of passing them to an external liquidity provider. When a B-book client loses, the broker gains, and when the client wins, the broker pays. This is the market-maker or dealing-desk model. Its opposite is the A-book, where trades are passed to the market and the broker earns from spreads and commissions. Most retail Forex and CFD brokers today run a hybrid of both.
A-book vs B-book vs hybrid
| Parameter | A-book (STP/ECN) | B-book (market maker) | Hybrid |
|---|---|---|---|
| Who is the counterparty? | External liquidity provider | The broker | Depends on the client or trade |
| Broker income | Spread markup and commission | Client losses plus spread | Both |
| Conflict of interest | Low | Built into the model | Depends on routing rules |
| Typical execution | Market execution, variable spread | Instant execution, fixed or variable spread, possible requotes | Mixed |
| Attitude to fast, profitable flow | Accepts if it can hedge | Often restricts it | Moves it to A-book or restricts it |
How a B-book broker manages risk
- Internal netting: buy and sell positions from many clients offset each other, so the broker only carries the net exposure.
- Client profiling: accounts are grouped by profitability, holding time and strategy. Consistently profitable or fast accounts may be moved to the A-book.
- Exposure limits: when net exposure in one instrument becomes too large, the broker hedges part of it with a liquidity provider.
- Execution settings: spreads, execution delays, maximum deviation and requote rules can be set per group of accounts.
Regulatory view: conflicts of interest and capital
- Conflicts of interest: under MiFID II, firms must identify and manage conflicts of interest. ESMA has highlighted in its Q&A on CFDs and other speculative products that market-making brokers face particular conflicts, and that practices such as asymmetric slippage indicate a failure to manage them.
- Best execution: a B-book broker is still bound by best-execution rules. It must show that its prices are fair, usually by comparing them with external market data.
- Enforcement: the UK FCA fined FXCM UK in 2014 over asymmetric price slippage, and the Polish KNF fined XTB in 2018 for not passing on favourable price moves.
- Capital: firms that deal on their own account need higher initial capital than pure agency brokers; under the EU Investment Firms Directive this is €750,000.
- Disclosure: regulated brokers describe their execution model in the order execution policy and conflicts-of-interest policy. Read these documents to find out whether a broker internalises your trades.
How to tell if your broker uses a B-book
- Read the execution policy: words like “principal”, “market maker” or “we act as your counterparty” mean the broker can take the other side.
- Look at execution type: instant execution with requotes and fixed spreads is typical of dealing-desk models.
- Watch execution quality by account: if slippage, requotes or delays appear only on a profitable account, the broker may have moved it to a different risk group.
- Ask directly: many brokers will confirm whether they run a hybrid model.
B-book brokers and latency arbitrage
In latency arbitrage, the slow broker is often a B-book or hybrid broker, because its own prices update later than a fast price feed. For the same reason, B-book brokers classify this activity as toxic flow, since every winning arbitrage trade is a direct loss for them. They may respond with wider spreads, execution delays, requotes, slippage or by closing the account under their terms of business. A-book brokers that route to liquidity providers can face the same issue through last look.
FAQ about B-book brokers
Is a B-book broker a scam?
No. The B-book is a legal and widely used model, and regulated B-book brokers must manage conflicts of interest and meet best-execution rules. The risk is in how the conflict is managed, not in the model itself.
Can a B-book broker refuse to pay profits?
A regulated broker must pay legitimate profits. However, client agreements often allow trades to be cancelled if the broker finds they broke the terms, for example by exploiting price errors or delays.
Risk warning: Leveraged trading in Forex and CFDs can result in losses that exceed your initial expectations. Broker execution models affect spreads, fills and trade outcomes, and past results do not guarantee future results. This article is for educational purposes only and is not investment advice.