A-Book Broker vs B-Book Broker: Models, Risks and Fit

An A book broker (also written A-book broker) passes client orders, or the risk they create, to external liquidity providers. A B-book broker keeps that exposure on its own books and may hedge part of it. The labels show where market risk sits. They do not show whether prices, fills or conduct are fair.

Last updated: 7 November 2026. Reviewed by the FxTrusts editorial team. Published by FxTrusts.

Disclosure: FxTrusts supplies brokerage and prop firm technology, including liquidity bridge and routing-control features, so we have a commercial interest in this subject. This article explains the models in general terms. It is not legal, tax or investment advice, and it does not recommend one model for any firm.

What a book broker does

You will also see these models written as "a book broker", "b-book brokers" or "a book vs b book". The meaning is the same. Both terms are industry shorthand, not legal categories. They do not say which legal entity acts as counterparty, which venue fills the order or how the price is set.

In an A-book arrangement the broker offsets some or all of the client's exposure with an external counterparty, usually a liquidity provider or prime broker. The broker may earn a markup, a commission or a spread on that route.

In a B-book arrangement the broker is the counterparty to the client's trade and keeps the exposure it does not hedge. If a client profits, the broker pays out. If a client loses, the broker keeps the client's loss as revenue, before any hedging costs. Some firms hedge most B-book exposure quickly. Others hedge little or none. The difference matters more than the label.

The label can also mislead. A broker that calls itself A-book may still internalise some orders, and a broker that calls itself B-book may hedge large positions externally. Treat the label as a starting point, then ask for the written rule that decides each order.

A book vs B book: execution versus dealing

Execution means passing an order to a venue or provider that fills it. Dealing means the firm takes the other side and sets the price it shows the client. An A-book route sits closer to execution, because an external party fills the order or the hedge. A B-book route sits closer to dealing, because the broker fills the client against its own book. Many firms use both, depending on the instrument, order size and market conditions.

That distinction shapes the questions you should ask. For an execution route, ask who fills the order, how long the fill takes and what happens to rejected or partial fills. For a dealing route, ask how prices are set, which limits apply to the exposure the broker keeps and when it hedges. A written answer to each question tells you more than a label on a website.

For the operational definitions, see the A-book, B-book and hybrid routing answers. For what A-book execution means in practice, read the answer on A-book execution.

How the money and the risk move

The table sets out the main differences. It describes typical features of each route. Your own arrangement may differ, so check the contracts, the routing rules and the records.

Question	A-book route	B-book route
Who holds the market exposure?	An external counterparty, after the order or hedge is passed on	The broker, until it hedges or the position closes
Typical revenue for the broker	Markup, commission or spread on the external route	Client losses on positions it keeps, plus spreads and fees
Main operating risk	Provider quality, latency, rejected orders, slippage and hedge timing	Unhedged losses in fast markets and concentration in a few large clients
Main conflict to disclose	Markups, rebates or provider incentives on routed orders	The broker gains when clients lose, so pricing and risk limits must be explained
Evidence to keep	Routing decision, provider order reference, fills, markups and costs	Client order, internal fill price, hedge decision and the timing of any hedge

The risks behind each model

A B-book model creates a direct conflict. The broker's result depends partly on how its clients trade, so a firm that takes the other side of client orders needs clear pricing, sound risk limits and clear disclosure. Unhedged exposure can produce large losses when prices gap, liquidity thins or a group of clients trades the same direction. A B-book firm that cannot absorb those losses can fail, and clients feel that whatever model the firm uses.

An A-book model does not remove risk. It moves much of it to the provider and the routing process. Orders can slip, be rejected or fill at worse prices than expected. A provider can fail or stop quoting. The broker may also carry credit exposure to its counterparties. Markups and rebates create their own incentives, which the broker must disclose and monitor.

Neither model protects a trader from market losses. Trading on margin can lose money quickly, whichever route a broker uses. Read the risk disclosure that applies to the product and jurisdiction before you trade.

Hybrid routing and why the written rules matter

Many brokers use a hybrid. They may internalise small or predictable orders and route large, news-driven or hard-to-manage orders externally. Some route by instrument, account type or net exposure. A hybrid can be sound, but only when the rules are written, tested and followed.

A workable rule names the eligible destinations, the inputs that decide the route, the order of priority, the reason codes for exceptions and the people who may approve overrides. It should be deterministic wherever possible. Hidden manual switching, undocumented thresholds and changes made after a loss all weaken the arrangement.

Review actual routing outcomes against the written policy at a set interval. Compare how each order was handled with the rule that should have applied, by account class, instrument, size and market condition, and record every exception and who approved it. Those records let you show a regulator or auditor that the model works as described.

Disclosure must match practice. A broker that describes its model one way to clients and runs another way internally has a disclosure problem, whatever the label says. Keep the policy, the system configuration and the client-facing wording aligned, and record every change with an approval.

Choosing a model: a practical checklist

There is no universal best model. The right choice depends on your capital, your regulator, your client mix, your risk tolerance and your technology. Work through these steps before you settle on a design.

1. Confirm the legal entity, the regulator and the permissions that apply to each product.
2. Write the routing rule, including eligible destinations, priority, exceptions and approvals.
3. Set the limits on any exposure you intend to keep in-house, and decide how and when it is hedged.
4. Test the rules with sample orders, including volatile sessions and rejected or partial fills.
5. Decide which records you will keep for each order, and how long you will keep them.

Whether a model is permitted, how it must be disclosed and which records must be kept depends on the legal entity, instruments, client types and jurisdictions. The standards listed under Sources are a starting point, not an approval of any model. Take qualified legal and compliance advice before you launch or change a routing model.

The same questions apply to a prop firm. A firm that funds trader accounts on its own book may carry the traders' results as its own exposure, so its hedging limits, pricing and disclosure need the same written treatment.

If you are building a brokerage on a supplier's platform, the supplier's liquidity and technology do not transfer your legal responsibility for the routing model. Check the forex white label service scope and the liquidity access options against your own rules. Current commercial terms are on the pricing page.

Sources

• FX Global Code: global principles of good practice for the wholesale FX market. Its disclosure guidance is a separate resource, covered by the cover sheets below.
• Global FX Committee disclosure cover sheets: standard disclosures on dealing with liquidity providers and platforms.
• SEC Rule 15c3-5: pre-trade risk controls for brokers or dealers with market access. Its scope is US brokers or dealers with market access.
• EU Delegated Regulation (EU) 2017/565: organisational requirements for investment firms, including conflicts of interest and best execution. Whether it applies depends on authorisation.