A-book and B-book: how brokers actually handle orders

[Shadow Trader]

Brokers decide what to do with client orders. Some pass them to the market (A-book), others keep them in house as counterparty (B-book), and many use a hybrid.

The B-book model creates a conflict of interest: the broker profits when the client loses. Brokers using it have an incentive to identify profitable clients and treat them differently, for example by routing them to the A-book, widening spreads or adding execution delay.

Scalpers, who often exhibit patterns distinct from typical retail flow, are especially exposed to this treatment.

Transparent brokers explain their model. Regulators in some regions require disclosure of how orders are handled.

Warning signs include execution quality that worsens as an account becomes profitable, unexplained order rejections on winning trades and sudden changes to account conditions.

Choosing a broker with a pure agency model and low markups on raw spreads reduces the conflict.

What is known about the order handling model at the broker used here?

[Amanhasnoname]

I spent a while trying to work this out for my own broker and the honest answer is that it took digging. The marketing page said no dealing desk, but the regulatory disclosure document for the entity my account sits under said they may act as principal on client trades and hedge exposure in aggregate. That is a hybrid, whatever the website says.

What I actually watch is execution data rather than labels. I export my fills every month and check average slippage on entries and stops, and how often orders get rejected during fast moves. When my account was small those numbers were steady, and after a couple of profitable months they stayed steady, which reassured me more than any claim from support.

A friend of mine had the opposite experience with a different broker. Once his account grew, requotes on his scalps became frequent and his spread on gold widened compared to a demo on the same server. He moved to a raw spread account at another broker, and the problem disappeared within the first week.