A-book and B-book: why the word matters even if the broker won't say it

[Shadow Trader]

When a broker sends client orders to external liquidity, it's called A-book. When it takes the other side internally, it's B-book. Many brokers use a hybrid, routing some clients one way and some the other, based on risk models.

Why it matters: in B-book, the broker profits when the client loses. A scalper with a consistent edge is a cost to a B-book broker. That creates an incentive to restrict, re-route, or worsen conditions for profitable accounts.

Brokers rarely disclose how they classify clients. Some are open about the model, others use vague language like "straight-through processing" with no detail on who gets what.

Signs of B-book treatment are circumstantial: requotes on profitable trades, asymmetrical slippage, restrictions that appear after a winning streak, or spreads that differ between accounts at the same moment.

None of these is proof. Testing with two accounts and comparing helps, as does reading the execution policy and the order-routing disclosure, which some regulators require.

A broker that discloses routing in detail and reports execution statistics is making an effort at transparency.

Account types give clues. A broker that offers a "pro" or "raw" account at a higher minimum deposit may send those orders directly to liquidity providers, while the standard account is handled internally. Some brokers also reveal that accounts with high activity are moved to a separate execution group.

The financial incentives explain why transparency varies. A broker running a pure A-book earns its money from commissions and markups, which are the same whether the client wins or loses. A broker running a B-book earns from client losses as well, which means a conflict of interest exists for each profitable client.

Neither model is inherently wrong. Many reputable brokers run hybrids. The question is whether the model is disclosed and whether the treatment of clients is consistent.

For a scalper, the practical takeaway is to prefer brokers that publish detailed execution statistics, accept scalping in writing, and have a long record without complaints about withheld profits.

Would a broker that refuses to explain its routing model still be worth using?