A-Book Vs. B-Book Forex Broker | Everything Trading

Trading Blog

A-Book Vs. B-Book Forex Broker

Feb 27, 2019 | Blog

A-Book Vs. B-Book Forex Broker

It is important to understand what happens to your trades as you place them with your broker. There are actually different ‘books’ (A or B Book) that different brokers will put your trades into. It all sounds a bit confusing, but let us explain. 

 

 

A-Book System

How is your trade processed?

You open a position (place an order) ⇒
The broker sends this order over the ECN (bridge) to a liquidity provider ⇒
The liquidity provider matches the other side of the trade ⇒
The trade is executed seamlessly.

TADA – and all within milliseconds!

 

Did you know?

An A-Book only broker is also known as a Straight Through Processing (STP) broker.

 

How does the broker profit?

The broker (and liquidity provider) will make their profits via a small mark up on the spread/commission that you directly pay when placing an order. Therefore the more that you trade, the more they will make.

 

Benefits?

The broker will have the same interest as you, to succeed! The more you succeed, the more you will trade – and the more the broker will earn through the spread.

 

Negatives?

The broker will have slightly higher spreads and may have a slower execution than the B-Book system.

 

Does a broker using this system have an FCA license?

Yes, a broker using an A-Book system hold a ‘Matched Principal’ License with the FCA.

 

 

B-Book System

How is your trade processed?

You open a position (place an order) ⇒
The broker ‘bets against you’ and matches the other side of the trade themselves.

 

Did you know?

An B-Book only broker is also known as a Market Maker broker.

 

How does the broker profit?

The broker will make their profit in several ways.

The first way is via the spread/commission that you directly pay when placing an order.

The second way is by ‘betting’ against the trader. This means that as the broker took the other side of the trade, that when the trader ‘loses’ when closing their position, the broker ‘wins’ (and visa versa).

 

Benefits?

This type of broker may offer slightly better spreads than brokers using an A-Book system.

 

Negatives?

As this broker is directly ‘betting’ against you, the trader – there is a conflict of interest.

Unlike a broker using the A-Book system. A broker using the B-Book system doesn’t want you to profit. They win when you lose.

 

Does a broker using this system have an FCA license?

Yes, a broker using a B-Book system hold a ‘Market Maker’ License with the FCA.

 

Some brokers deal ONLY with an A-Book system, like our favoured STP Forex brokers Zenfinex.

Other brokers tend to use a ‘hybrid’ system, where they utilise both an A-Book and B-Book system (depending on their risk management plan, etc).

free forex course banner

Sign up for a free membership to unlock:

  • Lesson Tracking
  • Lesson Quizzes
  • Lesson Videos
  • Course Certificate
What Is Spread In Forex?

What Is Spread In Forex?

What is the 'Spread' in Forex trading? The spread in Forex is the difference between the ‘buying’...