But they still profit from the destruction of their own clients. So long as that is the case, they will continue to find new ways to “encourage” their clients to lose money and remain uneducated about the proper ways to trade and manage risk. Having a standardised approach to closing out a retail trader’s positions if their trades are going against them so severely that they risk blowing their account is a perfectly logical measure. Excessive leverage can lead to you blowing up before you have the chance to educate yourself, and offering high leverage with minimal requirements is a common trait of B-book brokers. During their discussion on how forex brokers make money, co-founder of Global Prime Jeremy Kinstlinger quotes an interesting ASIC report. In essence a B-book broker simulates the real markets and your trade fills are based on the underlying market, but your trades are never actually sent there.

A B-Book broker prefers that those profits are passed around more evenly among its customer base since it allows them to continue pocketing the spread from a larger pool of traders. Also, this reduces the capital that a broker needs to set aside (which would be used to pay out winning trades) because its customers are essentially, “making a market” for each other. This allows the broker to offset trades with each other rather than exposing itself to market risk.

For beginners, B-book brokers can also be suitable, but only as long as the client loses his deposit. At the same time, it is necessary to consider the fact that one of the reasons for the deposit loss can be worse (than in A-book broker) trading conditions. Statistically, the profit of an A-Book forex broker is less, but more stable. It is well known that 80-95% of traders lose a book broker meaning their initial deposit within 6 months, which plays into the hands of the Forex B-book broker. But don’t forget about unforeseen circumstances that regularly occur and make B-book brokers suffer huge losses, often for many months in a row. On the one hand, such a model encourages competition between liquidity providers, thus narrowing the spread and reducing the commission fees.

Why Do Forex Brokers B-Book?

There were numerous cases of bankruptcy after the SNB unpegged the franc from the euro. Therefore, today the pure STP model is rare, although some brokers continue to focus on it. Differently put, a Price Giver places an order in the interbank market indicating the purchase volume in lots and the price at which it is ready to buy/sell the asset. The order enters the Depth of Market, Price Taker accepts the most suitable order for it (at the best price and sufficient volume), entering into a deal with Price Giver.

I’m not being paid to say any of this – I just want to be transparent and open about my experiences as a trader. But if you’re unaware that you’re gambling your money in a casino run by your broker – then that’s a problem of communication and education, and perhaps even an ethical problem. If there is no DOM of level 2, which can be used to assess supply/demand and https://www.xcritical.com/ the further direction of the price, you do not deal with an ECN broker. Other brokers present themselves as STP, being in fact common Dealing Desks or kitchens. After all, a B-Book kitchen scheme does not always mean a scam, so do not hurry to put labels. Eventually, they become too big and risky for the broker that their orders have to be hedged (A-Booked).

In short, it allows you to flexibly configure the approval settings for withdrawal requests though a variety of parameters. The system lets you control the requested amount, the departments that approve the withdrawal, which managers are allowed to approve the requests, whether account details are mandatory, whether or not the CEO approves the requests and many more. All these settings are extremely useful and allow the broker to protect themselves from many unpleasant situations. Only a few of our clients take advantage of these features, while they are available in UpTrader Forex CRM completely free of charge. As an illustration, we would like to share with you a recent case from one of our clients’ operations.

Understanding the Forex Brokerage Business Models – A-Book, B-Book, and Hybrid

The A-Book hybrid forex broker model is one of the most common ways of technological support for trades execution employed by large brokerage companies. ECN/STP brokers are the brokers that combine both models without prioritization, focusing on the speed of finding a matching trade. Each broker can work with an unlimited number of aggregators and liquidity providers. The terms of the partnership will depend on the order execution speed, spread, and commission. There are several flaws in this scheme, which are easier to show with examples. DD brokers, market makers, Dealing Desk brokers – all these mean the same counterparty, which takes the other side of the client’s trade, executing almost all the trades with its internal system.

• In the event that the market moves against the broker, the broker will run all of the losses, and vice versa.
• Clients who have been duped will not keep quiet and will undoubtedly damage the broker’s image, which is crucial for achieving success in the forex market.
• Some people will say that this execution model generates conflicts between the client and the broker.
• We are going to discover the difference between A book and B book broker models.
• There are two types of broker operating technologies – A-Book and B-Book models, which differ in the way client orders are brought to the market.

One significant advantage is that brokers have more control over the pricing and execution of trades, allowing them to offer fixed spreads and maintain a consistent profit margin. This model also enables brokers to provide additional services, such as offering leverage beyond what external liquidity providers may offer, providing more flexibility to clients. The foreign currency market is a continuously operating marketplace, open 24 hours per day, 5 days a week.

B-Book Broker Model Advantages

I strive to foster understanding, inspire confidence, and catalyze growth in these dynamic sectors, contributing to the forward momentum of our digital financial future. The material covered and the resources offered are for educational purposes only. Always do your own research and only execute trades based on your own personal judgement. I’m now a client of Global Prime, and I do all of my trading through their platform. Having a broker who profits when you profit is like having them as an ally instead of just a facilitator – or in most cases, an adversary. What this creates is an atmosphere and culture of seeing your clients as prey rather than customers.

Faced with challenging tasks in life, I have developed the habit of thinking rationally and creatively to solve problems, which not only helps me develop as a person, but also as a professional. Speaking about my professional activities, I can say that I have always been attracted to the study of foreign languages, which later led me to the study of translation and linguistics. Seasoned copywriter with a focused expertise in crypto and fintech, adept at translating complex industry jargon into clear, engaging content. Driven by my mission to illuminate the intricacies of the crypto and fintech industries, my commitment is to create and deliver content that educates, engages, and empowers.

This tool is already integrated into the UpTrader Forex CRM, however, only a few of our clients use it for additional sales. Forex trading provides you with unlimited opportunities for success and financial well-being, if you approach running your business responsibly, acquire patience and use business models that are suitable exact for your purposes. We conclude that none of the schemes can be a panacea for losses. You must decide which business model to choose for you, depending on your business plans and strategies. But high leverage is usually used by traders who are inexperienced anyway. The more experienced you are as a trader, the less you depend on leverage to make your profits; and the more money you make as a trader and the larger your account balance is, the less leverage and margin you require in the first place.

All these are costs that the A-Book broker compensates at the expense of high mark-up to the spread. And since the trade is now hedged, the broker won’t make money if the customer loses anymore. So its revenue is now limited to pocketing the spread (and overnight finance charges if the traders leave their positions open overnight). Between 74-89% of retail accounts lose money when trading forex. The B-book has the same business model as a casino and the reason why every year certain brokers and exchanges go bankrupt is partly due to not properly managing the A and B-book of their clients.

It might just wait when its customers lose own money by themselves or contribute to that by transmitting non-market quotes to them. At that, the broker earns on fees for every transaction or spread markups. It’s not just that a Forex broker doesn’t want to operate on a fair business model. The fact is that there are circumstances that made it select such a model. It creates the potential for the broker to do “bad” things to increase the chances that your trades lose. The UpTrader team has developed a flexible withdrawal approval system that is integrated in UpTrader Forex CRM.

The main reason I kept using Oanda for so long is because their platform is fully integrated with TradingView, and they allow me to trade in any position size (units instead of lots). I started this blog in 2017 to document my journey as a trader, and this shift from Oanda to Global Prime is as much a part of that journey as becoming consistently profitable was. An intermediate comparative analysis for three major NDD models (I will not include DD and B-Book models without passing orders to the external market) is presented in the table below.

By interacting with an A-Book FX broker, the trader avoids both the market maker and their trading desk. As a result, the entities that might otherwise benefit from their trades are eliminated. The key benefit of utilizing an A-Book broker is that they face fewer conflicts of interest because their customers’ profits do not negatively influence their operations. It is important to note, however, that A-Book brokers are not without disadvantages. Orders are sent straight to the liquidity pool, resulting in adjustable spreads for traders.

To understand which broker you are working with, you need to place a Limit order and it should be displayed in the Depth of Market. The Depth of Market is a tool reflecting the information on orders placed by sellers and buyers at the current time. The trader sees prices and volumes of orders, which suggest a kind of market sentiment. The Depth of Market of level 1 displays the data on the best prices. The Depth of Market of level 2 provides complete information on all orders placed. This is the reason why most brokers use a combination of B-Book and A-Book execution, also known as a “hybrid model”.