A-Book and B-Book

A-book

The broker passes your trade to a liquidity provider, either immediately or by hedging its net exposure. It earns a known margin per trade and carries no market risk. It wants you to trade often and for a long time, which aligns its interest with yours surviving.

B-book

The broker takes the other side. Statistically most retail accounts lose, so a B-book is profitable on average, and it lets the broker offer tight spreads and instant fills because there is no external cost to cover. The risk is a run of client wins, which a broker manages by hedging the clients who win consistently: they are moved to the A-book.

Why the mix

Profiling is the norm. New or small accounts are often B-booked because they are cheap to hold and lose on average. Large or consistently profitable accounts are A-booked because their wins would hurt. Trades during news may be A-booked for the same reason. None of this is disclosed trade by trade, and it is entirely legal at a regulated broker provided execution is fair.

What it means in practice

• A B-booked trader is not being cheated by default; the price and fill rules still apply.
• The incentive to treat winners worse exists, and regulation plus your own records are the check.
• If you become consistently profitable, expect your execution to change as you move to the A-book, and take it as a compliment.
• An unregulated broker running a B-book has both the incentive and the freedom to abuse it, which is the whole case for regulation.

Key takeaways

• A-book hedges client trades; B-book keeps them.
• Most brokers run both and sort clients between them.
• The model is legal and common; regulation is what keeps a B-book fair.