A-Book vs B-Book Brokers: Why I QUIT OANDA & moved to Global Prime

If you are a broker, it would be best for you to decide which model is appropriate for your company’s specific goals and strategy. A similar recommendation could be made for investors selecting a brokerage firm. Both A-Book and B-book Forex brokers that are regulated have a “market maker license”. Typically, brokers are regulated by ASIC, FCA, or the NFA. Essentially, a broker will sell to a trader who makes a buy order and vice versa. It is apparent that this kind of approach leads to conflicts of interest between B-Book brokers and their customers.

Also, the right technical tools can help a risk manager to maintain the right balance between internal and external liquidity. For example, Forex Broker Turnkey from Soft-FX is an off-the-shelf solution that includes the trading multiplier system, where each trading account on the platform can be assigned a trading multiplier. The value of this multiplier determines the percentage of the requested trading volume that goes to the external market. This feature helps mitigate the possibility of exposure toxic flows to liquidity providers, while effectively hedging risks. A retail forex brokerage’s dealing desk is the division in charge of matching and carrying out client trade orders.

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The best option for any modern broker would be to resort to a hybrid model, which combines features of A-book and B-book. We will talk about this in more detail in the next section. With A Book setting enabled all incoming trade flow from end user traders will be instantly married and non-married positions will be covered at aggregated Best Bid and Offer instantly. If you need quotes for your platform and the ability to execute trades on the market, we can help you in finding the right Liquidity Provider. You tell us about your requirements and we will help you with the right solution for your business. Their offices are not open to the public, which means that clients cannot go and visit them, and they do not operate from the countries in which they offer their pseudo financial services.

• Well, if your Forex broker purely B books you, without giving you slippage, then it is actually good for you!
• All this data helps the broker to determine which of the 2 models (A-Book or B-Book) to use for executing an order.
• For a professional or experienced retail trader, high leverage can be a powerful tool in exploiting certain opportunities in the markets .
• The forex broker’s choice of which liquidity bucket to use at any one time is based on.
• You won’t be paying more to use an A-book broker than a B-book broker.

The flow of profitable trades, which is usually sent to liquidity providers, is commonly referred to as toxic. First of all, let’s talk about what is an A-book broker in Forex. The definition of the A-book model is a brokerage operation scheme that transmits all client trades directly to the interbank market. Thus, the broker acts only as an intermediary, while the market acts as a counterparty.

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The trader’s profit depends on the spread (its size or type – fixed or variable), order execution speed, and the reliability of the broker. The quotes in the interbank market change in milliseconds the price at which the order will be executed depends on how quickly the trade is transferred to the market. Therefore, the broker is forced to use software to track such tricks of the provider. For now, just know that when a forex broker chooses to accept market risk (“B-Book execution”), a major downside to doing this is that a potential conflict of interest does exist between a broker and its customers. We won’t go into examples of broker shadiness just yet since the focus of this lesson is how forex brokers manage their market risk . It’s an extremely tough business for a retail forex broker to operate as 100% A-Book.

Just to be doubly sure, you can read their legal documentations on their website, the one most people ticked that they read the terms and conditions of the agreement when they signed up for the broker. In there, it will usually say whether the broker can trade against you or not. The spreads are very reasonable and commission is very attractive at $35 per million round trip.

Types Of Accounts In…

In case of violation of these rules, they will be prosecuted in accordance with legislation of the intellectual property protection. Cwgmarkets February 25, 2021It is really a helpful blog to find some different source to add my knowledge. Because I became suspicious after the accounts are not labelled as “True ECN” anymore but instead as “Raw Spead”. To be honest, there is no advantage in opening a prime broker account, unless you do very high volumes or you need physical delivery of the currency.

However, B book brokers today will simulate your fill against the real market, and B book you. This means that your trade is filled as if it were to be trading on an A book , but instead of sending your trades out to their liquidity providers, they keep your trades in house. On the one hand, such a model encourages competition between liquidity providers, thus narrowing the spread and reducing the commission fees. On the other hand, traders do not receive the best price because of the mark-up added to the spread. Another problem is that the quality of the services offered by liquidity providers is deteriorating over time. The order execution quality lowers, there emerge slippages.