Insights · Risk & execution
A-book vs B-book: how brokers manage risk
By Tan Hui Ling, Head of Execution & Markets · 18 May 2026
A-book and B-book describe how a broker handles client orders. In the A-book model the broker passes orders straight through to an external liquidity provider, so the market is the counterparty. In the B-book model the broker internalises the order and takes the other side itself. The difference is who bears the risk — and whether a conflict of interest exists.
Key takeaways
- A-book = straight-through processing: orders pass to an external liquidity provider and the broker earns from spread or commission.
- B-book = internalisation: the broker takes the other side of the trade, so client losses become broker revenue and vice versa.
- A-book removes the direct conflict of interest; B-book creates one but keeps the spread and market risk in-house.
- Many brokers run a hybrid model, routing flow they want to hedge to the A-book and internalising the rest.
- A Prime of Prime is the A-book liquidity source — full STP, no dealing desk taking the other side of the broker's flow.
Definition
What is A-book?
In the A-book model, the broker acts as an intermediary. When a client places an order, the broker passes it straight through to an external liquidity provider — a bank, an ECN or a Prime of Prime — which becomes the effective counterparty to the trade. The broker does not take market risk on the position; it earns from a mark-up on the spread or an explicit commission on volume.
Because the broker's revenue comes from client activity rather than client losses, A-book is often described as conflict-free: the broker profits when clients trade, not when they lose. This straight-through, or STP, approach is what institutional counterparties and serious traders generally expect, and it is the model our execution stack is built around.
What is B-book?
In the B-book model, the broker internalises the order instead of routing it out. The broker itself takes the other side of the client's trade, keeping the position on its own book. If the client loses, the broker gains; if the client wins, the broker pays. The broker keeps the full spread and can offer instant fills, but it now carries the market risk of every position it has warehoused.
B-book is not inherently improper — internalisation is a legitimate and widely used practice, and it lets brokers offer tight pricing and immediate execution on flow that would otherwise be uneconomic to route out. What it requires is disciplined risk management and transparency, because the broker sits on the opposite side of its clients.
Side by side
A-book vs B-book: pros and cons
Two models, two risk profiles. The right choice depends on the flow, the broker's risk appetite and the transparency it wants to offer.
| Dimension | A-book (pass-through / STP) | B-book (internalisation) |
|---|---|---|
| Counterparty | External liquidity provider / the market | The broker itself |
| Broker revenue | Spread mark-up or commission on volume | Client losses, plus the spread |
| Market risk | Passed to the liquidity provider | Warehoused on the broker's book |
| Conflict of interest | None — aligned with client activity | Present — broker is on the other side |
| Transparency | High; fills reconcilable to the market | Lower; execution is internal |
| Typical upside | Scales with volume, sustainable, institutional-grade | Higher margin per trade, instant fills |
| Typical downside | Thinner margin per trade | Balance-sheet risk; needs strong risk management |
Illustrative, structural comparison. Actual practice varies by broker, jurisdiction and regulatory regime.
In practice
Hybrid models: most brokers do both
In reality, few brokers run a pure A-book or a pure B-book. The common approach is a hybrid, where the broker segments its flow and decides, order by order or client by client, which route to take:
- A-book the risk it wants to hedge — profitable, high-volume or sharp flow is routed straight through to an external provider so the broker does not carry the exposure.
- B-book the rest — smaller or offsetting flow may be internalised, where positions naturally net against each other and the residual risk is manageable.
- Net and hedge the residual — the broker's risk desk continuously nets internalised positions and hedges the leftover exposure into the market.
Run well, a hybrid model lets a broker offer competitive pricing while controlling risk. Run badly — with weak controls or a bias toward keeping losing flow — it amplifies the conflict of interest. The deciding factor is the quality of the risk engine and the honesty of the routing logic, which is where the broker's technology and the depth of its A-book liquidity matter most.
Where a Prime of Prime fits
The A-book liquidity behind the model
Whenever a broker A-books an order, that flow needs somewhere to go. A Prime of Prime is that destination: it aggregates tier 1 bank and non-bank liquidity into one deep feed and offers full straight-through processing, so A-booked orders route to the underlying market with no dealing desk taking the other side.
That is the core distinction. A Prime of Prime is not a broker running a B-book against its clients — it is the neutral liquidity source that makes credible A-book and hybrid execution possible. Deep, aggregated liquidity is what lets a broker hedge confidently and pass fills its clients can trust.
A-booked flow, routed out
| Layer | Role |
|---|---|
| Client | Places the order |
| Broker (A-book) | Passes it straight through |
| Prime of Prime | Aggregates & routes to market |
| Banks & venues | Provide the fill |
→ Full STP: no dealing desk on the other side of the broker's flow.
Common questions
A-book vs B-book, answered
What is the difference between A-book and B-book?
In the A-book model a broker passes client orders straight through to an external liquidity provider, so the market — not the broker — is the counterparty, and the broker earns from spread or commission. In the B-book model the broker internalises the order and takes the other side itself, so the client's loss is the broker's gain and vice versa. A-book removes the direct conflict of interest; B-book creates one but lets the broker keep the spread and manage risk internally.
Is A-book or B-book better?
Neither is inherently better — they serve different purposes and carry different risks. A-book is transparent and conflict-free, earns from volume rather than client losses, and passes market risk to the liquidity provider, but margins per trade are thinner. B-book can be more profitable and lets the broker offer instant fills, but it puts the broker's balance sheet against its clients and requires disciplined risk management. Many brokers run a hybrid, A-booking flow they want to hedge and B-booking the rest.
Does a Prime of Prime run an A-book?
A Prime of Prime is the A-book liquidity source, not a broker running its own book against clients. It aggregates tier 1 bank and non-bank liquidity and offers full straight-through processing, so a broker that A-books its flow routes those orders to the Prime of Prime, which passes them to the underlying market. There is no dealing desk taking the other side of the broker's flow — the model is built for transparent, pass-through execution.
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