What is the difference
I can go into detail on this but I prefer to focus on whether this should make a difference to you.
An A-book is when a broker passes your trades directly to a liquidity provider. A B-book is one where the broker takes your trade and opts it on its own book. Some might refer this to bucketing a trade but what the broker is doing is taking the risk on your trade without sending it to its liquidity providers.
Brokers can distinguish between those traders who are profitable and those who are less likely to succeed. The former would go into an A book and the latter into a B-book. The B-book is a bet that the average trader will lose even though positions get lumped together and are not treated as individual trades.
It could also have to do with the size of a trade where the broker is more likely to take a large order and pass it directly to its liquidity providers.
Most brokers employ risk management systems for their B-book to control their risks and maximize potential profits. The question is should it matter to you?
One main issue is since there is no common clearing between brokers, a trader is essentially hostage to one broker for entry and exit of positions. I am not privy to software but assume there are tricks a broker can play to tilt the odds against, you, like running stops if they get close. This is an argument for trading with a regulated broker in a jurisdiction where the regulators lookout for unfair practices.
Another issue is the potential solvency of a broker if it takes on too much client risk on its B-book. This is difficult to find out and why it pays to trade with a reputable broker who has ample liquidity to manage its risk,
The question I would ask is whether a broker running mainly a B-book is really on your side if it is betting that you will be a loser. Unfortunately, statistics showing a high percentage of retail traders losing is the argument for a broker managing a B-book for those traders.
There is, however, a way to buck those odds and teach brokers a lesson. It is by joining the Global-View Trading Club designed to help traders succeed in the challenging world of global trading. Membership is free, so JOIN NOW.
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