In an A-book model the broker passes client trades to liquidity providers and earns from spreads and commissions. In a B-book model the broker takes the other side of client trades and carries market risk. A hybrid model routes some clients or trades to the A-book and keeps others in the B-book, based on risk rules.
A-book (STP/ECN)
Orders are passed to liquidity providers. Revenue comes from markups and commissions, and the broker carries little market risk. Execution quality depends on the liquidity setup.
B-book (market making)
The broker internalises client trades. Revenue can be higher, but the broker is exposed to profitable traders and sudden market moves. Strong risk management is essential.
Hybrid
Most brokers use a hybrid approach: consistently profitable or large traders are routed to the A-book, while other flow is internalised. Exposure above limits can be hedged automatically.
Comparison
| A-book | B-book | Hybrid | |
|---|---|---|---|
| Market risk | Low | High | Managed |
| Revenue source | Spreads, commissions | Client losses, spreads | Both |
| Technology needed | Bridge, liquidity | Risk tools | Bridge + risk tools + profiling |
Technology that makes hybrid work
- Liquidity bridge with routing rules.
- Real-time risk management and alerts.
- AI client profiling to classify traders.
- Dynamic leverage to limit exposure.
Execution models are subject to regulation and disclosure requirements in many jurisdictions. Take legal advice for your licence.