A-book vs B-book vs hybrid
An A-book broker passes client trades to liquidity providers and earns from markup or commission. A B-book broker keeps trades in house and takes the other side. Most brokers run a hybrid, deciding by client, size, symbol or exposure which trades go where.
A-book, B-book and hybrid compared
The same client trade, three ways to handle it.
- How client trades are handledA-book:Passed on to liquidity providersB-book:Kept in house; the broker takes the other sideHybrid:Some passed on, some kept, by rules you set
- How the broker earnsA-book:Markup on the spread, commissionB-book:Client losses, plus spread and commissionHybrid:Both, depending on where each trade went
- Market riskA-book:Low: the LP carries itB-book:High: the broker carries itHybrid:Managed: kept where it is comfortable, covered where it is not
- Conflict of interestA-book:LowB-book:Higher, so regulators expect it to be managed and disclosedHybrid:Depends on the rules and how they are disclosed
- What it needsA-book:LP agreements, order routing, good pricesB-book:Capital, risk monitoring, good pricesHybrid:All of these, plus rules for who goes where
How hybrid brokers decide
A hybrid model is a set of rules about which trades stay in house and which go to an LP. These are the most common.
By client or group
New and small accounts kept in house, consistently profitable or professional clients passed to LPs.
By size
Trades above a set volume passed on, so one large position never sits fully on the house book.
By symbol
Instruments where the broker has no edge or thin liquidity passed on, the rest kept.
By exposure
Trades kept until net exposure on a symbol reaches a limit, then the excess covered at an LP.
Rules change as you learn your flow. Clients who profit from stale prices or latency are usually the first to move to the A-book, or to wider spreads.
Some instruments have no outside market to pass trades to: generated synthetic indices are always B-book.
Where the liquidity bridge fits
Whatever the model, every client needs a clean price, and that price comes from your LPs.
A full bridge can do two jobs. The first is pricing: combining your LPs into one price per symbol, applying your markups and sending it to every platform. Every model needs this, because even a pure B-book broker prices clients from real market quotes.
The second is order routing: sending A-book trades on to an LP and bringing the fills back. That part only applies to the trades you pass on, and it often runs through your platform’s own gateway or a separate execution bridge.
In XiroLink
Prices for every model, books for the risk
XiroLink does the pricing job and does not route orders. Its risk accounts keep books for your coverage accounts at each LP and for the house book, valued at XiroLink’s own live prices: ledger, P&L, margin, drawdown, exposure per symbol and the percentage your coverage offsets.
What to measure on the house book
Running a B-book or hybrid safely comes down to a handful of numbers, watched live.
- 01
Net exposure per symbol
Lots and USD exposure across all accounts, so you know what one move in gold would cost.
- 02
Coverage percentage
How much of the house book position is offset by hedges at your LPs, per symbol.
- 03
House book P&L
Realised and floating profit and loss on the positions you keep, valued at live prices.
- 04
Margin at each LP
Balance, equity and margin level on your coverage accounts, before a margin call surprises you.
- 05
Drawdown
The largest fall from a peak, on the house book and on each coverage account.
- 06
Toxic flow
Clients whose profits come from stale prices or latency rather than skill belong on a different book.
Execution model questions
What is the difference between A-book and B-book?
An A-book broker passes client trades to liquidity providers and earns from markup or commission, carrying little market risk. A B-book broker keeps trades in house and takes the other side, so it carries the market risk and earns when clients lose.
Is B-book legal?
In most jurisdictions, yes. Regulators usually expect the broker to manage the conflict of interest, disclose its execution model and hold enough capital. The exact rules depend on your licence, so check with your regulator.
Which model is more profitable?
It depends on your clients and how well you manage risk. B-book can earn more from retail flow but can lose heavily on a run of winning clients or one big move. Most brokers settle on a hybrid.
What is a coverage account?
An account a broker holds at a liquidity provider to hedge, or cover, positions it keeps on its own book. Its balance, margin and P&L need watching just like client accounts.
Does XiroLink route A-book orders?
No. XiroLink handles prices: it combines your LPs, applies your markups and feeds your platforms. Orders go through your platform and execution setup. XiroLink risk accounts keep books for your coverage accounts and house book.