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What is A book vs B book in Forex trading?

  • Post #1
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  • First Post: Aug 21, 2017 2:29am Aug 21, 2017 2:29am
What is A Book vs B book in Forex trading?
Forex is different from equities or futures trading because your broker can choose to trade against you. This is known as B booking. When your broker sends all your trades to the real market or their liquidity providers, this is known as A Booking.
In futures or equities trading, all your trades are sent to the exchange and matched with other buyers or sellers.
In Forex, your broker can keep your trades ‘in house’. This means that your trades are not sent to the real market. Instead, your broker bets against you, taking the other side of the trade.
For example, if you were to buy 1 lot of EURUSD at 1.35000, then your broker would be selling 1 lot of EURUSD 1.35000. If you win, your broker loses, vice versa.


Why do Forex brokers B book?
A B book business model is a very profitable one. Statistics says that 90% of traders lose their deposits within 6 months. The statistics favour the broker significantly.

So what are the pros and cons of trading with a b book broker?
Well, if your Forex broker purely B books you, without giving you slippage, then it is actually good for you! You can deploy strategies that won’t work on A book brokers such as news trading.
This is because in an A book broker, if you were to place a buy and sell stop just before the news, hoping for a breakout in either direction, you will receive a lot of slippage, because there is simply no liquidity to fill your trade during news.
In a B book broker, there is ‘unlimited liquidity’, hence whatever price you want to be filled at, the broker will ‘make a market’ for you, and fill you at the price you want. As a result, there is zero slippage, and news breakouts can be very profitable.
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 (with slippage), but instead of sending your trades out to their liquidity providers, they keep your trades in house.
This way, they get the best of both worlds. You receive the slippage, and they bet against you.

All hybrid brokers will send the trades of their profitable traders out to their liquidity providers. This flow is known as ‘toxic flow’, because these are profitable traders and no one wants to bet against them correct?
When banks and other LPs receive these toxic flow, their trade rejection rates are higher. Some of your trades will be rejected by the banks or LPs (known as ‘last look’) and you will receive a worse price, because you will be filled at the next best price.
The good news is that none of this is relevant when trading with a purely A book broker. Liquidity providers like the balanced flow of an A book broker and they are much less likely to reject your trades.This means you get better fills at the prices you want.
Seems very strange to me that after reading things like this so often...

"Often referred to as FX, Foreign Exchange is the market where global currencies trade. It is considered the largest and most liquid market with daily trading volumes in excess of 5.1 trillion dollars and is traded 24 hours a day, 5 days a week."

....that there would be any problems getting filled or slipped during "normal" trading. Imagine the problems big bank traders have

The two most powerful warriors are patience and time. Leo Tolstoy
Quoting Erebus
Seems very strange to me that after reading things like this so often...

"Often referred to as FX, Foreign Exchange is the market where global currencies trade. It is considered the largest and most liquid market with daily trading volumes in excess of 5.1 trillion dollars and is traded 24 hours a day, 5 days a week."

....that there would be any problems getting filled or slipped during "normal" trading.

If that seems "very strange" to you, I think it can only be because you haven't appreciated the significance of the reality that 99.9% of retail traders aren't trading in the market covered by the description above: they're trading instead in a tiny mini-market set-up by the counterparty against whom they're trading.

In other words, most retail forex "brokers" aren't really brokers at all.


Quoting Erebus
Imagine the problems big bank traders have

You're completely missing the point: they have different problems and issues which arise in their market, which is called the interbank market. That's not the market in which you (and probably 99.9% of this forum's members) are trading.
Quoting Quickly
If that seems "very strange" to you......
Given the inverted commas around the word "normal" and also the emoticon at the foot of Erebus' post, I think here's merely pointing out the irony that's implicit in the "Often referred..." quote.
Quoting hanover
{quote} Given the inverted commas around the word "normal" and also the emoticon at the foot of Erebus' post, I think here's merely pointing out the irony that's implicit in the "Often referred..." quote.
Yes, thank you, I am as big a sceptic as the next guy, especially after reading what FXCM used to get up to.

Now, should I believe some anonymous guy on the internet, with no proof, an unknown agenda, who is reposting an old theory that orders are not placed into the "market", or should I believe my regulated, large corporation broker???

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The two most powerful warriors are patience and time. Leo Tolstoy
Quoting hanover
{quote} Given the inverted commas around the word "normal" and also the emoticon at the foot of Erebus' post, I think here's merely pointing out the irony that's implicit in the "Often referred..." quote.
I got the same feeling about it, and you nicely phrased it_
Your answers always so cool and intelligent Hanover
The arriving better than the arrival, the journey has just started
Quoting Erebus
{quote} Yes, thank you, I am as big a sceptic as the next guy, especially after reading what FXCM used to get up to. Now, should I believe some anonymous guy on the internet, with no proof, an unknown agenda, who is reposting an old theory that orders are not placed into the "market", or should I believe my regulated, large corporation broker??? True ECN Connectivity IC Markets is able to offer market leading pricing and trading conditions through the MT4 platform by providing clients with True ECN Connectivity. True ECN Connectivity allows you...
Yes I agree with that. I use IC Markets. Which is an A Book provider ( the information you quote here shows they are an A booker) . But feel free to ask them. Somewhere hidden in a brokers T&C's will be whether they are A book or B Book or a hybrid. People talk about dodgy brokers all the time. That because they are B Bookers and are just in it to take your money.

Fact: IG markets holds the largest B book in the world. Don't believe me ? Go ask them.
Quoting londonboy
{quote} Fact: IG markets holds the largest B book in the world. Don't believe me ? Go ask them.
ig markets is a known bucket shop
Quoting MXT
{quote} ig markets is a known bucket shop
IG are a very clever marketing company and a "BASIC" at best trading company.
Their churn rate is so high they have to spend millions on marketing get new customers through the door because their old clients blow their accounts so fast.
It is first time i hear of this A and B booking, is B booking is also what is known as bucket shop?
Quoting FPipster
It is first time i hear of this A and B booking, is B booking is also what is known as bucket shop?
Exactly mate,
Or put in another words, when trading with a B book broker your order never leaves the broker, stays inhouse and it can do whatever it likes with it – slip it, stop hunt it, reject it and so one. That is one of the reasons way most of B book broker’s clients lose their money in no time.
On the other hand, A Book broker in its pure form has no dealing desk and in the moment, it receives your order it should send it directly to the liquidity pool i.e., It should act only as intermediary between its clients and the banks.
  • Post #12
  • Quote
  • Edited at 5:23pm Aug 24, 2017 4:50pm | Edited at 5:23pm
Quoting londonboy
The good news is that none of this is relevant when trading with a purely A book broker. Liquidity providers like the balanced flow of an A book broker and they are much less likely to reject your trades.This means you get better fills at the prices you want.
The key is FINDING an A-book broker. And the bad news is there is fewer and fewer A-book broker for retail traders especially if you are a trader from US. 99% of the brokers out there, the "better" ones are A-B book brokers simply because they are more profitable just as the analysis showed. So WHY would a broker set itself up as an A-book broker when it can make lot more money as an A-B book broker?

The only time A-B book broker lost the biggest was actually during the SNB crisis. Because unlike pure B-book brokers, what I call casino brokers, they actually hedged against their trades against the clients so since all of their clients lost huge amount of money so their hedging trades lost huge amount of money too that in many times more than they made from their client thanks to the HUMONGOUS bid/ask spread created by the "liquidity providers" shutting down the market. And this is the only time that A-book brokers actually fared better than the A-B book brokers.
Make your losses in demo. Earn your profits live.
Quoting FPipster
It is first time i hear of this A and B booking, is B booking is also what is known as bucket shop?
In a nutshell, yes.
Make your losses in demo. Earn your profits live.
People still discuss this topic like it can help them become better at trading...
Well, it will not make you a better trader by any means but I definitely sleep better when I know that my broker is not a bucket shop which is only looking forward to steal my hard - earned money
Quoting UlliC
Well, it will not make you a better trader by any means but I definitely sleep better when I know that my broker is not a bucket shop which is only looking forward to steal my hard - earned money
I don't understand why some choose to open an account with a bucket shop broker when they could just as easily open an account with good ones like Pepperstone and IC Markets...
There are many books online, but you need to do Demo if you wanna become successful in the Forex Trading, theoretical knowledge is necessary, but Demo would be more essential.
I don't get why people care if there B-booked or A-Booked...You will be B booked 99% of the time if your account is less then 10k and don't use stop losses or risk more then 10% of your account on each trade. Yes even with IC markets they will do that, simply because they know most of those people will lose money not because they can "slip" you...If you can make money with A booking you can make it with B booking as well. Learn how to trade, don't blame the brokers for your over leveraging or just doing dumb things. Now this goes for decent brokers, I know where are scammers out there...With most reputable brokers you will actually get a better instant fill if your "b-Booked"...lol
Quoting londonboy
{quote} Yes I agree with that. I use IC Markets. Which is an A Book provider ( the information you quote here shows they are an A booker) . But feel free to ask them. Somewhere hidden in a brokers T&C's will be whether they are A book or B Book or a hybrid. People talk about dodgy brokers all the time. That because they are B Bookers and are just in it to take your money. Fact: IG markets holds the largest B book in the world. Don't believe me ? Go ask them.
BS ICM duped you, ICM is B book, read the disclosures, TOS, VAN etc
Quoting rmrf
{quote} BS ICM duped you, ICM is B book, read the disclosures, TOS, VAN etc
Absolutely. I even think that all retail brokers are B book up to a certain Lot size. And it makes sense for them because it's more profitable business model. The stock brokers are doing the same thing. You think you trade on exchange with other traders but in reality the broker or some of his partners act as your counterparty. Seems like everything today is fake and upside down. Nothing is real anymore. Except for the losses. They are always real.
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