If you want to trade forex effectively, you need to understand how your broker actually processes your orders. Two fundamental models shape this: A-book (NDD) and B-book (DD). These models determine whether your interests align with your broker’s — or directly conflict.
In this article, we’ll explain how A-book and B-book forex brokers work, the real risks of conflict of interest in B-book brokers, 10 practical signals to identify which type your broker uses, and what the hybrid model means for your trading today.
A-Book vs B-Book Forex Brokers: The Core Difference
The A-book/B-book distinction describes where your order goes after you place it. This has major implications for pricing transparency, execution quality, and whether your broker benefits from your losses.
A-Book (NDD): Your Orders Go to the Market
A-book brokers (also called NDD — No Dealing Desk) route your orders directly to the interbank market or liquidity providers (LPs). The broker acts as an intermediary, not as your counterparty. This is the STP or ECN execution model in practice.
Key characteristics of A-book brokers:
- Your order is forwarded to the market
- The broker earns from commissions or spread markup
- No inherent conflict of interest — the broker profits regardless of your win/loss
- Prices reflect real market rates
- Slippage possible during high-volatility events
The biggest advantage of A-book brokers is transparency and alignment of interests: your broker wants you to trade more (and keep trading), not lose your account.
B-Book (DD): Your Orders Stay Inside the Broker
B-book brokers (also called DD — Dealing Desk, or market makers) internalize your orders. They become your direct counterparty: when you buy, the broker sells; when you sell, the broker buys. Your order never reaches the open market.
Key characteristics of B-book brokers:
- Orders processed internally — never sent to the market
- The broker sets bid/ask prices itself
- Fees usually embedded in the spread (no separate commission)
- Fast, stable execution — slippage is rare
- Potential conflict of interest: your losses can be the broker’s profit
The key advantage of B-book: fast execution and stable spreads even in low-liquidity conditions. The risk: the broker has a financial incentive when you lose.
A-Book vs B-Book: Side-by-Side Comparison
| A-Book (NDD) | B-Book (DD) | |
|---|---|---|
| Counterparty | The market / LPs | The broker |
| Price formation | Real market price | Set by broker |
| Spread | Variable, slightly wider | Stable, can range from very tight to wide |
| Commission | Often charged separately | Embedded in spread |
| Execution speed | Market-dependent | Fast and stable |
| Slippage | Possible (volatility) | Rare |
| Conflict of interest | None | Potential (your loss = broker’s gain) |
The Real Risks of B-Book Conflict of Interest
Because B-book brokers can profit from client losses, dishonest operators sometimes exploit this. The main concerns:
- Price manipulation: Showing prices slightly less favorable than interbank rates
- Order rejection: Refusing to execute profitable orders
- Requotes: Re-offering a slightly worse price at execution
- Account restriction: Limiting or closing profitable traders’ accounts
Important: These problems are far more common with unregulated B-book brokers. Regulated market makers (authorized by ASIC, FCA, CySEC) face legal obligations that significantly limit these behaviors. Always verify regulation before funding an account.
10 Ways to Tell if Your Broker is A-Book or B-Book
Most brokers won’t tell you outright which model they use. Here are 10 signals to look for:
1. Spread and Commission Structure
- A-book (ECN): Tight variable spreads (sometimes 0.0 pips) + per-lot commission
- A-book (STP): Wider variable spreads, sometimes no commission
- B-book: Fixed or variable spreads with no separate commission; if spreads are extremely tight with no commission, conflict of interest risk is higher
2. Execution Policy and Terms of Service
- A-book signals: “STP”, “ECN”, “NDD”, “orders routed to liquidity providers”
- B-book signals: “Market maker”, “Dealing Desk”, “DD”, “we act as counterparty”
Caution: A broker claiming “NDD” may use hybrid routing for smaller accounts.
3. Maximum Leverage Offered
- A-book brokers: Typically 100:1–200:1 (must manage market-side risk)
- B-book brokers: Often 400:1–1000:1 or more (risk managed internally)
4. Price Correlation with the Interbank Market
- A-book: Prices closely track interbank rates; spreads widen during volatility
- B-book: Prices are more stable; may diverge slightly from market during volatile periods
5. Execution Speed and Slippage Behavior
- A-book: Market-dependent; slippage possible during fast markets
- B-book: Fast, stable fills; slippage rare but requotes possible on volatile events
6. Requote Frequency
- A-book: Rare (except during extreme volatility)
- B-book: More frequent, especially on large orders and major news events
7. Maximum Trade Size and Lot Restrictions
- A-book: Higher lot limits (constrained by market liquidity, not internal risk limits)
- B-book: Often capped — especially for large accounts — to limit internal risk exposure
8. Bonus Offers
- A-book: Rarely offers large bonuses (commission-based revenue doesn’t benefit from inflated deposits)
- B-book: More likely to offer large deposit bonuses, no-deposit bonuses — because high trading volume benefits the broker regardless of trader outcome
9. Liquidity Provider Disclosure
- A-book: Often discloses liquidity providers (e.g., “we partner with Citi, Deutsche Bank, Goldman Sachs”)
- B-book: Rarely discloses LP relationships (orders don’t leave the broker)
10. Customer Support Answers
Ask support: “How are my orders processed? Do they go to external liquidity providers?” A vague answer like “we use proprietary technology” often means hybrid or B-book. A clear “yes, all orders are sent to LPs” is a positive A-book signal — though note that even A-book brokers may use B-book for small retail accounts.
The Reality: Most Brokers Use Hybrid Models Today
Pure A-book brokers are increasingly rare. Running a fully external order-routing operation is expensive and exposes the broker to high operational risk. Pure B-book is also uncommon among reputable brokers — the conflict of interest is too obvious and regulatory pressure is increasing.
In practice, most major brokers use a hybrid approach that applies A-book or B-book routing based on:
| Factor | A-Book (External) | B-Book (Internal) |
|---|---|---|
| Trade size | Large lots | Small lots |
| Currency pair | Major pairs | Minor/exotic pairs |
| Trading session | High-liquidity hours | Low-liquidity hours |
| Trader type | Professional traders | Retail/beginners |
| Market conditions | Normal volatility | Extreme volatility |
What this means for you: rather than obsessing over “is my broker A-book or B-book?”, focus on whether your broker is properly regulated, transparent about fees, and has a good execution track record.
Key selection criteria regardless of model:
- Regulation by a reputable authority (ASIC, FCA, CySEC, NFA)
- Segregated client funds
- Clear fee structure (spread + commission)
- Positive execution audit history
- Responsive customer support
