FXTM information and reviews
FXTM
95%
OctaFX information and reviews
OctaFX
94%
XM information and reviews
XM
93%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
90%
HFM information and reviews
HFM
89%

What is B Book business in the forex sector?


10 April 2020

Some analysis from the team at 4xCube.com: Is B Book business obsolete? How brokers survive in a more competitive environment.

With regards to forex there are multiple ways of processing trades, with A Book and B Book in forex trading, or a hybrid of the two, being commonplace. To understand if B Book business is becoming obsolete, however, it’s important to grasp the details of this technique. And, to check out other ways that brokerages are surviving in an increasingly competitive environment.

What is B Book business in the forex sector?


When it comes to trading processes, there are two main execution models. A Book in forex refers to ECN or non-dealing desk brokers that rely on Straight Through Processing (STP). Brokers operating under this model send executed orders straight to the liquidity pool comprised of several entities acting as a counterpart to the trades coming from the brokerage. In other words, the broker does not act as a counterparty and therefore there is no conflict of interest with each trade. Brokers usually charge commission.

In contrast, the B Book model is where brokers process trades in-house, acting as a market maker or fixed spread broker. B Book brokers often take the other side of client trades which means the broker’s profit is equal to the client’s losses and therefore there is a great conflict of interest. Brokers can potentially take advantage of your trading history in order to make a profit off you and that’s off-putting to many. But just because they act as your counterparty, however, doesn’t mean they’re sitting around waiting for you to lose. It’s all about creating suitable trading conditions.

Is B Book business obsolete?


While it’s obvious that B Book business brings about conflicts of interest in comparison to A Book business – is the former model obsolete? The simple answer is no. This is because many forex traders don’t often think about how their trades are executed behind-the-scenes and instead turn their focus to trading plans, leverage and so on.

What’s more, B Book business does have certain benefits including guaranteed fills on trades even during periods of low liquidity. Fixed spreads are also a highlight. That said, more and more traders are waking up to the downside of B Book business and are looking for brokerages that send trades directly to the liquidity pool.

How are brokers surviving in a competitive environment?


Hybrid solutions

Due to the increase in trader knowledge and the presence of STP, brokers are navigating a more competitive environment in numerous ways. For example, many brokers now use a hybrid solution of A Book and B Book. With this model, brokers can essentially choose whether they put traders in an A Book or B Book depending on factors such as risk profile. If you trade during sessions of high liquidity, trading with an A Book model is likely to be the best option. And, if more traders actively look for STP brokers, this could potentially have a negative impact on B Book business. So, flexibility is key.

Platform benefits

In order to gain a competitive edge, brokers are also spending more time on their overall business model in a bid to attract traders. Thanks to technology, brokers can offer a wide range of different trading services including AI-enhanced platforms with a multitude of benefits including rapid execution speeds based on personal risk tolerance. With machine learning able to interpret Big Data, trading patterns become easier to identify allowing traders to profit based on informed and intelligent decisions.

#source

Share:


Related

AMarkets'15th Anniversary: New Horizons Ahead!
AMarkets'15th Anniversary: New Horizons Ahead!

October 1st marked AMarkets' 15th anniversary! We’ve come a long way from zero to one million clients. True, it hasn’t been easy. We made mistakes, learned from them and grew. We closely monitored our competitors...

5 Oct 2022

OctaFX broker soon to launch own trading platform "OctaTrader"
OctaFX broker soon to launch own trading platform "OctaTrader"

After long months of behind-closed-doors technical development, the international Forex broker OctaFX finally announced its soon-to-be-launched native trading platform, OctaTrader...

4 Oct 2022

Multibank Group announces record-breaking financial figures for 2021
Multibank Group announces record-breaking financial figures for 2021

The award-winning financial services group announced a record turnover of over US$ 12.1 Billion per day, with a record annual revenue of approximately USD $ 189 million in FY 2021...

3 Oct 2022

Uncertain times call for trustworthy companies: What about OctaFX?
Uncertain times call for trustworthy companies: What about OctaFX?

How does the international Forex brokerage service OctaFX fare in light of recent uncertainties and fears on the financial markets in general and the Foreign Exchange in specific? We took a closer look at the company to find out...

29 Sep 2022

FP Markets claims a hat-trick of awards at the 2022 Global Forex Awards
FP Markets claims a hat-trick of awards at the 2022 Global Forex Awards

FP Markets has been awarded the “Best Global Value Broker 2022” for an unprecedented 4th consecutive year. FP Markets claimed two further awards for Best Forex Partners Programme...

28 Sep 2022

OctaFX is on an award spree, receiving the "Most Secure Broker Indonesia 2022"
OctaFX is on an award spree, receiving the "Most Secure Broker Indonesia 2022"

The global broker OctaFX collected yet another industry accolade with 2022’s ‘Most Secure Broker Indonesia’ distinction. The Dubai-based International Business Magazine is the award’s issuer...

27 Sep 2022


Editors' Picks

IronFX information and reviews
IronFX
88%
FXCM information and reviews
FXCM
87%
NordFX information and reviews
NordFX
85%
Vantage information and reviews
Vantage
84%
FP Markets information and reviews
FP Markets
81%
RoboForex information and reviews
RoboForex
81%

© 2006-2022 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.