Market StructureDealing Desk ModelInternalisation
B-Book
A broker risk model in which client trades are internalised and kept on the firm's own book rather than hedged externally.
What B-Book means
B-booking means the broker takes the other side of the client trade and retains the resulting exposure rather than passing it to a liquidity provider. Much of that exposure nets off internally, because at any moment some clients are long and others short the same pair; only the residual imbalance represents genuine risk, and the broker may hedge just that net amount. Revenue comes from the spread plus the net profit or loss on retained positions.
Internalisation is legitimate and widespread - it is how brokers can offer fixed spreads, micro lots, guaranteed stops and negative balance protection economically. The conflict of interest is nonetheless direct, since client losses become broker revenue on unhedged flow. Most brokers run hybrid books, classifying clients by profitability and routing accordingly. What matters practically is conduct: whether spreads widen selectively, whether stops are filled fairly, and whether the firm is supervised by a regulator with order-handling and best-execution rules.
Worked example
If clients hold 300 lots long and 280 lots short in EUR/USD, the broker internalises the offsetting 280 lots and carries or hedges only the 20 lot net long exposure.
Related terms
- A-BookA broker risk model in which client trades are hedged one-for-one with external liquidity providers.
- Market MakerA firm that quotes both a bid and an ask and takes the opposite side of client trades from its own book.
- Best ExecutionThe regulatory duty to take all sufficient steps to obtain the best possible result for a client when executing orders.
- Negative Balance ProtectionA rule or policy under which a client's losses cannot exceed the funds in their account, so no debt is owed to the broker.
- SpreadThe difference between the bid and the ask price, and the most common way a forex broker is paid.
Frequently asked questions
What does B-Book mean in forex trading?
A broker risk model in which client trades are internalised and kept on the firm's own book rather than hedged externally.
How does B-Book work in practice?
Internalisation is legitimate and widespread - it is how brokers can offer fixed spreads, micro lots, guaranteed stops and negative balance protection economically. The conflict of interest is nonetheless direct, since client losses become broker revenue on unhedged flow. Most brokers run hybrid books, classifying clients by profitability and routing accordingly. What matters practically is conduct: whether spreads widen selectively, whether stops are filled fairly, and whether the firm is supervised by a regulator with order-handling and best-execution rules.
What is an example of B-Book?
If clients hold 300 lots long and 280 lots short in EUR/USD, the broker internalises the offsetting 280 lots and carries or hedges only the 20 lot net long exposure.
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