Primarily A-book and B-book type brokers differ in how they process orders for traders. However a similarity that A-book and B-book brokers share is that they are both participants in the market, acting as an intermediary between traders and market maker organizations. Most brokers do not strictly fit into the A-book or B-book category alone, approaching the market with their own signature hybrid model.
Exness operates as a market maker, which means it is not classified as an A-book or B-book broker, though there may be some similarities shared with these models. We recommend following the link to read more about how market makers work.
A-book brokers make the majority of their profit through commission, by passing orders on to a prime broker or market maker organization. A-book brokers are DMA (Direct Market Access) brokers as they enable traders to enter the market, but they don't own order books. A-book brokers are not a counterparty to their traders, so it does provide a measure of fairness. However A-book brokers are essentially a toll gate between consumer traders and the market makers; an arguably unnecessary one. A-book brokers also do not provide liquidity to their brokered orders.
Liquidity refers to the extent at which a market allows assets to be bought and sold at stable, transparent prices. Higher liquidity markets have higher volumes of trades. If markets are not liquid, it becomes difficult to trade.
B-book brokers make the majority of their profit through their clients’ loss, by acting as a counterparty on any orders they facilitate. B-book brokers do provide liquidity, and match their orders in-house, but may mitigate their risk by hedging orders with market maker organizations if orders are too large. Some argue there’s a conflict of interest with B-book brokers, as they profit most when their clients lose. However the temptation of ultra slim spreads and too good to be true trading conditions often appeal to less risk averse traders.
Market makers, like Exness, provide liquidity for orders and make the majority of their profit from the spread charged on orders. Market makers aren’t merely participants in the market but have a considerable influence on it as they provide enough liquidity to shape the sentiment and trends of the market; this is what the label market makers describes. Market makers own their trading book, which means they can set their prices and provide transparency on information such as price, availability, and much more for their trading instruments.
An order book is an electronic list of buy and sell orders for trading instruments organized by price level.
For an in-depth look at how market makers operate, we recommend reading our article about understanding market makers.
|A-book brokers||B-book brokers||Market makers|
|Quote creation||Receives price from other brokers||Receives price from other brokers||Owning order book, creates own pricing|
|Execution||Routing orders to LPs||
|Source of income||Commission||Clients' losses (deposit)||Cost of clients' transactions|