Broker Business Models: A-Book, B-Book, and C-Book Explained

Partner Federation — last updated September 2026

When people talk about a broker’s “A-book” or “B-book,” they’re describing something more fundamental than jargon — it’s how the broker actually makes money from the trades your referred clients place, and it shapes almost everything downstream: pricing, payout stability, and how a broker treats order flow it does and doesn’t want. This page covers what A-book, B-book, and C-book actually mean, why a broker picks one over another, and what each one means for you as a partner and for the clients you refer.

On this page

• What “book” actually means
• A-Book: passing trades to the market
• B-Book: the broker takes the other side
• C-Book and hybrid: splitting the difference
• Why a broker runs one model over another
• What it means for a partner
• What it means for a client
• How to find out which model a broker runs
• FAQ

What “book” actually means

Every time a client opens a trade, the broker has a choice to make: pass that exposure on to someone else, or keep it. “Passing it on” means sending the trade out to a liquidity provider — a bank or a larger market maker — so if the client’s position moves, the broker’s own risk moves with an offsetting position elsewhere. “Keeping it” means the broker becomes the other side of the trade itself: if the client wins, the broker pays out of its own pocket; if the client loses, that loss is the broker’s revenue. Which of those two things happens, and how a broker decides between them, is what “book” refers to.

This isn’t a cosmetic choice. It determines where the broker’s risk sits, how its revenue is generated, and — for a partner — what kind of business is actually sitting on the other side of your referral agreement.

A-Book: passing trades to the market

In an A-book (straight-through-processing) model, the broker routes client orders through to a liquidity provider rather than taking them on itself. The client’s position is hedged, one for one, in the wholesale market. The broker earns a markup on the spread, a commission, or both — and that revenue doesn’t depend on whether the client wins or loses.

What this means in practice: the broker carries close to no market risk on client trades. Its revenue is thinner per trade but predictable, and it scales with volume rather than with client outcomes. Because the broker has no financial stake in whether a client wins or loses, there’s no structural incentive for the broker to want a client to lose — which is part of why regulators in a number of jurisdictions look more favorably on A-book execution for retail business. The trade-off is that A-book is a volume business: it needs genuine scale to be worth running, since the margin on any single trade is small.

B-Book: the broker takes the other side

In a B-book (market-making) model, the broker doesn’t pass the trade anywhere — it becomes the counterparty itself. If the client’s position loses, that loss lands directly on the broker’s revenue line. If the client’s position wins, the broker pays it out of its own book.

This only works as a sustainable business the way a casino works: across a large enough pool of clients, on average, losses need to outweigh wins for the model to be profitable — retail trading in leveraged CFD and forex products has historically skewed that way at the population level, which is the underlying economics that makes B-book viable at all. A client (or a segment of clients) who wins consistently breaks that assumption for the broker, which is exactly the dynamic covered in more depth on Client Order Flow.

What this means in practice: the broker carries full market risk on whatever it keeps in-house, which means it needs real risk-management discipline — position limits, monitoring, and the ability to react quickly to concentrated exposure. In exchange, it avoids paying liquidity-provider costs and can often offer simpler pricing (fixed spreads, no commission) to clients. It also creates a structural conflict of interest that doesn’t exist under A-book: the broker’s own revenue is tied to specific clients losing money, which is why B-book brokers, particularly regulated ones, are expected to run independent pricing and execution controls that aren’t influenced by that incentive.

C-Book and hybrid: splitting the difference

Most brokers of any real size don’t run a pure A-book or pure B-book — they run some version of both, splitting client flow between the two based on the risk profile of the client or the trade. This is usually called a hybrid model, and “C-book” is the term the industry most often uses for the same thing: a broker that dynamically routes some flow to the market and keeps the rest in-house, adjusting as client behavior changes.

In a typical hybrid setup, a broker will lean toward hedging out (A-book) clients who trade consistently profitably, at high volume, or in a way the broker finds hard to price safely — the same “toxic flow” classification covered on Client Order Flow — while keeping smaller, less consistently profitable retail flow in-house (B-book), where the underlying house-edge economics still apply. That classification isn’t a one-off decision; it runs on an ongoing basis as a client’s trading pattern becomes clearer over time.

Worth being straight about: “C-book” doesn’t have one single, universally agreed definition. Most sources use it exactly as described above — as another name for the dynamic hybrid split. A minority use it more narrowly, to describe a specific technique within that split: partial hedging, where a broker hedges only part of a position rather than all or none of it (or, less commonly, over-hedges or takes an additional position against the client). In practice, the label matters less than the mechanic — what a partner actually needs to understand is that flow gets split and reclassified dynamically, not that there’s a strict, fixed third category alongside A and B.

Why a broker runs one model over another

No single model is objectively “better” — the right one depends on the business behind it. A newer or smaller broker often leans toward B-book because it doesn’t require the capital, liquidity-provider relationships, or trading volume that A-book needs to be worth running. A broker chasing institutional or high-volume professional clients tends toward A-book, both because that segment expects genuine market pricing and because a broker generally doesn’t want large, sophisticated, consistently profitable accounts sitting on its own book. Regulatory environment plays a role too — some regulators impose stricter requirements, disclosure obligations, or outright restrictions on B-book execution for retail leveraged products, which pushes brokers in certain jurisdictions further toward A-book or hybrid models regardless of their own preference. Most established brokers end up at some form of hybrid simply because it lets them capture the more predictable A-book economics on the flow that’s hard to profit from internally, while still keeping the more profitable retail flow in-house.

What it means for a partner

This isn’t abstract for a partner — it’s directly connected to what you actually get paid and how stable that pay is:

• Your ongoing payout is a share of whatever the broker actually earns from your clients’ trading. Revenue share, lot rebate, and spread share are all, in different ways, a cut of that — and what the broker earns from a given client depends heavily on which book that client’s trading lands in. A steadily A-booked client generates smaller, more predictable margin; a losing B-booked client can generate much more; a winning B-booked client can be a cost the broker absorbs rather than a source of your payout at all.
• This is the same mechanic behind flow classification. Client Order Flow covers what happens when a broker decides your referred clients’ trading is “toxic” — reduced allocation, withheld payouts, a renegotiated deal, or termination. That determination is, at its core, the broker deciding which book your clients belong in and finding they don’t fit the one it can profitably run in-house.
• CPA partners are more insulated, but not immune. A fixed CPA payout doesn’t move with which book a client ends up in — but that’s also exactly why brokers who can’t reliably tell profitable, well-hedged flow apart from flow that’s expensive to run in-house are more cautious about offering CPA at all, as covered on Why Some Brokers Don’t Offer CPA.
• A heavily B-booked broker carries more business risk of its own. A broker running a lot of unhedged exposure without disciplined risk management is more exposed to a bad run in the markets than one that’s hedged most of its book out — which matters to a partner because a broker’s own financial resilience is part of what determines whether your commissions keep getting paid, covered in more depth on Broker Shutdown / Acquisition.

None of this means a partner should avoid B-book or hybrid brokers — most of the industry runs one of those two models, and plenty of well-regulated, reliably-paying brokers are built on them. It’s a reason to understand which model a broker is running and factor it into how you evaluate the partnership, not a reason to rule a model out on principle.

What it means for a client

For the clients you refer, the book model shows up in pricing, execution, and — less visibly — in incentives:

• Pricing and execution style often differ. A-book brokers more commonly charge a separate commission on top of a variable, market-reflective spread, since they’re passing a real cost through from the liquidity provider. B-book brokers can offer fixed spreads and no commission, since they’re not paying a liquidity provider on that flow — simpler and often tighter-looking pricing, but pricing the broker itself controls rather than pricing sourced directly from the market.
• B-book introduces a real conflict of interest. A broker that profits when a client loses has, in principle, a financial incentive that a pure A-book broker doesn’t. Reputable, regulated B-book brokers manage this with independent pricing and execution controls, negative balance protection, and regulatory oversight — but it’s a legitimate thing for a client (and the partner who referred them) to be aware of, not something to assume away.
• The model itself isn’t a verdict on quality. Plenty of well-regulated, fairly-priced brokers run B-book or hybrid models, and plenty of poorly-run ones have technically clean A-book execution. The model tells you where the incentives sit; it doesn’t by itself tell you whether a broker manages those incentives responsibly.

How to find out which model a broker runs

Brokers rarely advertise “we’re a B-book broker” outright, and per-client, per-trade routing decisions in a hybrid setup are proprietary and constantly shifting, so there’s no way to get a precise, real-time answer. A few practical signals and steps:

• Pricing structure is a rough tell. Fixed spreads with no separate commission lean toward B-book or a market-making component; variable, market-reflective spreads plus a commission lean toward A-book — though plenty of hybrid brokers blend both across account types.
• Regulated brokers often disclose their general execution approach in their Product Disclosure Statement, Financial Services Guide, or client terms, even if they don’t use the words “A-book” or “B-book” directly — worth a direct read during due diligence, alongside the steps on Verify a Broker’s IB Program Is Legitimate.
• Ask directly. A broker willing to describe its general execution model — even in broad terms — is telling you something useful regardless of the specific answer; one that won’t discuss it at all is itself a data point, and fits naturally into the evaluation criteria on Key Factors to Consider When Choosing an IB Broker.

FAQ

Is B-book inherently unethical or predatory?
No. It’s a legitimate, widely-used business model across the industry, including at many well-regulated brokers. The conflict of interest is real and structural, but a broker managing it responsibly — independent pricing, negative balance protection, proper oversight — is a normal, legal way to run a brokerage. The concern is about how the conflict is managed, not the existence of the model itself.

Can I ask my broker which book my referred clients are on?
You can ask, but don’t expect a precise answer at the individual-client level — routing decisions in a hybrid model are dynamic and proprietary. Most brokers will discuss their general execution approach even if they won’t break down specific accounts.

Does the book model change my commission rate?
Not directly — your contractual rate is what it is. But it affects what the broker can sustainably pay out over time, and it’s the same underlying mechanic behind flow classification, which can affect your deal the way Client Order Flow describes.

Is C-book just another name for hybrid?
Most of the time, yes — that’s the dominant usage. A smaller number of sources use it more narrowly for a partial-hedging technique within a hybrid setup. There’s no single industry-wide definition, so it’s worth treating “C-book” as a label rather than a precisely defined third category.

Which model should I look for as a partner?
There’s no universally “best” one. What actually matters is whether the broker is properly regulated, transparent about how it operates, and has a track record of paying reliably — not which acronym describes its execution model.

Does this affect revenue share partners differently than CPA partners?
Yes. Revenue share, lot rebate, and spread share partners are paid from what the broker actually earns on trading, so the book a client lands in directly shapes their payout. CPA partners are paid a fixed amount regardless, which insulates the payout itself — but it’s also why brokers weigh CPA offers more cautiously in the first place.

Related Terms

Client Order Flow · Revenue Share · Why Some Brokers Don’t Offer CPA · Choosing an IB Broker · Verify a Broker’s IB Program Is Legitimate · Broker Shutdown / Acquisition