When a retail forex broker takes the opposite side of a customer’s trade, it can accept the market risk or transfer it to another market participant.
If the broker accepts the risk, the trade is B-Booked (a.k.a. “B-Book execution”). This means the broker is essentially betting against the trader.
📌 1. What is B-Book Execution?
When a broker B-Books a trade: ✔️ The broker takes the opposite side of the trader’s position.
✔️ The broker keeps the trade in-house rather than hedging it externally.
✔️ If the trader loses, the broker profits.
✔️ If the trader wins, the broker loses.
💡 B-Book brokers “internalize” or “warehouse” the risk, meaning they keep the exposure on their books instead of hedging it in the external market.
🔹 B-Book brokers profit from traders’ losses.
🔹 Traders’ profits = Broker’s losses
🛑 Potential Conflict of Interest 🚨
Since a B-Book broker profits when its customers lose, this creates an inherent conflict of interest. The broker might be tempted to manipulate prices, widen spreads, or use other shady tactics to make traders lose money.
📌 2. Example 1: Broker Wins (Trader Loses)
Let’s look at an example where the B-Book broker profits because the trader loses.
📝 Trade Details:
👤 Trader Elsa goes long 100,000 EUR/USD at 1.1500.
🏦 B-Book Broker takes the opposite trade and goes short 100,000 EUR/USD at 1.1500.
📉 EUR/USD drops to 1.1400 (-100 pips).
😨 Elsa closes her position at a loss.
💰 P&L Calculation:
📉 Elsa’s Loss:
P&L = (Exit Price – Entry Price) × Position Size
💸 = (1.1400 – 1.1500) × 100,000
💸 = -$1,000
🏦 Broker’s Profit:
P&L = (Entry Price – Exit Price) × Position Size
💰 = (1.1500 – 1.1400) × 100,000
💰 = +$1,000
✅ Outcome:
✔️ Trader Elsa loses $1,000
✔️ Broker profits $1,000
📌 The broker benefits when Elsa loses money.
📌 3. Example 2: Broker Loses (Trader Wins)
Now let’s see what happens when the trader wins and the broker loses.
📝 Trade Details:
👤 Trader Elsa goes long 100,000 EUR/USD at 1.1500.
🏦 B-Book Broker goes short 100,000 EUR/USD at 1.1500.
📈 EUR/USD rises to 1.1700 (+200 pips).
🎉 Elsa closes her position at a profit.
💰 P&L Calculation:
📈 Elsa’s Profit:
P&L = (Exit Price – Entry Price) × Position Size
💰 = (1.1700 – 1.1500) × 100,000
💰 = +$2,000
🏦 Broker’s Loss:
P&L = (Entry Price – Exit Price) × Position Size
💸 = (1.1500 – 1.1700) × 100,000
💸 = -$2,000
❌ Outcome:
✔️ Trader Elsa wins $2,000
✔️ Broker loses $2,000
📌 The broker suffers a loss when Elsa wins money.
📌 4. Summary: How B-Book Brokers Profit
| Trader’s Outcome | Broker’s Execution (B-Book) | Broker’s Profit/Loss |
|---|---|---|
| Trader Wins | Broker takes opposite side | Broker loses |
| Trader Loses | Broker takes opposite side | Broker profits |
💡 B-Book brokers make money when traders lose money.
📌 5. What Happens If Too Many Traders Win?
B-Book brokers make easy money when most traders lose.
🚨 But what if too many traders win?
✔️ If the broker has too many profitable traders, it starts losing money.
✔️ This can become a serious risk if traders are skilled or markets move unexpectedly.
📌 How do brokers manage this risk?
They use a Hybrid Model:
🔹 Move profitable traders to A-Book (liquidity provider hedging)
🔹 Keep losing traders in B-Book
If a trader keeps winning, the broker may stop B-Booking their trades and instead hedge them externally to avoid further losses.
📌 6. The BIG Problem with B-Book Brokers
Because B-Book brokers make money from traders’ losses, some of them engage in shady tactics to make sure traders keep losing.
🚨 Shady Practices of Some B-Book Brokers: ✔️ Stop Hunting – Artificially pushing prices to trigger stop losses.
✔️ Widening Spreads – Increasing spreads before news events to wipe out positions.
✔️ Slippage Manipulation – Deliberately delaying execution to give traders worse prices.
✔️ Requotes – Preventing traders from opening profitable positions by changing the price.
✔️ Withdrawal Delays – Making it difficult for profitable traders to withdraw funds.
⚠️ B-Book brokers have full control over price feeds and execution. If they want you to lose, they can make it happen.
💡 Not all B-Book brokers are unethical, but the potential conflict of interest is real.
📌 7. How to Avoid Shady B-Book Brokers
✔️ Check their regulation – Are they licensed in a strict jurisdiction (e.g., FCA, ASIC, CFTC)?
✔️ Look for an A-Book broker – Brokers that hedge trades with real liquidity providers have less conflict of interest.
✔️ Avoid brokers with high bonuses – Big bonuses usually mean a high B-Book operation.
✔️ Test withdrawals – Try withdrawing profits before increasing your deposit.
✔️ Read reviews – Check trader complaints about price manipulation, spread widening, or stop hunting.
📌 A good broker should be transparent about its execution model (A-Book vs. B-Book).
📌 8. Key Takeaways
✔️ B-Book brokers take the opposite side of traders’ trades.
✔️ If you lose money, they profit. If you win, they lose.
✔️ There is an inherent conflict of interest in the B-Book model.
✔️ Some brokers use unethical tactics to ensure traders lose.
✔️ If you are consistently profitable, the broker may switch you to an A-Book.
✔️ Always check regulation, execution policies, and reviews before choosing a broker.
💡 Final Thought: If your broker profits when you lose, do you think they really want you to win? 🤔
