A-Book brokers do not make money from their traders’ losses. Instead, they generate revenue through commissions and spread markups. Let’s break down their business model and understand their financial incentives.
📌 1. A-Book Broker Revenue Model
Unlike B-Book brokers that keep risk on their books, A-Book brokers hedge every trade with liquidity providers (LPs) and instead make money in two key ways:
✔️ Commissions (charging a fee per trade).
✔️ Spread Markups (adding a markup to the bid-ask spread).
The key advantage of this model is that A-Book brokers do not have a conflict of interest with their traders.
The broker makes money regardless of whether traders win or lose.
📌 2. Revenue Stream #1: Commissions
🔹 A fixed commission is charged for every trade, typically based on trade size.
🔹 The commission is charged either:
- Per lot (e.g., $6 per standard lot).
- Per million USD traded (e.g., $60 per $1M).
- As a percentage of trading volume.
🔹 Example of Commission-Based Pricing
Let’s assume an A-Book broker charges $6 per standard lot (100,000 units).
📌 If a trader opens 10 standard lots, the broker earns:
✔️ $6 × 10 = $60
📌 If a trader opens 100 standard lots per month, the broker earns:
✔️ $6 × 100 = $600 per month
📌 If the broker has 1,000 active traders, each trading 10 lots per month, the broker earns:
✔️ $6 × 10 lots × 1,000 traders = $60,000 per month
✔️ Annual revenue: $720,000
📌 The More Volume Traders Generate, the More the Broker Earns.
This is why A-Book brokers prefer traders who trade frequently and in large sizes.
📌 High-volume traders receive commission discounts to encourage more trading.
Example:
🔹 Traders who generate $100M in volume per month might get a 33% commission discount.
🔹 Instead of $60 per $1M, they are charged $40 per $1M.
✔️ Encouraging profitable traders benefits the broker!
📌 3. Revenue Stream #2: Spread Markups
Instead of charging a commission, some brokers increase the spread between the bid and ask price.
🔹 The broker gets a better price from LPs but offers a slightly higher price to traders.
🔹 This small difference is the broker’s profit per trade.
🔹 Example: Spread Markup on EUR/USD
Let’s assume:
- Raw Spread (from LPs) = 0.1 pip
- Broker’s Spread (offered to traders) = 1.3 pips
- Broker’s Markup = 1.0 pip
💰 If a trader opens a 1-lot EUR/USD position (100,000 units):
✔️ 1 pip = $10 per standard lot
✔️ The broker earns $10 per trade
🔹 Spread Markup Revenue for Different Lot Sizes
| Trade Size | Broker’s Markup (1 pip) | Broker Revenue |
|---|---|---|
| 1 Standard Lot (100,000 units) | 1 pip = $10 | $10 per trade |
| 1 Mini Lot (10,000 units) | 1 pip = $1 | $1 per trade |
| 1 Micro Lot (1,000 units) | 1 pip = $0.10 | $0.10 per trade |
📌 Monthly Revenue from Spread Markups
Let’s assume the broker has 1,000 traders, each trading 10 mini lots per month:
✔️ 1 pip per mini lot = $1 per trade
✔️ 1,000 traders × 10 trades per month × $1 = $10,000 per month
✔️ Annual revenue: $120,000
📌 The More Traders and Volume, the More the Broker Earns
A-Book brokers are motivated to attract more traders and increase their trading volume.
📌 4. Commission vs. Spread Markup: Which is Better?
| Revenue Model | How It Works | Who It’s Best For |
|---|---|---|
| Commission-Based | Brokers charge a flat fee per lot traded. | Best for high-volume traders who prefer tight spreads. |
| Spread Markup | Brokers widen the spread slightly. | Best for casual traders who prefer zero commission trading. |
📌 Hybrid Model (Commission + Markup)
Some A-Book brokers combine both models:
✔️ Tight spreads with a small commission per trade.
✔️ Example: EUR/USD spread = 0.1 pip + $5 per lot commission.
🔹 This balances tight spreads for traders while ensuring broker profitability.
📌 5. Why A-Book Brokers Want Profitable Traders
Since A-Book brokers don’t profit from traders’ losses, their business depends on high trading volume.
✔️ The more traders win, the more they trade.
✔️ More trading = More spread and commission revenue.
✔️ This is why A-Book brokers want profitable traders.
📌 Why A-Book Brokers Avoid “Gambler” Traders
🔴 If traders lose all their money quickly, they stop trading.
🔴 This means less trading volume = less broker revenue.
🔴 Unlike B-Book brokers, A-Book brokers don’t want traders to “blow up” their accounts.
✔️ A-Book brokers want sustainable, long-term traders.
✔️ They prefer experienced traders who trade frequently in large volumes.
📌 6. Challenges of Running an A-Book Brokerage
While A-Book brokers offer fair execution and transparency, their business model has challenges.
🔹 1. Requires High Trading Volume
✔️ Micro lot traders (1,000 units) generate very little revenue (~$0.10 per trade).
✔️ Brokers need thousands of traders to generate profits.
🔹 2. Competitive Market
✔️ Spreads & commissions must be competitive to attract traders.
✔️ Marketing costs are high to acquire new clients.
🔹 3. LP Costs & Execution Risks
✔️ Brokers pay fees to liquidity providers for executing trades.
✔️ LP execution delays can affect trade pricing.
📌 7. Monthly and Yearly Revenue Projections
Let’s calculate potential A-Book broker revenue.
🔹 Monthly A-Book Revenue (from Mini Lots)
| Number of Traders | 10 Mini Lots/Month | 30 Mini Lots/Month |
|---|---|---|
| 100 Traders | $1,000 | $3,000 |
| 500 Traders | $5,000 | $15,000 |
| 1,000 Traders | $10,000 | $30,000 |
| 5,000 Traders | $50,000 | $150,000 |
🔹 Annual A-Book Revenue (from Mini Lots)
| Number of Traders | 10 Mini Lots/Month | 30 Mini Lots/Month |
|---|---|---|
| 100 Traders | $12,000 | $36,000 |
| 500 Traders | $60,000 | $180,000 |
| 1,000 Traders | $120,000 | $360,000 |
| 5,000 Traders | $600,000 | $1,800,000 |
📌 A-Book brokers need a large number of active traders to be profitable.
📌 8. Summary: Why A-Book Brokers Are Different
✔️ No conflict of interest – They don’t profit from traders’ losses.
✔️ Earn revenue from commissions & spreads – NOT from traders losing.
✔️ Prefer skilled, profitable traders – Because more trading = more revenue.
✔️ Need high trading volume – To maintain profitability.
📌 Final Thought: A-Book Brokers Want You to Succeed
💡 Unlike B-Book brokers that profit from your losses, A-Book brokers profit when you trade more.
💡 This means they actually want traders to succeed.
If you want fair execution, transparency, and a broker that doesn’t trade against you, A-Book brokers are the way to go. 🚀
