Forex Brokerage Business Model: A-Book, B-Book and Hybrid Explained

A forex brokerage makes money from the spread, commissions and overnight financing its clients pay, and, if it runs a B-book, from the dealing result on the client positions it keeps. Its business model is the choice between passing client exposure to the market (A-book), keeping it (B-book) or mixing both (hybrid). TradeCore runs the CRM and back office around whichever model a broker chooses.

The execution model is the decision that shapes the rest of the business: where revenue comes from, how much market risk the broker carries, what liquidity it needs and what its regulator will ask about conflicts of interest. This guide explains each model as the industry uses it. If you are setting a brokerage up from scratch, the steps are in how to start a forex brokerage.

How do forex brokers make money?

Every forex and CFD broker earns from some mix of five sources. Which ones matter most depends on the execution model:

• Spreads. The difference between the bid and ask price the client sees. An A-book broker earns a markup on top of the liquidity provider's spread; a B-book broker keeps the whole spread.
• Commissions. A fee per lot or per trade, typical on raw-spread or ECN-style accounts where the spread itself is kept tight.
• Swaps and financing. The overnight charge or credit on positions held past the daily rollover, set by the broker within the rates its liquidity provider charges or pays.
• B-book dealing P&L. When the broker keeps a client's exposure, the price movement on that position is the broker's residual gain or loss, counted on top of the spread and commission it has already earned: a client's net market loss is the broker's gain and a client's net profit is the broker's cost.
• Other fees. Account fees, inactivity fees, deposit or withdrawal fees and currency conversion, depending on what the broker publishes in its terms.

Partners sit on the cost side of the same sheet. Introducing brokers (IBs) and affiliates are paid out of that revenue, so the commission plan has to be priced against how the broker actually earns on the clients they bring.

What is an A-book broker (STP/ECN)?

An A-book broker passes the market exposure of each client trade on to an external liquidity provider, so the risk sits in the wider market rather than with the brokerage. It earns from the spread markup and commissions whether the client wins or loses.

How the exposure is passed on depends on the broker's set-up. Under agency execution the broker transmits the order and is not the client's counterparty; under matched-principal execution the broker is the client's counterparty but enters an identical offsetting trade with its liquidity provider at the same moment.

Brokers describe A-book execution as STP (straight-through processing, orders routed to one or more liquidity providers) or ECN (orders matched in a pool of liquidity, usually with a raw spread and a separate commission). The A-book broker's business depends on volume: income grows with the number of lots its clients trade, and it needs liquidity relationships, a bridge to its trading platform and enough capital to meet its providers' margin requirements.

What is a B-book broker (market maker)?

A B-book broker, or market maker, keeps client trades in-house and acts as the counterparty to them. When the client closes at a loss, the broker gains; when the client closes at a profit, the broker pays it out of its own capital.

The model keeps the spread, any commission and the residual dealing P&L on client positions inside the brokerage, and it needs no liquidity provider for the flow the broker keeps. In exchange, the broker carries market risk and a conflict of interest with its own clients. Regulators expect that conflict to be identified and managed: in the EU, MiFID II requires firms to manage conflicts of interest and to take sufficient steps to get the best possible result when executing client orders.

What is a hybrid model and how do brokers route clients?

A hybrid broker runs both books at once: some client flow is passed to the market, some is kept on the B-book, and the dealing desk manages the split. The aim is to keep the risk the broker is comfortable holding and pass on the rest.

Routing decisions are commonly made on criteria such as these:

• Client profile. Consistently profitable or high-volume traders are often routed to the A-book; smaller retail flow is often kept.
• Trade size. Large orders that would concentrate risk are passed on.
• Instrument and market conditions. Thin or volatile markets may be hedged rather than held.
• Net exposure. The desk hedges the brokerage's overall position once it passes a limit the broker sets, rather than trade by trade.

A hybrid broker still owes clients best execution and has to explain its execution approach in its order execution policy. In the UK, the FCA sets out best-execution obligations in COBS 11.2A.

A-book vs B-book compared

The three models differ on who takes the market risk, where revenue comes from and what the broker needs to run them:

Retail CFD rules apply whichever model a broker runs. In the UK, FCA COBS 22.5 sets leverage limits, a margin close-out rule and negative balance protection for retail clients, so a retail client cannot lose more than the funds in their CFD account. Separately, regulatory capital requirements apply according to the permissions the firm holds; see forex broker licence jurisdictions.

Where do IBs and affiliates fit in the revenue model?

Introducing brokers and affiliates bring clients in exchange for a share of what those clients generate. How they are paid has to follow how the brokerage earns: a per-lot rebate tracks volume, which suits A-book revenue, while a fixed fee per funded client (CPA) pays on acquisition regardless of what the client later trades.

TradeCore's IB Suite pays commission in three categories: Trade-Based (per-lot, SSV or hybrid rates), CPA and Prop Challenge, across unlimited partner levels, with partners working from their own Partner Hub. TradeCore's free plan runs the IB programme with per-lot Trade-Based commission and one sub-level; Core adds CPA and Prop Challenge commissions, unlimited partner plans and deals, and the tier programme. The structures themselves are explained in IB commission structures.

What goes into a forex brokerage business plan?

A forex brokerage business plan turns the model into numbers and decisions a licensing authority, a bank or an investor can check. Most plans cover the same ground:

• 1. Target clients and regions — retail or professional, and which countries you will onboard from.
• 2. Products — spot FX, CFDs on indices, commodities, shares or crypto, and the account types you will offer.
• 3. Execution model — A-book, B-book or hybrid, with the liquidity relationships and risk limits that follow.
• 4. Jurisdiction and licensing — which regulator, which entity structure, and where the licensing work stands.
• 5. Revenue model — spreads, commissions, swaps and fees per account type.
• 6. Acquisition — IBs, affiliates and direct marketing, and what each costs per funded client.
• 7. Technology — trading platform, CRM and back office, client portal, payment providers and KYC.
• 8. Capital and costs — regulatory capital, margin with providers and running costs; see how much it costs to start a forex brokerage.
• 9. Compliance and controls — onboarding and verification, client money, conflicts of interest and order execution policies.

Write the execution model and the revenue model together. A plan that projects B-book revenue but budgets only for A-book capital, or prices IB rebates above what an A-book account earns per lot, fails the first serious review.

Running the business on TradeCore

Whichever model a broker runs, the business around the trades is the same: clients sign up and get verified, deposit and withdraw, open trading accounts, get support and come in through partners. TradeCore is the CRM and back office for FX/CFD brokers that runs that layer, with a white-label client portal under the broker's own brand and domain. On TradeCore's CRM, every client has one record with 17 tabs in 7 groups, and TradeCore never deletes data.

• Trading platforms. TradeCore connects to 8 trading platforms: MT4, MT5, cTrader, DXtrade, MatchTrader, TradeLocker, ScaleTrade and TraderEvolution.
• Payments. 100+ PSPs and 300+ payment methods, with withdrawals through a priority-ordered approval chain.
• KYC. TradeCore Compliance routes verification across 5 KYC providers: SumSub, Onfido, Cellbunq, GBG and ComplyAdvantage.
• Partners. The IB Suite's three commission categories, on the same client and trading records.
• Reporting. Sales, trade, team, support, KYC and finance reports come with the Reporting & statistics add-on on Core, at €300 a month.

TradeCore is forex brokerage software for new FX/CFD brokers, and a new brokerage can set up its flows, portal and connections on TradeCore's free plan alongside its licensing work. Start free. Add only what you need: the free plan's shop lifts single limits, and Core is €2,500 a month, flat, with capacity packs that stack with no ceiling and no per-trader, per-trade or setup fees. For how a forex CRM fits the stack, see the forex CRM guide.

Related guides

• How to start a forex brokerage: a step-by-step guide
• How much does it cost to start a forex brokerage?
• Forex CRM: what brokers need from one
• IB commission structures for forex brokers