TradingAdvanced#Brokers#Execution
A-Book vs B-Book
A
Definition
Industry labels often used for external order routing, principal dealing, or a mixture of both. Their meaning and applicable rules depend on the firm, product, jurisdiction, and account agreement.
Source reviewed
- Investor.gov: Executing an order opens in a new tab
Supports: Investor.gov explains that brokers can route orders to exchanges, market makers, ECNs, or internalize from inventory, and discusses best-execution considerations.
- Investor.gov: Brokers opens in a new tab
Supports: Investor.gov advises understanding how a broker is paid, its conflicts, services, fees, and disciplinary history before selecting it.
Concept Diagram
Key Takeaways
1
A-Book and B-Book are non-universal commercial labels, not execution guarantees
2
A broker may route, internalize, or deal as principal depending on the account and product
3
Principal dealing can create conflicts; it does not alone prove misconduct or poor execution
4
Review entity, disclosures, costs, route, fills, and complaint process for the specific account
Practical Example
Before opening an account, a person obtains the agreement, execution and conflict disclosures, entity details, fees, and regulator record. After using a permitted demo or small account, they compare their own quotes and fills with the stated policy. They do not infer misconduct from an A-Book or B-Book label alone.
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Related Terms
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Prop Firm (Proprietary Trading Firm)A firm that offers a trading evaluation, simulated account, or a proprietary-capital arrangement under its own terms. The label alone does not establish real capital, registration, payout, or customer protection.
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Wash TradingTransactions that create the appearance of trading without a bona fide change in market risk or beneficial ownership. The legal definition and enforcement scope depend on the instrument and jurisdiction.
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Order Flow ToxicityA market-microstructure concept for adverse-selection risk faced by liquidity providers when order flow may contain information. It is a modelled property, not proof that a trader is informed or that a trade will profit.
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SlippageThe difference between a quoted or expected trade result and the result that can execute under the protocol's state and limits.
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