Can anyone explain what my broker is?

Broker Discussion Forex Brokers
#1

Good day BP community! So yesterday, I opened an account with a broker. Went and tested their overall services, and also tried their live chat feature. I have talked to an agent and I curiously ask whether they are an A Book or B Book broker. My question was simplistic because I am fairly new to the forex business. And so, they replied the quote below, which I find quite confusing. Here is what they have replied:

“We don’t differentiate client flow. In our view every trade taken in isolation has mathematically the same chance of being a successful trade. We therefore internalize (match off against other client trades in the other direction) as much as possible within symmetrical (long /short) risk limits. Where we breach those risk limits we would then hedge the exposure, by trading in the underlying market.This hedging is asynchronous, meaning we don’t initiate hedging trades based on any one order / client; instead do so based on the net exposure of the group.”

So, what did this quote really meant? Are they an A Book or Book broker?
Given their answer, what are the implications, pros and cons, of trading with this broker?

Thank you for taking the time to read my post, I really meant it.

- Brylle M.

Grit for a newfound passion
#2

The significance is that through no action or fault of yours, the broker will vary their spreads to a huge degree if they need to limit their overall risk exposure. Widening spreads is an instantaneous and potentially profitable way of doing this.

This can seriously affect short-term traders, whose entry, stop and exit orders are likely to be very close to price. even long-term traders can get caught out by wide spreads, particualrly around high-impact news events or just around the week’s Asian session opening.

What they have said is they are not hunting anyone’s stops in particular, they’re protecting themselves from everybodies’ entry and TP orders.

3 Likes
#3

i agree with everything @tommor said above (obviously!)

they’re not pretending (as many brokers do) to be “STP” or “NDD” or “ECN”, but they’re saying that after the balancing out of their clients’ long/short positions, the group’s overall liability (net imbalanced risk) may be laid off via a liquidity provider

they’re claiming to be partly A-book, at least regarding their own net risk, while not giving you much specific information, in other words sometimes they’ll be your counterparty and at other times (they say) not

all the above (though it could be answered at length!) is actually barely relevant to that question at all

all that really matters, Brylle, is where and by whom your account is regulated: if that’s ok, you can use them “as safely as you can effectively get”, noting tommor’s comments above

3 Likes
#4

Thank you tommor for answering, there is so much to learn indeed not only Technical Analysis-wise but also broker-wise! Much appreciated my friend!

#5

Crystal clear! Thank you so much for taking time to reply to my post!

1 Like
#6

This broker is kinda doing a mix of A and B book. They match trades between clients in-house when they can. When there’s too much risk on the table, they’ll hedge by making trades in the real market to balance things out.

  • They don’t guarantee market execution for every trade.
  • There might be times when trades are slower to execute.
  • The way they manage trades in-house could mean they have a vested interest in the outcome.
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#7

It appears that they operate as a hybrid broker, primarily functioning as a matching engine for their clients. In instances where a perfect match isn’t feasible, they may assume the opposite side of your trade. When faced with a risk limit due to an excess of clients trading against them, they have the capability to transfer this risk to another counterparty, such as another broker or liquidity provider, through engaging in hedging trades.