Essentially you’ve just regurgitated what had already been discussed - no disrespect intended.
As for running your own retail brokerage/middle person/risk taker…the list goes on, I’m sure you would equally appreciate that retail brokers do not have to tell you which business model they run (at least they don’t have to be totally honest). No level of due diligence will uncover a potential clouded truth, unless you have some internal information to hand, unlikely on both counts.
Secondly, I don’t see anything wrong with a broker operating both A-Book and B-Book - the reality is that most brokers do indeed use this hybrid approach. As discussed in many trading books (ones of which are endorsed and incredibility well published) retail clients tend to all start under B-Book status. This makes sense as most traders lose, it’s easy money for the broker - without the need for the broker to manipulate any aspects of your trade.
Only when you become profitable, net aggregated, does the retail broker push you on to A-Book status. As said, this is when your orders are either past to market or the broker hedges against any open risk that you have. The ethical problem you run into with A-Book is that of retail brokers front running their successful traders (makes logical sense when they know that these elite group of individuals happen to know what they are actually dong. A rarity in this industry)
So going back to the original question, there is no way in earth that any pure retail broker is 100% A-Book. It’s an inefficient business model, and with margins so tight for the broker they are not going to ignore this additional element of income. It’s not illegal, it’s also openly discussed by some of the biggest retail brokers on line. These brokers suggest that at a retail level they will off-set all client net-longs against net-shorts (these trades never hit the REAL market). It’s up to the retail broker if they then want to pass to market any exposed risk.
We all know that you never buy or sell anything when using a retail broker - a clear fine cut distinction between that of a commercial broker, hence True ECN. Lets not fool anyone here, True ECN does not exist in retail brokers. Retail brokers simply ‘fabricate’ an account to reflect ECN. The costs are too high for a retail broker to offer True ECN given the pathetic deposit amounts that retail traders make.
Finally, there is nothing wrong with a retail broker having a hybrid of both A-Book and B-Book. What is wrong is when they start to manipulate trades.
Two different aspects that NO level of external due diligence is going to answer
Edit: A little birdy has pointed out that I am actually wrong, at least on a technicality of how I defined a ‘retail broker’. When I say ‘retail broker’, I am talking of the many many brokers whereby you can [perhaps open an account with less than $10k]. Interactive Brokers (IB) is classed as a retail broker, legally, even though I’d push it more into the realms of a ‘professional/commercial’ broker; they are however a retail broker by definition and A-Book only - contrary to what I have argued above!