ON THIS PAGE
The distinction concerns execution and exposure
A-Book commonly describes an arrangement in which client execution or exposure is passed to external counterparties. B-Book commonly describes an arrangement in which the broker retains exposure internally. Hybrid arrangements combine policies. Actual order handling depends on the architecture and agreements; a marketing label does not describe every step of the order lifecycle.
Routing and hedging are related but different
An individual client order may be routed externally, while exposure management may also act on aggregated positions. Keep the order execution path distinct from the process used to manage the broker’s exposure. Documentation should explain what the routing rules do and which records support reconciliation across systems.
Technology requirements for each policy
External connectivity needs instrument mapping, session health and reliable handling of execution reports and rejects. Internal exposure management needs accurate account and position state. A hybrid policy also needs deterministic selection rules and control of changes. All arrangements require operational visibility; a routing toggle alone is not a risk-management process.
What to do when a destination fails
Define the behaviour for unavailable counterparties, stale prices and uncertain order state. Decide whether a request is rejected, held or handled under an agreed fallback policy. A new destination must have compatible instrument definitions. Avoid interpreting a timeout as permission to send an indistinguishable duplicate order elsewhere.
Compare policies through evidence
Ask how an operator can identify the rule used, destination selected and final recorded outcome. Test outages and rule changes before production activation. The architecture should make responsibilities clear and support investigation; it does not determine the commercial suitability of a business model or guarantee its profitability.