Order Routing Models Explained
How forex brokers handle your orders: A-Book, B-Book, Hybrid, NDD, and Smart Order Routing. Understanding these models is essential for evaluating broker transparency.
Why Routing Matters
The way a broker routes your order determines whether they profit from your losses, have a conflict of interest, or operate as a neutral intermediary. Most retail brokers do not clearly disclose their routing model, making it one of the most important transparency criteria in the BTI scoring methodology.
A-Book (Agency Model)
In the A-Book model, the broker passes your order directly to an external liquidity provider (LP). The broker earns revenue through commissions or spread markup, and does not take the opposite side of your trade.
- Conflict of interest: Low. The broker profits regardless of your trade outcome.
- Transparency signal: Naming LPs and publishing fill data strengthens the A-Book claim.
B-Book (Dealing Desk / Market Making)
In the B-Book model, the broker internalizes your order and takes the opposite side. If you lose, the broker profits directly. This creates an inherent conflict of interest.
- Conflict of interest: High. The broker benefits from client losses.
- Transparency signal: Honest disclosure of B-Book practices (including when/why orders are internalized) is a positive sign.
B-Book is not inherently “bad” -- many regulated brokers operate B-Book profitably and ethically. The issue is when brokers claim to be NDD/STP while internalizing a significant portion of flow without disclosure.
Hybrid Model
Most large retail brokers use a hybrid approach: smaller or less profitable orders are internalized (B-Book), while larger or institutional-grade orders are routed externally (A-Book). The criteria for routing decisions are rarely disclosed publicly.
- Conflict of interest: Medium. Depends on the proportion and criteria for internalization.
- Transparency signal: Disclosing the hybrid nature and the criteria for routing decisions is relatively rare and scores well on BTI.
No Dealing Desk (NDD)
NDD brokers do not operate a dealing desk that intervenes in order execution. Orders are matched against external liquidity. This model emphasizes the absence of manual dealer intervention and price manipulation.
- Conflict of interest: Low, provided the NDD claim is verifiable.
- Transparency signal: Publishing execution analytics, routing logic, and LP relationships supports the NDD claim.
Smart Order Routing (SOR)
SOR technology automatically routes each order to the venue or liquidity provider offering the best available price at the moment of execution. SOR is standard in institutional markets and increasingly adopted by retail brokers.
- Conflict of interest: Low if SOR is genuinely best-price-seeking.
- Transparency signal: Explaining SOR logic, venue selection criteria, and publishing routing statistics is the gold standard for transparency.
Comparison Table
| Model | Conflict Level | Revenue Source | Disclosure Rarity |
|---|---|---|---|
| A-Book | Low | Commission / Markup | Moderate |
| B-Book | High | Client losses + Spread | Rarely disclosed honestly |
| Hybrid | Medium | Mixed | Very rare |
| NDD | Low | Commission / Markup | Moderate |
| SOR | Low | Commission | Rare (institutional standard) |
How BTI Evaluates Routing
In our scoring methodology, Order Routing is one of six pillars worth up to 20 points. We award full points when a broker:
- Explicitly names their routing model
- Discloses liquidity provider relationships
- Explains SOR or routing decision logic (if applicable)
- Describes how conflicts of interest are mitigated
Browse the Broker Directory to see which brokers score highest on routing disclosure.