Dealing Desk Brokers (Market Maker Brokers)
A dealing desk broker, often called a market maker broker, is a broker that can take the opposite side of your trade on its own internal book instead of always routing it directly to the external market. In this model, the broker "makes a market" to its clients by quoting bid and ask prices and deciding when to hedge client positions with external liquidity providers.
Understanding the A-Book vs B-Book Model
This is sometimes referred to as A-book vs B-book routing: the broker can send some trades out to the market (A-book) and keep others internally (B-book).
💡 Dealing desk models are common in retail FX and CFD trading and are not automatically "good" or "bad" – it depends on how they are managed and regulated.
How Does a Dealing Desk Broker Operate?
In a dealing desk setup, the broker sits between you and the wider market as a principal:
- The broker quotes bid and ask prices on its platform, often based on prices from external liquidity providers.
- When you place a trade, the broker can take the other side internally rather than immediately hedging externally.
- The broker monitors its overall exposure and decides which positions to hedge in the external market and which to keep.
- Profits and losses from internalised client trades affect the broker's own P&L.
🏢 The "dealing desk" is the part of the firm (sometimes automated) that manages this risk and hedging process.
What Is A-Book vs B-Book Routing?
Many dealing desk brokers use a blended approach to routing client orders:
A-Book Flow
Client trades are hedged externally with liquidity providers, banks or ECNs. The broker earns mainly from spread markups and/or commissions.
B-Book Flow
Client trades are kept on the broker's internal book. The broker effectively takes the other side of these trades and may profit when those clients lose.
Brokers may classify clients or strategies (for example, high-frequency scalpers vs longer-term traders) and route different flow types differently.
⚠️ This is where potential conflicts of interest arise, and why transparency and regulation are important in dealing desk models.
How Do Dealing Desk Brokers Make Money?
Dealing desk brokers have several revenue streams:
💰 Spreads
They typically quote an all-in spread that includes their markup over raw interbank spreads.
📋 Commissions
Some also charge explicit commissions, especially on certain account types.
📊 B-Book P&L
On internalised flow, the broker may profit if clients are net losing over time.
Reputable brokers manage this with risk controls, hedging policies and compliance rules. Regulators may require fair execution standards, best-interest policies and clear disclosures.
Example: Internalising vs Hedging a Client Trade
Imagine you open a 0.5 lot long position on EUR/USD with a dealing desk broker:
- The broker checks its overall exposure and historical performance of similar clients.
- If its internal book is currently short EUR/USD and the broker expects many small retails to lose on average, it might internalise your trade (B-book) and not hedge it externally.
- If a larger or more sophisticated client places a big order, the broker might hedge externally (A-book) to avoid large directional risk.
- Your platform experience (spread, execution) may look the same in both cases, but the broker's risk and incentives differ.
Key Point: This is why understanding the model matters, even if you can't see the routing in real time.
What Does a Dealing Desk Model Mean for Retail Traders?
For retail traders, dealing desk models have both pros and cons:
✅ Potential Advantages
- Simpler pricing: All-in spreads without separate commissions can be easier to understand.
- Stable conditions on small sizes: Brokers can sometimes offer attractive conditions for small-ticket flow.
- Flexibility in risk management: Brokers may absorb short-term volatility instead of passing every tick directly to the client.
❌ Potential Drawbacks
- Inherent conflict of interest: On B-book trades, the broker may profit when clients lose.
- Execution risk: Poorly managed dealing desks may be tempted to widen spreads, delay fills or use other practices that hurt clients, especially if unregulated.
- Lower transparency: You usually cannot see whether your trades are A-booked or B-booked.
💡 The key is not avoiding all dealing desks, but choosing well-regulated, transparent brokers with strong reputations and clear execution policies.
Common Misconceptions About Dealing Desk Brokers
"All market maker brokers are scam brokers."
Not true. Many large, reputable brokers operate dealing desks under strict regulation. The problem is unethical behaviour, not the model itself.
"STP/ECN is always safer than dealing desk."
A well-regulated dealing desk can be safer than a poorly regulated "ECN" broker. Regulation, capital strength and conduct matter more than marketing labels.
"Dealing desks always hunt your stop losses."
Price spikes around stops often reflect wider market liquidity and volatility, not necessarily deliberate manipulation. That said, unethical practices have existed, which is why regulation and broker selection are important.
Quick Checkpoint: Do You Understand Dealing Desk Brokers?
Check if you can answer these questions:
- What is the main difference between a dealing desk broker and an STP broker?
- What do "A-book" and "B-book" mean in practice?
- How do dealing desk brokers typically earn money?
- What are the main risks and potential benefits of trading with a dealing desk broker?
Tip: If you can explain these clearly, you have a realistic view of one of the most common broker models in retail trading.
Frequently Asked Questions: Dealing Desk Brokers
Can a broker switch clients between A-book and B-book?
Yes. Many brokers use internal risk models to classify clients and strategies, routing some flow to external LPs and other flow to their internal book. This should be governed by clear policies and, ideally, disclosed at a high level in documentation.
Is it possible to know if I am A-book or B-book?
You usually can't know for sure on a trade-by-trade basis. However, patterns in execution, broker disclosures and regulatory filings can give clues about how the broker generally operates.
Are fixed-spread accounts always dealing desk?
Fixed spreads are more common with dealing desk models, because the broker internalises risk to maintain fixed pricing. However, some brokers may use a mix of internalisation and external hedging to support fixed or semi-fixed spreads.
Should beginners avoid dealing desk brokers?
Not automatically. Beginners should prioritise regulation, reputation, transparency, education and support. If those are strong, a dealing desk model can be perfectly acceptable for learning and smaller accounts.
Summary: Where Dealing Desk Brokers Fit in Market Structure
Dealing desk brokers (market maker brokers) quote prices and can take the opposite side of client trades on their internal book, deciding when to hedge externally and when to keep exposure. This allows them to offer simple, all-in pricing, but also creates potential conflicts of interest, especially on B-book flow.
For retail traders, the key is to understand the model, choose well-regulated and transparent brokers, and focus on real conditions – spreads, execution, slippage and support – rather than just marketing terms.
Next Steps: In the next topics, you'll move on to core trading mechanics such as the bid-ask spread, price discovery, slippage, execution speed and market depth, tying together how broker models connect to your real trading experience.
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