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Hybrid book

A broker that sorts clients between internal and external execution, hedging some flow and keeping the rest, based on profitability and risk models.

Almost all large retail brokers run this way. Software scores each account and routes accordingly: consistent winners and large orders go to the a-book, the remainder stays in the b-book. The classification is dynamic and invisible to the client.

It is not inherently improper, and it is normally disclosed in the terms of business. What matters to a trader is whether execution quality changes with performance, which is visible in slippage statistics over time.

Example: a trader's average fill slippage is plus 0.1 pips for six months while unprofitable, then minus 0.6 pips after a strong run. That pattern is consistent with being moved between books.

Related: a-book, b-book, slippage, best-execution

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Slippage on a market orderA buy order clears four price levels, so the average price paid is worse than the price first quoted.Buy 1,000 shares at marketpricesell orders resting (bar length = size)20.04300 shares20.03200 shares20.01200 shares20.00300 sharesnothing resting at 20.02order sweeps up the bookaverage fill 20.02SLIPPAGE0.02 a share$20.00 in totalintended 20.00Each level fills at its own price; the average is what you really paid.
Slippage on a market order. You click at 20.00, but only 300 shares are resting there, so the rest of the order fills at 20.01, 20.03 and 20.04. The average price paid is 20.02, and that two-cent gap is slippage.

Educational only, not advice. Spotted an error? Post in Site Feedback.