Mitigate risks. Optimize profits.

Brokers often adopt the risk-in-house model to execute trades within their ecosystem using market data from the provider. Although this approach is cost-effective and reliable, it has several drawbacks.

This model creates a conflict of interest between brokers and traders, as brokers profit from trader losses. As traders become more efficient, the company’s expenses increase, forcing brokers to raise commissions and reduce compatibility, making them less appealing to existing and potential clients.

To balance these processes, brokers must continually attract new clients, which increases operational risks.

Furthermore, brokers may lack transparency in the pricing process, resulting in unfavorable rates for the client.

The model has gained significant popularity within the trading industry due to its advantages:

• Fast execution under normal conditions;
• Reliable execution irrespective of available market volume;
• Brokers may benefit when traders lose.

The pure b-book execution model also poses significant challenges, such as:

• Expenses increase as traders improve their skills;
• Losses reduce the lifetime value of a client;
• Brokers find themselves in a cycle where they only earn more by attracting more clients.

To avoid these operational risks by adjusting your execution model and finding a balance between the pure risk-in-house model and the hybrid model. Efficient brokers hedge trades to mitigate risks.  

The hybrid execution model combines elements of both the a-book and b-book. This model has several advantages. 

• It allows the broker to manage risk effectively by hedging client trades with liquidity providers while retaining some risks. 
• The broker can offer traders more competitive spreads and lower commissions. 
• It allows brokers to utilize both market liquidity and the broker’s internal liquidity, ensuring that trades are executed efficiently with minimal slippage.

The best way to do it is by the multi-platform Liquidity Bridge by Brokeree Solutions.

Use Liquidity Bridge to create various trade execution groups; execute high-performance traders on the LP while processing the other group in-house.

Multi-server Liquidity Bridge is a comprehensive solution that combines advanced order execution, smart liquidity aggregation, and risk management.

Available trading platforms: MT4, MT5, DXtrade CFD, cTrader

• Flexible hybrid order execution;
• Smart quotes aggregation;
• 30+ integrated liquidity providers.