STP (Straight-Through Processing) brokers pass orders directly to liquidity providers. ECN (Electronic Communication Network) brokers connect multiple participants in an electronic network. Market Maker brokers act as the counterparty to client trades. STP and ECN are A-Book models, while Market Maker is typically B-Book, each with different order execution approaches and conflict of interest levels.

Brokers use advanced risk management models including protective stops, position trading limits, dynamic switch capabilities, and internal hedging strategies. During surging volatility, B-Book brokers may increase spreads or implement re-quotes, while A-Book brokers rely on their liquidity provider relationships to manage execution quality.

C-Book typically refers to a broker’s own proprietary trading book, where the firm trades its own capital separately from client operations. However, in modern brokerage industry terminology, C-Book often describes advanced hybrid forex broker models that use sophisticated client segmentation and predictive analytics to optimize execution across both A-Book and B-Book approaches.

Algorithmic traders significantly impact brokerage risk management. In B-Book models, sophisticated algorithms can exploit price inefficiencies, causing substantial losses. A-Book models handle algorithmic trading better by passing all orders to liquidity providers. Hybrid models use dynamic switch technology to route algorithmic traders’ orders directly to the interbank market while keeping less sophisticated clients on the B-Book.

Regulatory compliance varies significantly by model. A-Book brokers typically face fewer conflicts with regulators due to transparent order execution. B-Book operations require careful disclosure of the counterparty relationship and robust risk management documentation. Hybrid models must clearly explain their order processing flow and client segmentation practices to maintain regulatory compliance across different jurisdictions.