There’s Always a Market Maker. But Should It Be Your Broker?

In this article, I’ll put on two hats and explore both sides of the argument — but don’t worry, I won’t sit on the fence.

My name’s Sam, and I’ve worked for brokers for 17 years. But I’ve always been a trader first. So I get why brokers like to be market makers - and I get why traders see it as a red flag.

Why This Matters

As a trader, your goal is (I presume) wealth creation.

You’re not here to pay your broker, and you want to keep as much of your profits as possible.

That’s why it’s worth understanding how trade execution works behind the scenes. It could have more impact on your bottom line than you think.

Market Making Is Inevitable

Let’s be clear: in forex, there is always a market maker.

Market making is when the counterparty you trade with sets the price and takes the opposite side of your trade. This is different to an agency model, where your broker passes your trade to the underlying market.

In equities, brokers route your orders to a central exchange - unless they’re a literal “bucket shop” (yes, that’s where the term comes from - putting the order in a bucket). But in forex, there is no centralised exchange. So if your broker isn’t the market maker, the liquidity provider is. And if not them, then their liquidity provider. Ultimately, your trade ends up with a prime broker, a bank like Citi or Deutsche, whose job is to make the market.

So, the point is: market making happens somewhere,  whether it’s your broker or not.

The Case For Market Making

Market making is the default model for most brokers - and for good reason.

It allows brokers to run what’s called a B-book (no, the “B” doesn’t stand for “bucket”). Trades aren’t passed to the market — they’re internalised. That means the broker profits when clients lose and pays out when they win.

Brokers usually operate multiple books — A, B, C, even D-books — depending on trader behaviour and risk.

• A-book: Trades are passed through to the underlying market or liquidity provider.
  

• B-book: Trades are held in-house. The broker takes the other side.
  

• C/D-book: Perhaps used for high deposit accounts where some of the risk is off-set.
  

Why do brokers do this? Because, after spreads and costs, they make an average of $50 per million traded on the B-book. It doesn’t sound like much, but for brokers processing billions in daily volume, it adds up fast.

Brokers argue that as long as execution is identical, the client isn’t harmed. In fact, better margins allow them to improve spreads, platforms, and service.

Sounds fair?

The Case Against Market Making

The problem is incentives.

When a broker profits from client losses, their interests are no longer aligned with the trader. They may say, “Don’t worry, we A-book the profitable clients.” But in practice, few brokers truly focus on finding consistent winners — the pressure for B-book profits is simply too strong.

This shows up in common industry practices:

• Deposit Bonuses: If a bank offered to top up your account by 50%, you’d call it a scam. Yet in FX, clients expect it. Why? Because brokers are not topping up anything real — they’re running accounts with deposit bonuses on the B-book. Most of these bonus will never see the light of day.
  

• High Leverage: The fastest way to blow up an account is with small capital and big leverage. Yet that’s exactly what brokers promote. Why? Because it benefits the B-book.
  

When I worked for Invast, we had the best client retention in the industry. We restricted leverage and required large deposits. This was very good for clients and helped them with their wealth creation goals. 

So why isn’t that the norm? Because most brokers are making the majority of their money from the B-book and everything about their model is designed to support that outcome.

The Real Question

Ask yourself this:

‘If brokers couldn’t profit from trader losses, how would the industry change?’

Seriously, sit with that question. You’ll see that the biggest issue in FX isn’t leverage or volatility or regulation.

It’s the B-book.

The Broker’s True Role

A broker should be on the trader’s side — standing between the client and the market, working to secure the best execution and fairest pricing possible.

Beyond that, their job should be to help traders achieve what they came for: wealth creation.

So, Should Your Broker Be a Market Maker?

No.

There’s always a market maker. But it shouldn’t be your broker. 

The conflict between what you are trying to achieve and what they are is too great.