A-book vs B-book in practice: how a dealing desk sees and manages exposure

What does a dealing desk watch during the trading day?

The A-book and B-book term page defines the two models. This guide follows the desk that runs them and decides, hour by hour, how much client risk the broker keeps.

• Net exposure per symbol: client longs minus client shorts on the broker's own book, in lots and in account currency, with the hedged share beside it.
• Net exposure per client group: retail, professional, each introducing broker's (IB's) clients, copy-trading followers. Routing, leverage, margin and swaps are set per group, so groups are where the desk acts.
• Floating profit and loss of the B-book, and concentration: how much of a symbol's exposure sits with a handful of accounts, or with accounts that trade together.
• Accounts near margin call or stop-out, because a run of close-outs in a fast market changes exposure in seconds.
• The calendar and the hedge side: rate decisions and the daily rollover, when spreads tend to widen, and fills, rejections and slippage at each liquidity provider.

Copy trading adds a twist: one leader's trade can arrive as many follower orders at once, so mirrored flow is best read as one exposure line per leader. The copy trading guide explains the mirroring.

How does a desk profile clients and spot toxic flow?

Toxic flow is the desk's name for orders that win because the client sees a price or a headline before the broker's quote catches up. Profiling exists to find it early and send it to the A-book, where a liquidity provider prices it; wins on stale quotes also point to a price feed the desk should fix, because providers can decline that flow too.

Useful signals are behavioural and measurable: very short holding times with a high win rate; entries clustered just after news or a price gap; trades on quotes the desk's own feed shows were stale; several accounts, sometimes under one IB, opening the same trade at once. Deposit history and the know your customer (KYC) profile in the customer relationship management (CRM) system add context but prove nothing alone.

Two cautions. A profitable client is not a toxic one; a trader who is right over days is simply good, and the answer is to hedge. And supervisors watch what happens next. ESMA's questions and answers (Q&A) on contracts for difference (CFDs) say firms should not use poorly defined clauses to arbitrarily cancel client trades, usually the profitable ones, and that terms affecting execution should be strictly linked to objective and fairly determined thresholds or events.

When does the desk hedge, and what does the bridge do?

ESMA's Q&A describes three models for a firm that is its client's counterparty: hedge all client orders, one-to-one or in aggregate; deal on own account without hedging; or hedge partially, for example above a specific limit, when volume crosses a predefined risk threshold, or only for a subset of clients. One firm may combine them. ESMA calls the third a hybrid model, and in practice a hybrid is defined by its thresholds.

A usable threshold policy states, per symbol and client group, the net exposure at which hedging starts, how much is hedged, with which counterparty, who may change each number, and what happens when a fast market moves the hedge price. Supervisors read the policy as well as the trades: ASIC's RG 227 benchmark 3, for example, expects a CFD issuer to keep and apply a written policy for managing market risk from client positions, naming its hedging counterparties, and to publish it on its website.

The bridge sits between the trading platform and the liquidity providers: it routes orders, aggregates prices and applies mark-ups. Dealing desk software sits beside it, showing exposure and letting authorised staff act on accounts and groups. A group change can move an account onto a different routing rule, so every such change needs an owner and an approval.

The desk's controls: what each protects against and who decides

Every lever a desk can pull should be a named control with an owner. This is a starting set; your licence, risk committee and platform decide the final list.

Two properties turn this list into controls rather than buttons. Approvals: anything that changes a client's money or trading conditions needs a second person, enforced by the system. And the audit log: who acted, when, from where, on which account, the values before and after, and the reason. When a client complains or a supervisor asks, the log is the answer.

Which regulatory duties shape the desk's work?

Conflicts of interest come first. ESMA's Q&A on CFDs and other speculative products (ESMA35-36-794, last updated 31 March 2017) says a firm dealing with retail clients without any hedging has no incentive to execute in the client's best interest, and that this conflict in all likelihood cannot be managed. Hedging within the same group still leaves a conflict to manage, and keeping favourable price moves between order and hedge while passing unfavourable ones to clients (asymmetric price slippage) fails the duty to avoid conflicts. Whatever the model, clients should be told the firm is their counterparty.

Best execution applies to over-the-counter CFDs too. The same Q&A asks for a transparent pricing methodology based on the relevant market or benchmark, a disclosed maximum mark-up for each underlying, and discretionary pricing only when market data is unavailable, with records kept. It was written under the first Markets in Financial Instruments Directive (MiFID); its own footnote notes that MiFID II's Article 27 raises 'reasonable steps' to 'sufficient steps'.

Retail accounts carry hard limits. ESMA's 2018 measures set opening leverage limits from 30:1 to 2:1 by underlying, a margin close-out rule at 50% of minimum required margin per account, negative balance protection per account and a restriction on incentives. They lapsed on 31 July 2019 because most national regulators had adopted permanent measures at least as stringent. ESMA's opinion of 24 June 2019 records the UK Financial Conduct Authority (FCA) describing its permanent measures, expected from 1 August 2019, as the same at national level apart from listed differences. ESMA's technical Q&A adds two details for platform groups: the close-out test counts only cash in the CFD account plus unrealised net profit and loss, and negative balance protection caps liability at the funds in that account.

Australia's regulator, the Australian Securities and Investments Commission (ASIC), has applied leverage limits, standardised margin close-out, negative balance protection and a ban on certain inducements since 29 March 2021. In consultation CS 64, published on 12 October 2026, it proposes, subject to ministerial approval, extending that order beyond its 23 May 2027 expiry until it sunsets on 1 April 2031, and confirming that initial margin must be applied separately to each CFD and cannot be reduced by netting opposing positions. If any group charges reduced margin on opposing positions, review it now.

Rules differ by licence and change over time; this guide is not legal advice. Confirm each client group's regime with counsel or your compliance adviser, then configure it in the groups, where nobody can forget it.

What to ask a dealing desk software vendor

• Where does the exposure figure come from (platform positions, bridge reports or both), and how old is it when a dealer reads it?
• Can exposure be grouped by symbol, client group, IB and copy-trading leader, and exported for the risk committee?
• Which client-profile measures does it calculate (holding time, win rate by holding time, news-window activity, linked accounts), and can we add our own?
• Which actions can staff take on accounts and groups: close positions, change leverage, margin call and stop-out levels, swaps, group moves?
• Can approval rules differ by action and size, and is a dealer blocked from approving their own request?
• Does the log hold the values before and after, the reason and the approver, and can compliance export it unaided?
• Does the product route orders or edit bridge rules, and which platform permissions does it need?

Where EntropyX Labs fits

EA Panel is EntropyX Labs' console for dealing and operations teams on MetaTrader 5 (MT5): exposure and risk dashboards, manual intervention workflows with approvals, role-based access for dealers, risk and support, and an audit log that records each action's author, time, origin and before-and-after values. Through the same console the desk can manage margin, leverage and swaps on its MT5 groups, set up with your team as part of the engagement. It reaches MT5 through manager access granted with least privilege, shows exposure from your MT5 servers in real time (bridge reports are not included), and runs self-hosted. A second approver must be a different person from the one who asked, and approval thresholds by action size are set per desk.

Brokerage CRM holds the client record the desk profiles against (KYC status, documents, IB and affiliate tracking) and shares identities with EA Panel. Social Copy mirrors leader trades into follower accounts with per-follower scaling, exposure caps and instrument whitelists, and shows the broker volumes and spreads. Exposure views by introducing broker or by copy-trading leader, client profiling and toxic-flow flags are built with your desk per engagement.

EntropyX Labs does not supply a bridge, route orders or provide liquidity, and it does not decide what the desk hedges. Routing rules, liquidity providers, limits and every intervention stay with your desk.

Sources and further reading

• ESMA: Questions and Answers relating to the provision of CFDs and other speculative products to retail investors under MiFID (ESMA35-36-794, 31 March 2017) — Read 13 November 2026: three counterparty models (hedge all orders, no hedging, partial hedging above a limit or threshold or for a subset of clients) that one firm may combine; unhedged dealing with retail clients is a conflict that in all likelihood cannot be managed; intra-group hedging still a conflict; asymmetric price slippage; disclose being the counterparty; transparent pricing methodology, a disclosed maximum mark-up per underlying, discretion only when data is unavailable with records kept; no poorly defined clauses to arbitrarily cancel (usually profitable) trades; footnote: MiFID II Article 27 replaces 'reasonable steps' with 'sufficient steps'
• ESMA: ESMA agrees to prohibit binary options and restrict CFDs to protect retail investors (27 March 2018) — Read 13 November 2026: leverage limits on opening a position from 30:1 to 2:1 by underlying; margin close-out rule per account at 50% of minimum required margin; negative balance protection per account; restriction on incentives to trade CFDs
• ESMA: Questions and Answers on ESMA's temporary product intervention measures on CFDs and binary options (ESMA35-36-1262, last updated 9 November 2018) — Read 13 November 2026: funds for the close-out test are cash in the CFD trading account and unrealised net profits of its open CFDs, no other assets; negative balance protection limits the client's aggregate liability to the funds in that CFD trading account
• ESMA: ESMA ceases renewal of product intervention measures relating to contracts for differences (31 July 2019) — Read 13 November 2026: most national competent authorities had taken permanent national measures at least as stringent as ESMA's, so ESMA's temporary measures expired at the end of 31 July 2019
• ESMA: Opinion on the product intervention measures relating to CFDs proposed by the FCA of the United Kingdom (ESMA35-43-1961, 24 June 2019) — Read 13 November 2026: the FCA informed ESMA that its permanent national measures are the same as ESMA's measures at national level, with listed differences, expected to take effect on 1 August 2019
• ASIC: 26-239MR ASIC moves to extend and strengthen CFD consumer protections (12 October 2026) — Read 13 November 2026: the CFD product intervention order commenced on 29 March 2021 with leverage limits, standardised margin close-out, negative balance protection and a ban on certain inducements; proposal (consultation CS 64, published 12 October 2026; an editor's note corrects the release's original 2037 date), subject to ministerial approval, to extend it beyond its 23 May 2027 expiry until it sunsets on 1 April 2031; initial margin to be applied separately to each CFD, not reduced by netting opposing positions
• ASIC Regulatory Guide 227: Over-the-counter contracts for difference: Improving disclosure for retail investors — Read 13 November 2026: benchmark 3, a written policy to manage exposure to market risk from client positions, naming hedging counterparties, displayed up to date on the issuer's website (RG 227.51-52)

This guide is engineering and product guidance from EntropyX Labs, a technology provider. It is not legal, regulatory or investment advice.