What is a-book / b-book?
A-book describes the model where client positions are passed through to the real market; B-book the model where the firm is itself the counterparty and keeps the losses. Most prop firms run predominantly on a B-book.
Both terms come from brokerage, and they explain a prop firm’s economics better than any About page.
The distinction
Under an A-book, the company passes its clients’ positions to a market counterparty. It earns from the spread or the commission, and its result does not depend on how its clients perform: a winning trader is worth as much to it as a losing one.
Under a B-book, the company is the counterparty. When a client loses, it collects; when a client wins, it pays. Its result is the direct inverse of its clients’.
How this applies to prop firms
The dominant model is hybrid, and it becomes clear once you follow the money.
Evaluation fees are the first revenue stream, and by far the main one at most operators. They are earned regardless of how candidates perform, and they are fed by a high failure rate.
Funded accounts are mostly run internally — so, on a B-book. The firm pays winnings out of its own cash, which is supplied by the fees of the candidates who fail.
Some firms move their strongest traders onto an A-book: they replicate those trades on the real market and collect their share of an actual gain.
Why it matters to you
A firm that lives exclusively on evaluation fees depends on a steady stream of new sign-ups. Its model weakens as soon as marketing slows, or as soon as a run of traders wins at the same time.
A firm that genuinely hedges its best traders has an interest aligned with theirs, and a revenue stream that does not rest solely on its clients failing. It is a soundness criterion firms rarely advertise, and one that separates the operators built to last.
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Related terms
- Payout A payout is the actual transfer of a funded trader's gains. It follows a cycle specific to each firm, after a minimum period since the account was opened, and often above a floor amount.
- Prop firm A prop firm is a company that gives access to a funded trading account after a paid evaluation. The trader deposits no capital: they pay evaluation fees, respect risk rules, and keep a share of the profits generated.
- Simulated account A simulated account reproduces market conditions without orders reaching a real market. Most prop firm accounts, including those held after passing the challenge, run on this model.
- Slippage Slippage is the gap between the price requested and the price actually obtained on execution. On a prop firm account it depends on the company's infrastructure, and can trigger a drawdown breach.