7 min read Most of what you pay to trade goes to your broker, and most of that is the spread. A broker quotes you a price a little wider than the raw market and keeps the difference. Add commissions and overnight financing, and you have the business model. How a broker earns also decides one thing that should interest you: whether it wants you to win.
The spread is the markup
At its simplest, a broker buys access to the real market at one price and offers it to you at a slightly worse one. The raw interbank quote on EUR/USD might be 1.10010 / 1.10012, a sliver of a pip wide. By the time it reaches you it reads 1.10009 / 1.10013, and that small markup is the broker’s cut. You pay it without a line item: you buy at the ask, you can only sell at the bid, and the gap stays with the house. On a “zero commission” account, this is the whole business model. The spread isn’t an incidental fee, it’s the product. For how the bid-ask gap works under the hood, the forex spread guide breaks it down.
Two business models
How a broker sources that price splits the industry in two.
A market maker, or dealing-desk broker, builds its own market on top of the real one. It quotes you a price, often a fixed spread, and frequently takes the opposite side of your trade itself instead of sending it out. A no-dealing-desk broker, the ECN or STP model, routes your order to a network of liquidity providers, banks and institutions, and passes their raw, variable spread straight through, charging a separate commission instead of a markup. The first earns from a wider spread; the second from volume and commission. That split, fixed-spread market maker versus variable-spread ECN, is the same one covered in fixed vs floating spreads, seen from the broker’s side of the screen.
A-book vs B-book: the part that matters
Underneath the marketing labels sits the detail that actually affects you: what the broker does with your trade once you place it.
An A-book broker passes your trade to the real market and hedges it. It earns from the spread markup or commission whether you win or lose, so its incentive is simple: keep you trading as long as possible. A B-book broker keeps your trade in-house and becomes your counterparty. When you lose, that loss can be the broker’s gain. Since most retail traders lose money over time, running a B-book is profitable, and it creates an obvious conflict of interest.
That sounds damning, and the reality is more mixed. B-book brokers manage their risk by netting opposite client orders against each other and hedging the rest, and the profit from that flow is part of what lets them offer tight spreads, small minimum deposits, and instant fills to everyone. Most large brokers run a hybrid: profitable and large traders get routed to the A-book and hedged in the market, while the rest stay in the B-book. It’s legitimate, widely regulated, and not the same as being cheated. What it does mean is that with some brokers your loss is quietly their revenue, and that’s worth knowing before you pick one.
The other ways brokers earn
The spread is the headline, not the whole story.
Commissions are simply the explicit version of the spread: a flat fee per lot, common on raw and ECN accounts that show near-zero spreads in return. Swap, or overnight financing, is charged on positions held past the daily cut-off, and brokers usually take a small markup on the underlying interest-rate differential. Away from trading itself, many add currency-conversion fees, withdrawal fees, or inactivity fees. The full picture of what you pay, and therefore what the broker earns, is the all-in cost broken down in spread vs commission vs swap.
Why it matters to you
Knowing how your broker earns tells you where its interests sit and how to read what it’s selling.
A few tells help. A broker advertising spreads “from 0.0 pips” with a commission is almost certainly running an ECN or raw model. Fixed spreads point to a market maker. Frequent requotes, or slippage that always seems to land against you, can flag an aggressive dealing desk, while symmetrical slippage that sometimes falls in your favour points to genuine market execution. To go further, a regulated broker’s order-execution policy and legal documents will state whether it acts as principal, meaning it deals on its own account, a B-book trait, or routes orders to external venues.
None of this makes one model right for everyone. A beginner on a small account may be better served by a market maker’s predictable fixed spreads; an active scalper needs the raw pricing and clean fills of an ECN. What matters more than the model is whether the broker is properly regulated and honest about how it operates. Learn what a regulated broker is, and how to tell whether a broker is legitimate, before you fund anything. And keep an eye on the moment the spread stops hiding the model: it widens most during news events, which is exactly when a market maker has the most reason to manage its risk against you.
Trade forex, gold, indices, and crypto on PrimeXBT from one account, or read how the platform approaches its spreads.
Trading involves risk.
How do brokers make money if they charge no commission?
Through the spread. A zero-commission broker quotes you a price slightly wider than the raw market and keeps the difference on every trade. The cost is built into the price rather than charged separately, so it's easy to miss, but it's the broker's main source of revenue.
Is a B-book broker bad?
Not automatically. A B-book broker is your counterparty and can profit when you lose, which is a real conflict of interest. But the model is legal, common, and regulated, and the revenue often funds the tight spreads and low deposits that retail traders benefit from. What matters is regulation and transparency, not the label alone.
Does your broker profit when you lose?
With a pure B-book or market-maker model, it can, because it holds the other side of your trade. With an A-book or ECN model, it doesn't: it earns the same spread or commission whether you win or lose. Most large brokers run a hybrid of the two.
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