Proprietary trading firms, or prop firms, provide traders with capital to trade financial markets, sharing profits in return. But how these firms operate varies widely, with some routing trades directly to the market (A-Book model) and others acting as the counterparty (B-Book model). This raises an important question: Do A-Book prop firms really want traders to win?
Understanding how A-Book prop firms work is key to knowing whether their success depends on profitable traders or other revenue streams. Unlike B-Book firms, which may profit from trader losses, A-Book firms generate revenue through commissions, spreads, and profit-sharing with successful traders. This article will break down how A-Book prop firms operate, how they manage risk, and whether their business model is truly aligned with trader success.
Understanding Prop Trading Firms
Proprietary trading firms, or prop firms, provide traders with firm capital to trade financial markets, such as forex, stocks, and futures. Instead of using client deposits like traditional brokers, prop firms fund traders and take a share of the profits. This allows traders to access larger positions without risking their own money, while the firm benefits from a portion of successful trades.
Unlike hedge funds or investment firms, prop firms do not manage external investors’ money. Their primary goal is to identify, fund, and develop skilled traders who can generate consistent profits. Some firms operate fully in-house with salaried traders, while others offer remote funding programs where traders keep a percentage of their profits.
Profit-Sharing Structure
Most prop firms operate on a profit-sharing model, where traders earn a portion of their trading profits, typically ranging from 50% to 90%. The firm provides capital and risk management tools, and in return, it keeps a share of the trader’s earnings.
- Example: If a trader earns $10,000 in a month with an 80/20 split, they receive $8,000 while the firm takes $2,000.
- Higher splits (such as 90/10) are often offered to experienced traders with a proven track record.
- Lower splits may come with additional benefits, such as free training, lower risk requirements, or access to exclusive trading tools.
This profit-sharing model aligns the firm’s interests with successful traders—the more a trader earns, the more the firm makes. However, the business model varies depending on whether a firm follows an A-Book or B-Book approach, which affects how they manage risk and trader profits.
The A-Book Model Explained
The A-Book model is a trading approach where prop firms route traders’ orders directly to the real market through liquidity providers. This means that every trade placed by a funded trader is executed on live exchanges or interbank markets. The prop firm does not take the opposite side of the trade, reducing the potential conflict of interest between the trader and the firm.
A-Book prop firms act as intermediaries, earning money through commissions, spreads, and profit-sharing rather than from trader losses. Since they do not profit when traders fail, they are incentivized to fund skilled traders who can generate consistent profits.
In an A-Book setup, a trader’s order follows these steps:
- Trade Execution – When a trader places an order, the firm routes it to a liquidity provider (such as banks, hedge funds, or market makers).
- Market Matching – The liquidity provider executes the order at the best available price, ensuring real market participation.
- Firm Revenue Generation – The firm earns through transaction fees, spreads, and a share of the trader’s profits rather than betting against them.
Since trades go directly into the market, A-Book firms experience no financial gain from trader losses. Their primary objective is to support profitable traders, as their earnings come from a portion of successful trades rather than failed ones.
This makes A-Book firms more transparent and trader-friendly compared to B-Book firms, which take the opposite side of trades and may benefit when traders lose money.
A-Book vs. B-Book Models
Prop firms generally follow one of two execution models: A-Book or B-Book. The difference lies in how trades are processed and how the firm makes money.
| Feature | A-Book Prop Firms | B-Book Prop Firms |
|---|---|---|
| Trade Execution | Orders go to real markets via liquidity providers. | Firm takes the opposite side of the trade (internalized). |
| Revenue Source | Commissions, spreads, and trader profit-sharing. | Profits when traders lose, plus challenge fees. |
| Conflict of Interest | No direct conflict—firm benefits when traders succeed. | Conflict exists—firm may want traders to lose. |
| Risk Management | Managed via external liquidity providers. | Firm controls risk by managing trader losses. |
| Trader Payouts | More transparent, real market profits. | Payouts depend on internal firm structure and risk model. |
Pros and Cons for Traders
A-Book Model
Pros:
- Trades are executed in real markets, ensuring transparency.
- No conflict of interest, since the firm profits when traders succeed.
- Payouts are reliable, as profits come from actual market performance.
Cons:
- Stricter risk management rules to protect firm capital.
- Profit splits may be slightly lower due to liquidity costs.
B-Book Model
Pros:
- Some firms offer higher profit splits.
- Faster trade execution since liquidity providers aren’t involved.
Cons:
- The firm profits from trader losses, creating a potential conflict of interest.
- Some firms may manipulate risk management to limit trader payouts.
- Firms that rely heavily on challenge fees may not prioritize trader success.
While some B-Book firms operate fairly, traders should be cautious of firms that make most of their money from failed evaluations. A-Book firms, on the other hand, align their interests with traders by focusing on market-based profits rather than trader losses.
Do A-Book Prop Firms Benefit from Traders’ Success?
A-Book prop firms benefit directly when traders succeed. Since they route trades to real markets, their profitability depends on traders generating consistent profits rather than failing evaluations. The better a trader performs, the more the firm earns through profit splits and transaction fees.
Unlike B-Book firms, which may have an incentive to see traders lose, A-Book firms have no reason to interfere with trader performance. Their success is tied to traders executing smart trades and following risk management guidelines. This alignment of interests makes A-Book firms a preferred choice for many professional traders.
Instead of profiting from trader losses, A-Book firms generate revenue through:
- Profit splits – Firms take a percentage of successful trades, encouraging them to develop skilled traders.
- Commissions and spreads – Every trade routed to the market generates a small transaction fee for the firm.
- Volume-based earnings – The more a trader executes profitable trades, the more the firm benefits over time.
Since A-Book firms rely on consistent trader profitability, they often provide high-quality risk management tools, market data, and training programs to improve trader success rates. The longer a trader remains profitable, the more stable revenue the firm generates.
This model proves that A-Book prop firms genuinely want traders to win—because their own financial success depends on it. Instead of profiting from losses, they focus on supporting skilled traders who can perform well in real market conditions.
Conclusion
A-Book prop firms operate on a model where they profit when traders succeed, not when they fail. By routing trades directly to real markets, these firms earn revenue through profit splits, commissions, and trading volume, making them invested in developing skilled, long-term traders. Unlike B-Book firms, which may have a conflict of interest by profiting from trader losses, A-Book firms rely on consistent trader profitability to sustain their business.
For traders looking to join a prop firm, understanding the firm’s execution model is crucial. A-Book firms provide transparency, fair payouts, and a business structure that aligns with trader success. Choosing the right prop firm means selecting one that prioritizes real market execution and supports traders in becoming consistently profitable.
