i havenot heard about C book however there is one hybrid model which is combination of A book and B book. B book that is market making and A book that is sending all the trades directly to the LP. when they map clients in A book, they are sending their trades directly to the LP and when they map clients under B book, they are keeping the trades to themselves now in this case, risk is with broker as client can make high profits so to hedge his risk, he hedge themselves against outside LP
Yes, usually that's the storyline. However, individual retail traders' orders are not matched directly against LPs. Rather, it is the retail broker that sends the orders out (aggregated or not) in the broker's name and that is what gets matched on whatever venue the retail broker has access to either through a prime broker, a prime-of-prime (PoP), or through an institutional account directly with venues such as LMAX Institutional or SAXO Prime.
Furthermore, there is no ECN trading conditions taking place for retail orders, no matter who the retail broker is, with 2 exceptions I know of (maybe there are more, you tell me):
1/ LMAX Professional, which is a MTF (European terminology for ECN) offering access to the SPOT OTC FX market via a central limit order book all participants can see and interact with: so real DOM, Level 2 prices, and ability to go on the bid/offer is available (DOM has 5 levels only through their web interface, but more if trading over a FIX connection);
2/ Dukascopy (both EU and Swiss HQ since EU funnels all orders to Dukas HQ whose servers are all in Geneva, Switzerland--why they don't have boxes at Equinix yet is beyond me) offers SWFX, which they call an ECN as per their website it meets the minimum technical specifications required of an ECN meaning: a client can trade against another internal client order, ie cross-matching; clients can go on the bid/offer so price discovery and improvement on the SWFX ECN, meaning anyone else on the ECN can now match the order if they like the price you are posting; DOM and Level 2 prices on SWFX are visible via JForex and FIX connectivity. However, Dukascopy can and does post its own liquidity on there so if there is not enough client volume available on SWFX, the rest of the volume is from Dukascopy, ie Dukascopy is making a market so clients can trade and if they don't want to internalize the client risk, then Dukascopy has the option to hedge the trade against the LPs they are connect to; please note these LPs are not connected to the SWFX ECN, meaning they are not trading on SWFX like the clients do, so this setup is different from LMAX where small traders might be placing 1 lot limit orders on the book next to traders sprinkling 500 lots across the book or automated market makers volume provisioning algos designed to provide liquidity specifically on the LMAX MTF; in other words, like all retail brokers, Dukascopy creates a synthetic market with indicative prices that reflect the prices they get from their LPs or prime broker; it is synthetic because at no time is the retail client trading in the real market, which is the same for anyone trading through MT4, and means the broker is always your counterparty either as a matched principal or as a principal (market maker) and could be trading its own account on the same venue as its clients, or not. As to this last point, the FCA indicates this very clearly when you look up a broker's registration. In Switzerland, I never could find this info so it is up to what Dukascopy discloses in its legal documents.
Finally, the fact that it is a bank does not mean much for people with less than 250K in their account. In Switzerland, the law requires that you be a bank to conduct this kind of business. So some kind of guarantees come with this, sure. But if you want to trade on the real market, for example, on venues such as HotSpot or FXAll, then that's not the way to go, unless they are offering it now via FIX.
Anyway, at the end of the day the problem always remains ticket size as if your size gets too large and the LPs don't like your trading pattern, they will exercise last-look and even cancel trades on you that would have been winners for you, thus you getting worse pricing and execution. There is thus a fine-line or optimal equilibrium to be found between execution quality and ticket size and broker honesty that allow one to make a consistent and very profitable living month after month.
Hope this helps. Oh before I forget... I am in the process of checking out Darwinex as their model allows traders to have AUM with the same fee structure that hedge funds use, if I am not mistaken. Basically, you trade and your performance if visible to the whole world. People who like it and want to invest money with you can do so via a brilliant interface that never reveals your strategy so no one can steal your IP. You win, the investors win, the broker wins. Everybody wins. It's brilliant. Anyway, I digress.
