Execution & Broker Models Glossary — Slippage, Last-Look, A-Book vs B-Book

Execution quality is one of the most underestimated dimensions of profitable algorithmic trading. A strategy with positive expectancy can become unprofitable on the wrong broker, while the same strategy on the right broker becomes a sustainable edge. The difference comes down to spread, slippage, rejection rates, and the structural alignment of broker incentives with client outcomes.

This cluster collects the concepts you need to understand broker quality and execution mechanics. The A-book vs B-book distinction is fundamental: A-book brokers pass orders to liquidity providers and profit from spread/commission regardless of client P&L; B-book brokers take the opposite side of client trades, profiting when clients lose. Most retail brokers operate hybrid models, classifying clients by profitability and routing accordingly.

Execution-quality terms (slippage, requote, partial fill, off-quote, spread spike) describe the various ways an order can be delayed or rejected. For scalping strategies, even small amounts of these effects can eliminate edge entirely. For longer-term strategies, they are usually tolerable. Understanding which effects affect your strategy class is essential for broker selection.

Last-look execution is the most controversial practice in forex execution: liquidity providers can reject orders after seeing them, even at quoted prices. Latency arbitrage, the historical exploit that motivated last-look, is no longer practical at retail scale but understanding the dynamic helps you evaluate broker claims about execution quality.

Infrastructure terms (VPS, FIX API, virtual hosting) cover the trader-side technical setup. For serious EA operation, a VPS co-located with your broker's server is essential. FIX API is the institutional-grade alternative to MetaTrader's API, used at scale but rarely accessible to retail traders. STP/NDD brokers are the retail-accessible flavour of A-book execution.

The practical guidance: choose your broker after choosing your strategy. Scalping strategies require ECN brokers with sub-1ms execution; trend-following can tolerate any reasonable regulated broker. Understanding these distinctions saves money and protects against broker-strategy mismatches that destroy otherwise-sound strategies.