The first, hedging, is also known as the A-Book business model. It involves the broker transferring the risk of the position you wish to take to a third-party liquidity provider. This limits the risk they take on when opening your position, making this a sustainable business model.
Internalisation, or the hybrid business model, involves the broker trying to incorporate the hedging process with long and short positions taken by its own clients. This involves matching buys to sells to net them off, and then hedging the remainder.
We choose to follow this strategy as we don’t make a profit from our clients losing.
The final model is something that we don’t do. Often called the B-Book business model, it involves betting on clients losing and means that a broker will directly benefit from your losses by taking a position opposite to yours. These brokers are betting on the majority of their clients losing money.
