Questions to Ask Your Broker
A structured due-diligence checklist covering routing, liquidity, execution quality, and conflicts of interest. Each question includes context on why it matters and what constitutes a red flag.
These questions are designed for institutional and sophisticated retail clients evaluating broker execution quality. They are organized by topic area and progress from structural questions (routing model) to operational detail (execution metrics) to conflict identification. Not every question applies to every broker type, but evasive answers to any of them warrant further investigation.
Order Routing & Execution Model
1. Do you operate an A-book, B-book, or hybrid execution model?
Why it matters: This determines whether the broker is your counterparty or routes to external liquidity. It is the single most important structural question.
Red flag: Vague answers like "we use best execution" without specifying the model.
2. What percentage of client orders are routed to external LPs vs internalized?
Why it matters: Even brokers claiming NDD may internalize a portion of flow. The ratio reveals the true execution model.
Red flag: Refusal to provide specific percentages or claiming 100% A-book without evidence.
3. Can you provide the FIX log or execution report showing my order was filled by an external LP?
Why it matters: FIX logs are the definitive proof of external execution. A genuine NDD broker can produce these.
Red flag: Claims that FIX logs are "proprietary" or "not available" for individual client orders.
4. Do you profile clients to determine routing treatment?
Why it matters: Some hybrid brokers route profitable clients A-book and losing clients B-book, creating different execution quality for different clients.
Red flag: Denial of any client segmentation while operating a hybrid model.
Liquidity & Pricing
1. How many liquidity providers are connected, and can you name them?
Why it matters: The number and quality of LPs directly affects spread quality, depth, and fill rates. Named LPs are verifiable.
Red flag: "Multiple tier-1 banks" without naming any, or fewer than 3 LPs for major pairs.
2. Is your pricing composite (aggregated from multiple LPs) or from a single source?
Why it matters: Composite pricing from multiple LPs typically produces tighter spreads and better depth than single-source pricing.
Red flag: Single-source pricing marketed as "institutional" without explaining the limitation.
3. Do your LPs use last look? If so, what is the typical hold window duration?
Why it matters: Last look creates asymmetric execution quality. The hold window duration directly impacts rejection rates and slippage.
Red flag: Claiming "no last look" while showing high rejection rates, or hold windows exceeding 100ms.
4. What is your average rejection rate across all LPs?
Why it matters: High rejection rates indicate aggressive last-look practices or stale quote issues, degrading execution quality.
Red flag: Rejection rates above 5% for standard lot sizes on major pairs during normal conditions.
Execution Quality Metrics
1. What is your average execution speed from order submission to fill?
Why it matters: Execution speed affects slippage probability. Faster execution means less time for market movement between submission and fill.
Red flag: Claiming sub-1ms execution (unrealistic for retail) or refusing to provide speed metrics.
2. Do you publish slippage statistics? Is slippage symmetric or asymmetric?
Why it matters: Asymmetric slippage (more negative than positive) is a structural indicator of last-look exploitation or dealing desk intervention.
Red flag: No published slippage data, or claiming "zero slippage" which is physically impossible in a real market.
3. What is your fill rate for market orders during normal and volatile conditions?
Why it matters: Fill rates drop during volatility. The magnitude of the drop reveals the resilience of the execution infrastructure.
Red flag: Claiming 100% fill rate (impossible) or fill rates below 90% during normal conditions.
4. How do you handle partial fills and order splitting?
Why it matters: Large orders may need to be split across multiple LPs. The splitting logic affects total execution quality.
Red flag: No clear policy on partial fills, or always filling at the worst available price across splits.
Conflicts of Interest
1. Does the broker or any affiliated entity take the opposite side of client trades?
Why it matters: This is the core conflict of interest question. If the broker profits when clients lose, their incentives are misaligned.
Red flag: Evasive language about "risk management" without directly answering yes or no.
2. How is the broker compensated? Spread markup, commission, or both?
Why it matters: Understanding the revenue model reveals whether the broker has incentives beyond fair execution.
Red flag: Zero-commission + zero-spread claims (the broker must earn revenue somewhere -- find out where).
3. Is there a separation between the execution team and the risk management/dealing desk?
Why it matters: Chinese walls between execution and risk prevent information about client positions from influencing execution decisions.
Red flag: Small teams where the same individuals manage both execution and the broker's own positions.
How to Use This Checklist
- Send these questions in writing (email) to your broker's compliance or institutional sales team. Written responses create accountability.
- Compare responses against the red flags listed. A single red flag is not necessarily disqualifying, but a pattern of evasive answers is.
- Cross-reference answers with the Atlas entries on NDD / A-Book Routing, Dealing Desk / B-Book, and Last Look to verify technical accuracy of the broker's claims.
- Request execution quality reports (if available) that include fill rates, slippage distribution, and rejection rates as empirical validation.
Educational content only. This is not financial advice. Always consult qualified professionals before making trading decisions.