The B-Book Model in Cryptocurrency Exchanges: Mechanisms, Arbitrage Opportunities, and Systemic Risks
Author: Waynecoin
Affiliation: Alpha 9 Ventures
Contact: X:@Wayne145591
Date: August 2025 Abstract
Against the backdrop of the rapid development of the cryptocurrency trading market, exchange business models have become increasingly diversified. Among them, B-Book exchanges have quickly risen due to their ability to offer high leverage, strong liquidity provisioning, and low operating costs. Unlike traditional A-Book exchanges, the B-Book model does not route orders to external liquidity providers. Instead, the exchange itself acts as the market maker, directly taking the opposite side of users’ trades. This model enables exchanges to capture user trading losses directly, creating high profit potential, but it also exposes them to significant risk during strong one-sided market trends.
This paper takes B-Book exchanges as the research subject and conducts a systematic study on three levels:

It explains the operational logic and historical background of the B-Book model, drawing comparisons with similar mechanisms in the forex market, contracts for difference (CFDs), and the gambling industry.

It analyzes the arbitrage opportunities and technical loopholes in B-Book exchanges, including latency arbitrage, extreme order execution flaws, risk control detection loopholes, promotional capital arbitrage, reverse control arbitrage, and high-leverage hedging with rebate farming. Mathematical formulas, operational models, and practical case studies are provided to illustrate these points.

It explores in depth the profit-and-loss structure and risk-control mechanisms of B-Book exchanges, showing how they generate stable profits in sideways markets through “long–short double-kills” and transaction fees, while in trending markets they may suffer heavy losses due to risk-control delays or unexpected retail traders being “on the right side” of the move.

The findings indicate that although arbitrage opportunities exist in B-Book exchanges, their sustainability is constrained by risk-control systems and back-end intervention. The key to long-term survival for arbitrageurs is to conceal arbitrage patterns by randomizing and dispersing trading behavior, making strategies appear closer to those of regular users, thereby reducing the risk of being flagged or switched to A-Book execution. This study not only reveals the dealer-style logic and arbitrage mechanisms underpinning B-Book exchanges, but also provides a useful reference framework for quantitative traders, risk-control modelers, and market regulators.

Latency Arbitrage Strategy Research:
A Quantitative Trading Model Based on Dual-Exchange Quote Delays

Author: Waynecoin
Affiliation: Alpha 9 Ventures
Contact: X: @Wayne145591
Date: July 2025 1. Research Background and Motivation
In the cryptocurrency market, due to differences in matching engines, participant structures, and API response speeds across exchanges, even for the same asset, the bid-ask prices often show short-term deviations between platforms. If one can capitalize on these quote delays, a "latency arbitrage strategy" can be constructed for short-term stable profits.

This study analyzes the synchronization of quotes between a leader exchange (Exchange A) and a follower exchange (Exchange B), focusing on the strategy of opening positions only on Exchange B and waiting for price convergence to realize profits.

Relationship Between Exchange Account Types and Strategy Design：
When implementing latency arbitrage strategies, different account types (Standard, VIP, Market Maker, Rebate Agent) can significantly impact strategy feasibility, profit margin, and risk control due to fee discounts, API permissions, and trade restrictions.

• Standard Account:
 - No fee discount.
 - Default taker/maker fees (e.g., 0.1%-0.2%).
 - Limited API rate.
 - Suitable for testing, not high-frequency latency arbitrage.
 → High fees eat away tiny spreads, making the
strategy unprofitable.

• VIP Account:
 - Achieved through high trading volume or large balances.
 - Maker fee may drop to 0.01% or even negative.
 - Higher API speed and quota.
 - Enables large-scale arbitrage execution.

• Market Maker (MM) Account:
 - Official agreement with the exchange.
 - Negative maker fees (e.g., -0.009% ~ -0.01%).
 - Advanced trading permissions like hidden orders.
 - Often used by professional teams.

• Rebate Agent Account:
 - Rebates up to 80%–90%.
 - No volume threshold required.
 - Suitable for small-scale or group arbitrage operations.