A large autonomous system (AS) can be divided into multiple sub-autonomous (sub-AS) systems and grouped into one BGP4 confederation.
Each sub-AS system must be uniquely identified in the confederation AS by a sub-AS system number. In each sub-AS system, all the rules of internal BGP (iBGP) apply. For example, all BGP routers in the sub-AS system must be fully meshed. Although eBGP is used between sub-AS systems, the sub-AS systems in the confederation exchange routing information like iBGP peers. Next hop, Multi Exit Discriminator (MED), and local preference information is preserved when it crosses sub-AS system boundaries. To the outside world, a confederation looks like one AS.
The AS path list is a loop-avoidance mechanism used to detect routing updates that leave one sub-AS system and attempt to re-enter the same sub-AS system. A routing update that attempts to re-enter the sub-AS system from which it originated is detected because the sub-AS system sees its own system number listed in the update's AS path.