Difference Between STP Broker and ECN Broker
Types of CFD Brokers: ECN Brokers
Most cfd trader ask what is the difference between the STP and ECN?
STP CFD Broker
STP has many liquidity providers, but selects the best one at any one time automatically for the trader. Therefore when a trader places a cfd trade the cfd orders will be passed direct to this interbank network of liquidity providers - after the liquidity provider with the low spread is selected automatically by the STP execution model.
Therefore STP cfd broker is like ECN cfd broker the only difference is that the Straight Through Processing Brokers automatically chooses the best fill at that particular time of trade execution & does it automatically for the trader.
ECN CFD Broker
ECN cfd broker has many liquidity providers from which a trader will see all at the same time and choose which liquidity provider to trade with, It is like having 10 brokers cfds quotes to choose from which to trade - these ten quotes are for the same cfd instrument - each quote from a different liquidity provider.
ECN broker quotes model means a trader will have to look at many streaming cfds quotes at the same time and choose one, this streaming quote will have varying spreads markups & a trader selects the low spread.
There is no much difference between ECN cfds trading broker and STP cfds trading broker, that is why some cfd traders or some cfd brokers will use the term interchangeably, because the only difference between Straight Through Processing execution from Electronic Communication Network execution is that STP cfd broker only chooses to have display only one liquidity provider with the best markup at the time of trade while ECN implements a wide variety of liquidity providers & displays all their quotes to the traders & it is up to the trader to select which liquidity provider to choose from while trading.
According to cfd broker reviews, these ECN and STP brokers are also have the lowest cfd trading spreads, therefore if you're looking for the low spreads it is good to choose an STP broker or an ECN broker.
Most online cfd brokers do not want to clutter the traders workspace with multiple streaming quotes from various different liquidity providers for the same cfd trading instrument at the same time because this might confuse cfds traders, especially the beginner traders who do not know what is what from what, that is why most cfd brokers might be ECN brokers but only choose to display only one streaming cfd price quotes from only one interbank liquidity provider, therefore becoming more of an STP broker rather than an ECN broker, but the model of cfd trade execution operation is basically one and the same.
If you were to open a cfd account with an ECN cfd broker you would get like 10 different quotes of CFD Trading from different liquidity providers and to trade you would have to chose the cfd trading quote from one of these liquidity provider. 10 cfds quotes for every cfd would make your cfd platform workspace too crowded (An ECN CFD Broker Lists Spread from many liquidity providers). Another thing is that you would need to have a more complex cfd platform to stream these multiple cfds quotes, this type of cfd trading platform would not make the best trading platform software to trade with. Furthermore, if you open an ECN cfd account you will have to pay additional commissions on top of cfd trading spreads. This is also another reason why to choose STP cfd broker since unlike ECN cfds trading broker, STP cfd broker do not charge commissions on top of spreads. This means that the ECN cfd broker execution isn't the cheapest execution technique & will charge cfd traders extra commissions on top of spreads adding onto your cfd transaction costs.
STP CFD Brokers offer the best liquidity for cfds traders to make trades
STP cfd brokers do not have a cfd trading dealing desk and therefore this provides for full cfd trade order transparency, faster and better order fills. The full order transparency means this type of STP cfd broker doesn't create an artificial market for clients, but instead shows a trader the real time cfd price data quotes from an electronic network of banks and allows the trader to enter the true market conditions created by various cfd market participants.
Straight Through Processing CFD Brokers- is the name given to cfd brokers that: upon receiving of a cfd trading order they will pass on the cfd orders directly to the network of banks through liquidity providers and as such there is no intermediary who will be involved in the order execution in other words the Straight Through Processing Execution Model will not be filtering cfd trade orders through a CFD Trading Dealing Desk. The absence of a CFD Trading Dealing Desk is what makes the STP execution model the best choice for many online cfds traders.
With the absence of such an intermediary process such as a cfd trading dealing desk the STP cfd broker is able to process its clients cfd orders without any delays. In addition STP cfd brokers don't send requotes to their clients something that most traders regard as an advantage.
This also enables the Straight Through Processing CFD Brokers to allow cfds traders to trade during the release times of financial news without any restrictions. Other online brokers might not have the liquidity of an STP cfds trading broker and might in turn lock out cfd for a few minutes before and after a cfd trading news release.
Straight Through Processing CFD Brokers provide the best cfd trading order execution & access to trade order execution due to high internal liquidity rate provided by multiple liquidity providers and reliable inter-bank partners they have.
Different Types of CFD Brokers - The Difference Between STP CFD Broker and ECN CFD Broker - Difference Between STP CFD Broker and ECN CFDs Broker - Types of CFD Brokers: STP Brokers - Types of CFD Brokers: ECN Brokers.
