Why Traders Choose STP Brokers & Difference Between STP Brokers & ECN Brokers

Straight Through Processing is the name given to online brokers that; when upon receiving a client order they will pass it directly to their Liquidity Provider. Liquidity providers (LP) can include Banks and as such there is no intermediary involved in the order processing in other words the Straight Through Processing model does not filter the orders through a Dealing Desk.

STP Brokers

With absence of an inter-mediary process (dealing-desk) the Straight Through Processing will be able to process its client's orders instantly without any delays. This makes STP brokers the most recommended broker type because they do not re-quote their clients something that most investors regard as very important. The Straight Through Processing will also in effect will allow its clients to trade during the release of financial news without any restrictions.

These brokers benefit from having several liquidity providers and an increase in the number of liquidity providers in the system means better fills for the client.

Before reading on, spot the difference between these 2 headings so that the headings below don't seem like a repetition.

• Reasons why Top Brokers prefer this execution
• Reasons why Top Traders prefer this execution

Reasons Why Brokers Choose This Model

As the clients places their orders through the Straight Through Processing platform, the orders are then sent directly to the liquidity providers and as such the STP Broker executes trades efficiently and quickly thus providing better fills for their customers using this model.

Why Traders Choose Straight Through Processing Execution

Client trades obtain better & faster fills through this method.

The better and faster fills are obtained directly from the many competitive market bids and offers coming through the many LPs, which provide for more liquidity within the market and in turn this implies the client gets the best fills.

Client transactions with an STP broker means there is anonymity for the client orders which are instead executed automatically through the interbank market network anonymously.

ECN Brokers

Electronic Communications Net-work ECN provides traders with real time data quotes straight from net-work of banks that form the Inter-bank markets.

ECN Brokers will show the entire bid and ask offers currently available in the gold market from banks. Electronic Communications Network allows investors to place their orders straight through to the market. Liquidity is not provided by the broker but by this inter-bank net-work of banks. This way traders transactions through an Electronic Communication Network and therefore they can execute trades very quickly and instantly without getting re quoted.

STP Brokers vs ECN Brokers

Most Investors ask which is the best between the STP Broker & the ECN Broker? and What is the difference between these two? - Compare brokers ECN & STP execution models?

STP Broker

STP brokers many liquidity providers, but chooses the best at any one time automatically for the trader. Therefore when a one places a trade and the gold trade orders will be passed direct to this inter-bank.

Therefore STP brokers are like XAUUSD ECN brokers, the only difference is that the Straight Through Processing model automatically selects the best quote, at that particular time of trade execution & does it automatically for the investor.

ECN Broker

ECN brokers have many liquidity providers from which a trader will see all at the same time and then select which one to trade, It's like having 10 brokers to choose from which to trade.

For true XAUUSD ECN brokers, one will have to look at many streaming quotes at the same time and choose one, each will having varying spreads and the investor will try to select the low spread for himself among the 10 displayed for the same xauusd.

There is no much difference between these two, that's why some traders or some online brokers will use the term interchangeably, because the only difference between the two is that the STP only chooses to display automatically the best xauusd quote chosen from a multiple of liquidity providers while ECN shows all of them at the same time and it is up to the investor to select which one to open an order with - as a trader you may not be able to chose the best as these change very fast.

According to reviews, this execution model also have the low spread, therefore if you are looking for the low spreads it's good to select an STP.

Most online brokers don't want to clutter the platform workspace with multiple streaming quotes from various different places which might confuse the trader, especially the beginners who do not know what is what, that's why most brokers might be implementing an Electronic Communications Network but decide to only display one streaming xauusd quote from only one interbank, therefore becoming more of an STP rather than an ECN, but model of operation is basically one and the same.

If you were to open an account with a ECN broker you would get like 10 quotes of each xauusd instrument from different banks and to trade you would have to chose from one of these banks - 10 price quotes for each xauusd instrument would make your trading platform workspace too crowded. Another thing is that you would need a more complex platform to stream this amount of data, this type of platform would not make the best option to trade with. Furthermore if you open an ECN account you will have to pay additional commissions on top of spreads. This is also another reason why to select STP since they don't charge commissions.

Because most brokers are MetaTrader 4 brokers & they want to make retain the platform as it's which makes it easier to operate & which is why this software is the most popular, these MT4 brokers will only display the low spread only after automatically selecting it using their algorithms, then display this low spread alone at all the time.

STP offer the best execution conditions for clients to make trades

STPs execution method provides for full trade transparency, faster and better order fills. The full transparency means a investors receives the real time data allowing them to enter the market directly at the best fill level.

The best brokers implement this model because this model is able to process its client's orders without any delay. In addition this model does not re-quote something that most traders regard as a huge advantage.

STP provides the best 24 hour access to market execution due to the high liquidity that they have from their reliable inter bank partners.