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

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

STP Brokers

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

These brokers benefit from having several liquidity providers & an increase in the number of liquidity providers in the trade system means better order fills for the clients.

Before reading on, spot the difference between these 2 headings so that as 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 Online Brokers Choose This Model

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

Why Traders Choose Straight Through Processing(STP) Execution

Client trades obtain better and faster fills through this method.

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

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

ECN Online Brokers

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

ECN Brokers will show the entire bid and ask offers presently available in the gold market from banks. Electronic Communications Network allows traders to place their trade orders straight through to the market. Liquidity isn't provided by online broker but by this inter-bank network of banks. This way traders trades through an Electronic Communication Network and henceforth they can execute trades quickly & instantly without getting requoted.

STP Brokers vs ECN Brokers

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

STP Broker

STP online brokers many liquidity providers, but selects the best at any one particular 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(STP) model automatically chooses the best quote, at that particular time of trade execution & does it automatically for the trader.

ECN Online Broker

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

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

There's no much difference between these two, that is why some traders or some 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 & 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're 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's 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 broker rather than an ECN, but model of operation is basically one & 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 platform workspace too crowded. Another thing is that you would need a more complex platform to stream this amount of data, this type of software 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 MT4 brokers & they want to make retain the trading software as it's which makes it easier to operate & which is why this software is the most liked, these MT4 brokers will only display the low spread only after automatically choosing it using their algorithms, then only display and show this low spread alone at all the time.

STP offer the best execution conditions for clients to make trade positions

STPs execution method provides for full trade order transparency, faster and better order fills. The full transparency means a investor receives the real-time data allowing them to enter in to 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 many gold traders regard and consider 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.

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