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

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

How STP Model Works? - STP Brokers

With absence of an intermediary 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 Forex broker type because they do not re-quote their clients/customers something that most traders consider as very important. The Straight Through Processing will also in effect will allow its clients/customers to trade during the announcement of financial news without any restrictions.

These online brokers benefit from having several liquidity providers & an increase in the No. of liquidity providers in the system means better fills for the clients.

Before reading on, spot the difference between these two headings so that as the headings below do not seem like a repetition.

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

Reasons Why Brokers Select and Choose This Model

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

Why Traders Select and Choose Straight Through Processing Execution

Client trades obtain better and faster fills through this technique and method.

The better and faster fills are received directly from the many competitive market bids and provides coming through the many LPs, which provide for deeper 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 automatically executed through the interbank market network anonymously.

Another Type of Execution is ECN - ECN Brokers

Electronic Communications Net-work Electronic Communication Network provides traders with real time data quotes straight from the network of banks which form the Inter-bank market.

ECN Brokers will show the entire bid and ask offers available currently in the market from banks. Electronic Communication Network allows traders to open and place their orders straight through to the online trading market. The liquidity is not provided by the broker but by this interbank network of banks. This way traders transactions through an Electronic Communication Network & therefore they can execute trade transactions rapidly and spontaneously without getting requoted.

STP Brokers & ECN Brokers Comparison - 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 Forex brokers ECN and STP execution models?

STP Online Broker

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

Therefore Forex STP brokers are like Forex ECN brokers, the only difference is that the Straight Through Processing(STP) model automatically/mechanically chooses the best quote, at that particular time of trade execution & does it automatically/mechanically for the trader.

ECN Broker

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

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

There is no much difference between these two, that's why some traders or some brokers will use this term inter-changeably, because the only difference between the 2 is that the STP only chooses to display automatically the best 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 choose 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 and searching for the low spreads it's good to choose an STP.

Most online brokers do not want to clutter the platform workspace with multiple currency streaming quotes from various different places which may confuse the trader, especially the beginners who don't know what is what, that's why most online brokers might be implementing an Electronic Communications Network but decide to only display one streaming quote from only one interbank, thenceforth becoming more of an STP broker rather than an ECN, but the 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 EURUSD from different banks and to trade you would have to chose from one of these banks - 10 currency quotes for every currency pair would make your Forex platform workspace too crowded. Another thing is that you would need a more complex software to stream this amount of info, this type of software would not make the best option to trade with. Furthermore if you open an ECN account you'll have to pay additional/extra commissions on top of spreads. This is also another reason why to select and choose STP since they don't charge commissions.

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

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

STPs execution technique provides for full trade transparency, faster and better order fills. The full transparency means a investor receives the real-time data allowing them to enter into 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 doesn't re-quote something that many FX traders regard and consider as a huge advantage.

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

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