Why Traders Choose Forex STP Broker and The Difference Between STP Broker and ECN Broker
Difference Between STP and ECN - Forex ECN Meaning - Forex STP Meaning
Best Forex STP Broker or Straight Through Processing, is the name given to brokers that, when upon receiving a client trade order they will pass on the orders directly to their Forex Liquidity Provider. Liquidity providers can include Banks & as such there's no intermediary involved in order processing in other words the STP doesn't filter the orders through a Dealing Desk. Absence of a Dealing Desk intervention is what makes this electronic trading software a Straight Through Processing.
With the absence of an intermediary process (dealing desk) the Best Forex STP Broker, Straight Through Process execution will be able to process its clients orders instantly without any delay. This makes Best Forex STP Brokers the most recommended Forex broker type. Straight Through Processing Brokers will also not send re-quotes to its clients something that most investors regard as very important. Straight Through Process execution will also in effect will allow its clients to trade during the release of financial news without any restrictions.
Straight Through Processing currency brokers benefit from having several liquidity providers and an increase in the number of providers in the system means better fills for the client. A large number of Best Forex STP Brokers will use banks trading on the inter-bank markets as their liquidity providers.
Before Reading Spot the difference between these two headings so that the headings below don't seem like a repetition.
- Reasons why Brokers select STP execution
- Reasons why Traders Choose STP execution
Reasons why Forex Brokers choose to be Best Forex STP Broker
In addition to the fact that most traders prefer Straight Through Processing due to fact that a client's losses are not a broker's profit. It's therefore in Forex broker 's interest for the Client to make profitable trades, a Straight Through Process execution model often implies that there is No Dealing Desk (NDD) & subsequently has less expenses through its staff salaries.
An Best Forex STP Broker is compensated through a markup on the spread it obtains from its Forex Liquidity Provider and/or commissions imposed for each trade. As most liquidity providers of Straight Through Process execution are banks on the Interbank market, the majority of which offer fixed spreads this allows the Straight Through Processing Brokers to provide both fixed and/or variable spreads to its clients.
Each time a client trades through a Straight Through Processing platform, the Best Forex STP Broker will always make a profit. As Straight Through Processing add a small markup to the spread they receive from their provider when getting quoting of bid/ask rate. The Best Forex STP Broker will apply this markup by a certain amount of fractional pips to the bid and ask price that it receives from its best bid/ask Forex Liquidity Provider before passing the rates onto the client via the straight through processing electronic platform.
As the client places the order through the STP platform, the orders are then sent directly to the Forex Liquidity Provider and as such the Best Forex STP Broker executes the same orders as the client at a slightly better price which is the markup.
Reasons why FX Traders Choose Straight Through Processing Forex Trading Brokers
Clients often choose to execute trades via an Best Forex STP Broker as it often implies there is no Dealing Desk, which in turn means that the broker is more transparent with the clients.
The Traders enter trades in to a true market instead of an artificial market that might be created by a market maker. Client trades obtain better and faster fills through an Best Forex STP Broker.
The better and faster fills are obtained directly from the many competitive market bids and offers coming through Straight Through Process liquidity providers, which provides for more liquidity within forex market and in turn this implies lower execution prices for the client.
Client transactions with an Best Forex STP Broker means there is anonymity for the client as there is no Dealing Desk monitoring the transactions of orders coming in from each client. The trading Forex orders are instead executed automatically through the market network anonymously.
Another Type of Online Forex Broker is Best Forex ECN Broker
What is an Best Forex ECN Broker?
Electronic Communications Network- Best Forex ECN Broker provide traders with real time data quotes straight from the network of banks that trade Forex- The Interbank market. Since these Best Forex ECN Brokers offer real time data quote from these network via their own Electronic Communication Network which connects directly to the Interbank network of banks, they are known as Best Forex ECN Broker technology brokers, short form is Best Forex ECN Broker.
Best Forex ECN Broker will show the entire bid and ask offers currently available in the forex trading market from banks. An Best Forex ECN Broker will allow traders to place their orders straight through to the market. The liquidity isn't provided by the broker but by this inter-bank network of banks. This way forex traders trading through an Electronic Communication Net-work gets high liquidity and execute trades very quickly & instantly without getting re-quoted.
Most Traders ask which is the best between the Best Forex STP Broker and the Best Forex ECN Broker? and What is the difference between these two?
Best Forex STP Broker
Has many liquidity providers, but selects the best at any one time automatically for the trader. Therefore when trader places a trade the orders will be passed direct to this inter-bank.
Therefore Best Forex STP Broker is like Best Forex ECN Broker the only difference is that the Straight Through Processing Brokers automatically chooses the best one at that particular time and does it automatically for the trader.
Best Forex ECN Broker
Has many liquidity providers from which a trader will see all at same time and choose which to trade, It is like having 10 Forex trading brokers to select from which to trade.
The Best Forex ECN Broker a trader will have to look at many streaming quotes at the same time and select one, this streaming quote will have varying spreads & a trader selects the low spreads.
There is no much difference between Best Forex ECN Broker and Best Forex STP Broker, that is why some traders or some brokers will use the term interchangeably, because the only difference between Straight Through Process execution from the Electronic Communication Network execution is that the Best Forex STP Broker only chooses to have only one Forex Liquidity Provider while Best Forex ECN Broker implements a wide variety of liquidity providers and it is up to the trader to select which Forex Liquidity Provider to choose from while trading.
According to reviews, these brokers are also have the low spread, therefore if you are looking for the low spread it is good to choose an Best Forex STP Broker.
Most online currency brokers do not want to clutter the traders work-space with multiple currency streaming quote from various different places which might confuse the currency trader, especially the novice forex traders who do not know what is what, that's why most Forex brokers might be Best Forex ECN Broker but only choose to display only one streaming quotes from only one interbank, therefore becoming more of an Best Forex STP Broker rather than an Best Forex ECN Broker, but the model of operation is basically one and the same.
If you were to open a forex account with an Best Forex ECN Broker you would get like 10 quotes of EURUSD from different banks and to trade you would have to chose the quote from one of these banks. 10 currency quotes for every currency pair would make your Forex platform workspace too crowded (An Best Forex ECN Broker Lists Spreads from many liquidity providers). Another thing is that you would need a more complex forex platform to stream these multiple currency quotes, this type of platform would not make the best trading software to trade with. Furthermore if you open an Best Forex ECN Broker account you will have to pay additional commissions on top of spreads. This is also another reason why to choose Best Forex STP Broker since unlike Best Forex ECN Broker, Best Forex STP Broker do not charge commissions. This means that the Best Forex ECN Broker is not the cheapest execution method and will charge traders extra commissions adding onto your transaction costs.
Best Forex STP Brokers offer the Best Liquidity Conditions for clients to make trades
Best Forex STP Brokers do not have a dealing desk and therefore this provides for full trade transparency, faster and better order fills. The full transparency means this type of broker does not create an artificial market for clients, but instead shows a trader the real-time data quote from an electronic network of banks & allows the trader to enter the true market conditions created by various forex market participants.
Straight Through Processing - is name given to brokers that: upon receiving of a client order they will pass on orders directly to the network of banks and as such there is no intermediary who will be involved in order execution in other words Straight Through Processing Execution won't be filtering orders through a Dealing Desk. The absence of a Dealing Desk is what makes the electronic communication network the best choice for many traders.
With the absence of such an inter-mediary process such as the forex dealing desk the Best Forex STP Broker is able to process its clients forex orders without any delays. In addition these brokers don't send requotes to their clients something which most Forex traders regard as a huge advantage.
This also enables the Straight Through Processing Brokerages to allow its clients to trade during the release times of financial news without any restrictions. Other online Forex brokers might not have the liquidity of an Best Forex STP Broker and may in turn lock out trading for few minutes before & after a news release.
Forex Straight Through Processing Brokers provide the best 24-hour execution and access to order execution due to high internal liquidity rate and reliable inter-bank partners they have.
Difference Between STP and ECN - Forex ECN Meaning - Forex STP Meaning
