Two Different Types of Crude Oil Trading Brokers

Straight Through Processing Crude Oil Brokers and Electronic Communications Network Oil Trading Brokers

STP or Straight Through Processing, is the name given to brokers which, when upon receiving a client order they will pass on the oil orders directly to their oil liquidity provider. Crude Oil Trading Liquidity providers can include Banks and as such there is no intermediary involved in order processing in other words the Straight Through Processing doesn't filter the oil orders through a Dealing Desk. Absence of a Dealing Desk intervention is what makes this electronic trading platform a Straight Through Processing.

With the absence of an intermediary process (dealing desk) the STP, Straight Through Process execution will be able to process its clients orders instantly without any delay. This makes STP brokers the most recommended Crude Oil Trading broker type. Straight Through Processing Oil Trading Brokers will also not send re-quotes to its clients something that most traders regard as very important. Straight Through Process execution model will also in effect allow clients of the STP broker to trade during the release of economic news without any restrictions.

Straight Through Processingoil trading brokers benefit from having several liquidity providers and this increased number of liquidity providers in their system means better order fills for the client. A large number of STP oil brokers will use banks trading on inter bank market as their liquidity providers.

Before Reading Spot the difference between these 2 headings so that the two headings below do not seem like a repetition.

• Reasons why Crude Oil Brokers choose Straight Through Process execution - STP Execution Model
• Reasons why Oil Traders Select Straight Through Process execution - STP Execution Model

Why Oil Trading Brokers Choose STP Execution Model

In addition to the fact that most traders prefer STP oil brokers due to the fact that a client's losses aren't a oil brokers profit. It's therefore in the Oil Trading broker 's interest for the client to make profit when trading, STP execution often implies that there is No Dealing Desk (NDD) & subsequently the broker has less expenses through its staff salaries.

An STP Crude Oil Trading Broker is compensated through a markup on the oil spread it obtains from its liquidity providers and/or commissions imposed for each trade. As most liquidity providers of STP crude oil brokers are banks on the Interbank market, the majority of which offer fixed spreads this allows the STP Brokers to provide both fixed and/or variable spreads to its clients.

Each time a client trades through the STP platform, the STP broker will always make a profit. As STP brokers add a small markup to the spread they receive from their liquidity provider when getting quotes of bid/ask rate. The STP Oil Trading Broker will apply this markup by a certain amount of fractional pips to the bid and ask crude oil price that it receives from its best bid/ask liquidity provider before passing the rates onto the client through their STP electronic platform.

As the client places an order through the STP platform, the oil orders are then sent directly to the liquidity provider and as such the STP broker executes the same orders as the client at a slightly better crude oil price this is the markup.

Why Oil Traders Choose STP Brokers

Oil traders often choose to execute their crude oil trades through an STP broker as it often implies there is no Dealing Desk, which in turn means that the STP oil broker is more transparent with clients.

The Oil traders enter trades into a true market instead of an artificial market that may be created by a market maker oil broker. Client crude oil trades obtain better and faster fills through an STP execution model.

The better and faster fills are obtained directly from the many competitive oil market bids and offers coming through the STP liquidity providers, which provide for more liquidity within the online interbank oil market and in turn this leads to lower execution oil prices for the client.

Client oil trades with an STP broker means there's anonymity for the client as there is no Dealing Desk monitoring the oil trade orders coming in from each client. The oil orders are instead executed automatically through the inter bank markets network anonymously.

Another Type of Crude Oil Trading Broker is ECN Broker

What is an ECN Oil Trading Broker?

Electronic Communications Network- ECN oil broker provide oil traders with real time crude oil price data quotes straight from the network of banks that trade Oil Trading - The Interbank Market. Since these ECN brokers offer real time crude oil price data quotes from these interbank network via their own Electronic Communication Network - which connects directly to the Interbank network of banks, they are known as ECN technology oil brokers, short form is ECN Brokers.

ECN oil brokers will show the entire bid and ask offers currently available in the crude oil market from banks. An ECN oil broker will allow crude oil traders to place their oil orders straight through to the crude oil market. The liquidity is not provided by the broker but by this interbank net-work of banks. This way oil traders trading oil through an Electronic Communication Network gets high liquidity and executes crude oil trades very quickly and instantly without getting re quoted.