Two Different Types of Stocks Brokers

Straight Through Processing Stocks Brokers and Electronic Communications Network Stocks Brokers

STP or Straight Through Processing, is the name given to brokers which, when upon receiving a client trade order they will pass on the stocks orders directly to their stocks trading liquidity provider. Stocks Trading Liquidity providers can include Banks and as such there is no intermediary involved in the order processing in other words the Straight Through Processing doesn't filter the stocks 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 Stocks broker type. Straight Through Processing Stocks 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 Processingstocks 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 stocks brokers will use banks trading on the interbank markets 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 Stocks Brokers choose Straight Through Process execution - STP Execution Model
• Reasons why Stocks Traders Select Straight Through Process execution - STP Execution Model

Why Stock Brokers Choose STP Execution Model

In addition to the fact that most traders prefer STP stocks brokers due to the fact that a client's losses aren't a stocks brokers profit. It's therefore in the Stocks 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 Stocks Broker is compensated through a markup on the stocks trading spread it obtains from its liquidity providers and/or commissions imposed for each trade. As most liquidity providers of STP stocks 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 Stocks Broker will apply this markup by a certain amount of fractional pips to the bid and ask stocks 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 stocks 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 stocks price this is the markup.

Why Stocks Traders Choose STP Brokers

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

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

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

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

Another Type of Stocks Broker is ECN Broker

What is an ECN Stocks Broker?

Electronic Communications Network- ECN stocks broker provide stocks traders with real time stocks price data quotes straight from the network of banks that trade Stocks- The Interbank Market. Since these ECN brokers offer real time stocks 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 stocks brokers, short form is ECN Brokers.

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