Sunday, June 5, 2016

Features of STP Brokers for Forex Trading

  • STP brokers offer fixed or variable spreads
  • Reliable regulation is also an advantage with STP brokers
  • Many STP brokers wrap a part of the orders as a market maker from
  • Avoid STP broker conflicts of interest in the ideal case completely
  • Often lower minimum deposit than ECN-Broker
  • Operate purely as a Market Maker

STP brokers process their customers' orders direct to the market and thus avoid conflicts of interest. After the first steps in a Market Maker Switch active traders often opt to invest with STP brokers because the costs are lower overall. A qualified STP Broker comparison also takes into account the regulatory environment.




STP stands for "Straight Through Processing" and refers to a market model. Orders are forward through the broker direct to the marketplace. This marketplace consists of one or more liquidity providers. In practice, traders know unfortunately more often than not know how many "Liquidity Providers" are on the other side of the trade surface and what contractual arrangements are made between them and the brokers.

The main difference with a market maker is that an STP broker will not take the opposite position to their customers and the orders are not matched or merged internally. Thus, the latent conflict of interest in MM is largely avoided. In addition, a real market with more than just a price-determining actor exists. There is one exception. Many STP brokers conduct smaller orders so as not to take their liquidity pool through but wrap themselves as a market maker. A separate "labelling" does not take place: By what authority liquidity is provided or at what volume orders to third parties are forwarded depends on the respective existing agreements between the brokers and the banks.


The Business Model of STP Brokers



An STP broker can set variable or fixed spreads. The variable spreads are often the more "usual spreads" indicated. Some brokers also mention the circumstances under which orders are deviated from the variable spreads. Trade can be commission-free, but not always. Because traders do not like to directly act against each other in a ECN Broker, both can be accommodated in explicit fees as well as within the spreads from the perspective of the broker of the contribution margin.

Whether trading on STP Broker for Forex traders is less expensive than via the Market Maker, depends on the provider and its cost and design of own trading activity. STP platforms appear cheaper in the long run especially for traders with larger trading volumes. Although the costs are often even lower at "real"  ECN brokers the selection of STP brokers is still greater. In addition, the requirements on the minimum amount are often very much less than with ECN brokers.




Even with STP brokers the Marketplace model says nothing about the quality of the regulatory environment. Many brokers are active in German and English and run their businesses from abroad. STP broker that are headquartered in the Caymans, Belize etc. should be considered particularly carefully.


Basically, the issue of "fraud" is by no means to be underestimated here. Whether an STP broker can be described as serious, is not easy to predict. In a comparison it soon becomes clear how well a broker operates in relation to their customers. The use of an STP Broker test is recommended for any trader. The broker comparison here is only once on the safe side.

The search for a suitable STP broker can be based on several factors. It is quite possible that there is also one or the other broker that is not serious. Always do plenty of research before you begin trading Forex in the marketplace.

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