STP Brokers
Straight-through processing (STP) brokers offer direct market access with ultra-fast executions. In this guide, we explain how STP trading platforms work, their respective benefits and drawbacks, plus how they compare to ECN providers. We also list the best CFD and forex STP brokers in the USA, UK, Australia, South Africa, and around the world.
Top Brokers With STP Accounts for United States
How STP Brokers Work
As the name suggests, straight-through processing brokers facilitate electronic transfers with no manual intervention. By automating the execution process, brokerages can cut overheads while traders benefit from reduced slippage. Importantly, STP brokers are no-dealing desk (NDD) providers, meaning that traders’ orders are routed directly to a selection of liquidity providers, such as banks and hedge funds.
True STP brokerages operate in various financial markets, including forex and CFD assets. Among the best brokers in 2024 are XTB, AvaTrade and VantageFX.
Pricing
STP brokers make money in several ways. Firstly, they apply a mark-up to the ask bid price of an asset, known as the spread. And while a nominal amount per order, this can add up over thousands of trades. Some of the top platforms also charge a commission on top of the spread. This is typically a flat fee, for example, $1 per lot per round turn.
STP Brokers Vs Market Makers
Market makers, also known as dealing desk brokers, set ask and bid prices using their own systems. When a customer places a trade, the company either finds another client to take the opposite side or they take the position themselves. For example, if you want to buy a Tesla share, the broker could sell you that share – ‘making’ the market.
Importantly, market makers turn a profit when their customers lose money and vice versa, arguably creating a conflict of interest. STP firms, on the other hand, are more transparent with their pricing. They earn money from every trade through spreads and/or commissions, regardless of whether the customer wins or loses.
Note, STP brokerages are known as A-book brokers, while market makers are known as B-book brokers. As a result, regulated STP brokers hold different licenses in the trading jurisdictions where they operate.
STP Brokers Vs ECN Brokers
STP and ECN models are similar. Both are no-dealing desk (NDD) brokers, meaning they send trades directly to the forex market, for example, and find liquidity providers to act as the counter-parties for their clients’ trades. Liquidity providers then compete to offer the best bid/ask prices. In each case, the broker is effectively a facilitator, linking a buyer with a seller and taking a mark-up from the spread in the process.
The main difference between STP and ECN brokers is routing. STP brokerages provide access to different providers within their liquidity pool and can choose between them. ECN brokers on the other hand, act as a central hub. This hub is formed of all the different hedge funds, banks and other market players, and acts as the primary source of liquidity.
ECN and STP companies both offer rapid execution speeds and tight spreads for traders. And due to their similarities, some brokerages adopt a hybrid approach – combining both models.
Identifying STP Brokers
It is not always clear which trading model an online broker uses. To help distinguish between providers, we have collated a list of clues:
- Spreads: Market makers generally claim to offer the lowest trading costs and the tightest spreads. This is because they generate revenue from losing client trades so don’t need to charge as much in spreads and/or commissions. STP and ECN brokers may still offer tight spreads but will likely charge higher commissions.
- Minimum lots: ECN brokers normally trade in larger lot sizes, starting at 0.1. This is because they often have less liquidity to play around with. Larger lot sizes also mean that ECN brokers tend to suit more experienced investors. STP brokers and market makers, on the other hand, often cater to beginners with lot sizes starting at 0.01.
- Execution speed: STP and ECN brokers offer the fastest execution speeds, reducing slippage and providing greater pricing certainty. In contrast, market makers cannot normally match the speeds offered by NDD brokers, which is why strategies such as scalping are often prohibited.
Benefits
Advantages of trading with STP brokers include:
- Ultra-fast execution speeds
- Transparent pricing schedule
- Smaller lot sizes, suitable for beginners
- No conflict of interest – they win when you win
Drawbacks
There are also downsides to investing with STP trading brokers:
- Commission charges
- Spreads may be higher than market makers
- Volatile markets such as forex can still lead to large losses
Getting Started With STP Brokers
If you want to start trading with an STP platform, follow these pointers to get going:
Choose a Broker
The first step is to choose a provider. Obviously, finding the cheapest STP firms with low spreads and commissions is important, but there are also other things to look out for. Ideally, your broker should offer fast deposits and withdrawals, a reasonable minimum deposit and good online reviews. Moreover, they should have a reliable customer support team with a responsive contact number and provide access to a decent range of financial markets, such as major forex pairs, precious metals and stocks.
Research the Market
Before you open a position, you need to conduct market analysis. Study the asset that you are interested in, for example gold, to understand any profit opportunities. Use technical indicators and charts to validate any suspected trends. You should also keep abreast of the latest market news – economic releases can have a significant impact on prices.
Open a Position
When the ask or bid price is looking reasonable, stake an amount that you are comfortable with. At this point, you should look to implement risk management measures like stop-loss and take-profit orders. These will protect your funds in the case of large price fluctuations.
Monitor & Close
All that is left to do now is to monitor the market. If you are swing trading, you may want to review your position daily. Whenever the market is looking favorable or you have hit your desired profit target, you can close out your position and withdraw your winnings.
Bottom Line on STP Brokers
STP brokers use the latest technology to automatically execute trades. Brokerages send trades directly to the market, ensuring faster processing speeds and increased price transparency. And while they are similar to ECN brokers, STP platforms usually offer smaller lot sizes, making them suitable for beginners. Follow our step-by-step guide above to start trading today.
FAQ
Are NDD And STP Brokers The Same?
STP brokers are a type of no-dealing desk (NDD) brokerage. Trades are sent directly to the market with no need for a central dealing desk. ECN brokers are another popular type of NDD provider.
Are STP And ECN Brokers The Same?
STP and ECN brokers share many similarities. They are both no-dealing desk (NDD) brokers that offer direct market access. The main difference is that ECN brokers route trades to a central liquidity hub whereas STP brokers can choose between different providers.
Are STP Brokers Safe?
No matter which type of broker you trade with, you should always ensure they are regulated by a top-tier authority like the CySEC. Also make sure you take a careful approach to money management.
Which Is The Best STP Broker?
There is no simple answer as to which is the best STP broker in 2024. Investors have different requirements. Read our reviews to learn about the top providers and find the right platform for your needs.
Is Interactive Brokers An STP Brokerage?
Interactive Brokers is effectively a hybrid brokerage. It combines ECN and STP execution to offer tight spreads and fast execution speeds.