STP broker forex – Straight Through Processing

The forex market being the largest market in the world, the investment in the currency trading is continuously increasing. As there is always risk associated with the trading, well versed knowledge regarding going trends in the forex market is very essential. There are many other factors that need to be regarded while trading. Thus to avoid the risk due to the unawareness to the trading system, trading through the broker will bring many benefits to the trader.

The broker using the model name STP (straight through processing) is known as the STP broker. The STP brokers act as the mediator between their client and their connected liquid providers which can be bank, another broker or any investor, etc. This is the electronic process, where the client places their order to the broker and in turn brokers will directly place their client’s quotes to the liquid providers. The broker will then find their appropriate liquid provider and ask the liquid provider to execute the deal. The brokers earn profits through the fixed commission charged by them for the single trading. Thus the more trading volume carried out by the client, the more commission will be earned by the client. The commission charges vary as per the different STP brokers.

Sometime, the STP brokers also acts as the market maker in which they try to manipulate the ask/bid rate obtained from their liquid providers to gain some profits. They will find the liquid provider with the appropriate bid/ask rates and change the pip value of the given quotes by few units say 0.3 to 0.5, before presenting that quote to their clients. The difference in the increase of the spread will be the profit for the STP brokers. Thus adding the mark up to the received quotes, there is the scope of getting the varying spread every time.  

As the STP brokers can process the clients order without any intermediation, they are considered as the non dealing desk brokers. So there will be no delay in the processing of the clients orders and will provide the transparent trading system, where the clients are assured that their orders are routed to the real market, instead of artificial market. Also due to the less processing time, there is also the less risk of settlement. This is the main reasons behind the selection of the STP brokers by the clients. Also through the STP brokers, the clients can get the chance to trade on the competitive bid/ ask rates, due to the presence of wide range of the liquid providers who can also provide client more liquidity.

Thus there are many benefits of trading through the STP broker. Certain brokers also provide other services like everyday market trends, guide to trade, etc. But along with the benefits, it is also need to take care that the STP broker, you are selecting is the true STP broker. Because there are many brokers available in the market, which does not transfer the clients order to the true market. Thus the selection of STP broker should be done very carefully.