A straight through process broker, or STP broker, is a type of broker that directly passes your orders to its liquidity providers. Liquidity providers may include banks, investment corporations, or hedge fund firms. One key advantage of an STP broker is that it does not process your orders through a dealing desk, thus, your orders are processed without any delay.
Reasons Why Traders Choose An STP Broker
- No Dealing Desk/dealer intervention
- No conflict of interest (STP brokers don’t trade against you)
- Competitive spreads
- Minimal slippage
- Fair pricing
Unlike Market Makers brokers, STP brokers do not trade against their clients. With an STP broker, traders are assured that their orders are filled without any intervention. Furthermore, STP brokers offer better and faster fills because there are many competitive market bids and offers coming via their liquidity providers. Each liquidity provider quotes its own bid and ask price, allowing traders to get the best possible price. For example, an STP broker has 4 different liquidity providers. In their system, traders will see different bid and ask quotes.
| ASK | BID | |
| Liquidity Provider 1 | 1.3001 | 1.3003 |
| Liquidity Provider 2 | 1.3002 | 1.3005 |
| Liquidity Provider 3 | 1.3003 | 1.3006 |
| Liquidity Provider 4 | 1.3004 | 1.3007 |
The broker will then sort these prices from best to worst. Of course, these are not the prices that traders see on their platform. The broker typically adds a small pip markup.
STP brokers also allow their clients to trade during the release of financial news without any restriction. An STP type of a broker is also the ideal choice for traders who love to scalp because of the lightning speed of STP execution.
Bottomline
If you are in search of a Forex broker, you may want to consider dealing with an STP broker to experience trading currencies without any intervention and restriction. With an STP broker, you will also receive the best possible market prices and will be able to use any kind of trading method, specifically scalping, because of its lightning speed execution.
