Why Traders Select STP Brokers & Difference Between STP Indices Brokers & ECN Indices Brokers

Online brokers who route a client's order directly to their Liquidity Provider upon receiving it are referred to as having Straight Through Processing. Banks can be among the liquidity providers (LP), which means that the trade order processing does not involve an intermediary. In other words, the Straight Through Processing model does not route the trade orders through a Dealing Desk.

How STP Model Works?

Without a middle step like a dealing desk, straight-through processing handles client orders at once with no holdups. This setup makes STP brokers a top choice since they skip re-quoting, a key issue for many traders. Straight-through processing also lets clients trade freely during news releases on financial reports without limits.

These brokers benefit from having several liquidity providers & an increase in the No. of liquidity providers in the trading system means better order fills for the clients.

Before proceeding further, clearly differentiate between these two section headings to avoid the impression that the subsequent content is merely redundant.

Reasons why Top Indices Brokers prefer this execution
Reasons why Top Indices Traders prefer this execution

Reasons Why Brokers Choose This Model

When clients place trade orders through the Straight Through Processing platform, the orders go straight to liquidity providers. The STP broker then handles trades fast and well. This model gives clients better order fills.

Why Traders Select Straight Through Processing(STP) Execution

Client trades obtain better and faster fills through this technique.

The better and faster fills are obtained and received directly from the many competitive market bids & offers coming through the many LPs, which provide for more liquidity within the market & in turn this implies that the client gets the best fills.

When you trade with an STP online broker, your orders stay anonymous - they're executed automatically through the interbank market.

Another Type of Execution is ECN

Electronic Communications Network ECN gives traders current price information right from the group of banks that make up the Inter-bank market.

ECN indices brokers display full bid and ask from banks. Electronic Communications Network routes orders direct to the market. Banks provide liquidity, not the broker. Trades execute fast via this network, without requotes.

STP Brokers and ECN Online Brokers Comparison

Traders always ask: Which is better, an STP or an ECN broker? And what's the real difference between them? It really comes down to comparing their execution models.

STP Broker

STP brokers have many providers of money, but they automatically pick the best one for the online trader at any given moment. Because of this, when someone makes a trade, the orders go straight to the inter bank.

So STP brokers are like Indices ECN brokers, but the Straight Through Processing system automatically picks the best price at the time of the trade and does it for the investor.

ECN Broker

ECN brokers have lots of places to get prices, so traders can see them all at once and pick which one to trade with. It's like having 10 brokers to choose from.

With true Indices ECN brokers, you'll see lots of live quotes at once. Each has a different spread, so you just pick the lowest one from the ten or so shown for the same chart.

There is not much distinction between these two scenarios, which is why some traders or brokers may use these terms interchangeably. The only difference lies in the fact that STP automatically selects the best indices quote from multiple liquidity providers, while ECN displays all quotes simultaneously, leaving it to the investor to choose which quote to execute an order with. As a trader, you may not be able to select the best quote, as these quotes can change rapidly.

Reviews say this execution model has low spreads. If you're after tight spreads, pick an STP broker.

Most online brokers prefer to keep their platform clean and straightforward by displaying only one streaming quote for indices. This approach helps prevent confusion, particularly for beginner traders who may struggle to distinguish between various options. As a result, many brokers may implement an Electronic Communications Network (ECN) but choose to operate more like a Straight Through Processing (STP) broker by showing just one quote from a single interbank source. Although the underlying operational model is similar, this design choice prioritizes user experience.

If you were to open an account with a ECN broker you would get like 10 quotes of each indices instrument from different banks and to trade you would have to chose from one of these banks - 10 stock price quotes for each indices chart would make your platform workspace too crowded. Another thing is that you'd need a more complex platform to stream this amount of data, this type of platform software wouldn't make the best option to trade with. Furthermore if you open an ECN account you will have to pay additional commissions on top of spreads. This is also another reason why to select STP since they don't charge commissions.

The majority of brokers utilize the MT4 platform, and they aim to retain the integrity of the trading software, which enhances usability. This popularity among brokers is evident as they typically display the lowest spreads only after aggregating data through their algorithms, ensuring this minimal spread is presented consistently.

STP offer the best execution conditions for clients to make trades

STPs execution method/technique provides for full trade transparency, faster and better order fills. The full transparency means a traders receives the real-time data allowing them to enter the market directly at the best fill level.

The most effective brokers utilize this model because it allows for the processing of client orders without any delays. Furthermore, this model does not re-quote, which is considered a significant advantage by many stock indices traders.

STP offers optimal 24-hour access to market executions because of the substantial liquidity obtained from their reputable inter-bank associates.

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