Emphasis has always been laid on putting in quality work in finding a good forex broker to work with. A lot of people, in the course of their search have come across STP forex brokers, amidst others, which can be confusing. Are there different types of brokers? Who are the STP forex brokers?
TYPES OF FOREX BROKERS:
Forex brokers are individuals or firms that provide forex traders with access to the forex market, and also execute their orders. They function as the mediator between the buyer and the seller. There are different types of forex brokers; the two major types being the
Dealing desk (DD), also known as market makers
No dealing desk (NDD)
The brokers under the NDD type are subdivided into STP and ECN+STP. STP means “Straight through Processing”, and ECN means “Electronic Communication Network”. The focus if this article will be on the best straight through processing brokers.
This type of brokers is classified under No Dealing Desk brokers. Just as the name implies, they do not pass their clients’ orders through a dealing desk. This means they simply have to link two clients. It is also important to note that the STP brokers do not have a direct access to the interbank market. When they receive an order from their client, all they have to do is route the order directly to their liquidity providers who have access to the interbank market. As a result of their lack of direct access to the interbank market, the STP brokers have many liquidity providers at a time; and for every order, the broker works with the liquidity provider that provides the best quotes.
The quote an STP broker gets from his or her liquidity provider is different from what he or she displays for the clients to see. They add a certain mark-up, usually small and fixed. That is what the broker gets as commission for all the trouble. The best STP brokers try so hard to give their customers a good cut, so they do not add so much to the quote. This makes their spread narrow, and in essence, attracts many clients to such broker.
Other traits of the best STP providers include
Quality customer care service
Free educational material about forex trading
Beginner friendly trading platform
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.