Broker Review Contents
Introduction — What Is a Straight Through Processing (STP) Broker?
A Straight Through Processing (STP) broker is a type of forex/CFD broker that forwards client trades directly to external liquidity providers — such as banks, hedge funds, and institutional market makers — without dealing desk intervention. This means that, unlike market makers, STP brokers do not act as the counterparty to your trades. They help route orders to real market participants and aim for faster execution, transparent pricing, and reduced conflicts of interest.
STP is considered a more market-based execution model, sitting between traditional dealing desk brokers and pure Electronic Communication Network (ECN) liquidity aggregation.
How STP Brokers Work — Step by Step
- Client Places Order
The trader submits a buy or sell order through a trading platform (MT4, MT5, cTrader, or proprietary system). - Broker Routes Order
Instead of filling the order from its own book, the STP broker routes it to one or more liquidity providers. - Matching & Execution
The broker’s STP system sends the order to the best available price from the LP pool. Depending on liquidity, prices may come from multiple providers. - Trade Execution & Confirmation
Once a match is found, the trade is executed in the real market and the result is sent back to the trader’s platform. - No Dealing Desk Intervention
Orders are not manually manipulated, requoted, or held — improving transparency and reducing price manipulation risk.
STP vs ECN vs Market Maker — Comparison Table
| Feature / Model | STP Broker | ECN Broker | Market Maker |
| Execution Model | Routes trades to LPs | Direct ECN order book | Internal counterparty |
| Dealing Desk? | No | No | Yes |
| Price Quotes | From LPs | True interbank | Broker-set |
| Spreads | Variable | Tight raw | Fixed or variable |
| Commission | Often included in spread | Commission + spread | Spread only |
| Slippage | Possible | Possible | Limited |
| Best For | Beginners to advanced | Advanced traders | Beginners / casual traders |
| Conflict of Interest | Low | Low | Higher |
Key Characteristics of STP Brokers
1. No Dealing Desk Intervention
Orders go straight to external liquidity providers. The broker does not take the opposite side of your trades, reducing potential conflict.
2. Variable Spreads
Since prices come from liquidity providers, spreads can widen and tighten with market volatility.
3. Faster Execution
Without manual intervention, execution speeds are generally faster and more reliable than dealing desk models.
4. Price Aggregation
The broker’s STP system often aggregates prices from multiple LPs and displays the best available bid and ask.
5. Limited Transparency Compared to ECN
While STP is more transparent than market making, it may not provide full depth-of-market (DOM) or visible order book data like ECN.
How STP Brokers Make Money
STP brokers generally generate revenue in two ways:
1. Spread Markup
The broker may add a small markup to the spread received from liquidity providers. For example, LP quoted spread might be 0.8 pips, and the broker offers 1.0 pip to the trader.
2. Commission (Sometimes)
In some STP models, a separate commission per lot is charged, though this is more common in ECN setups.
Typical Cost Breakdown
| Cost Type | Description |
| Spread | Difference between bid and ask; may include broker markup |
| Commission | Optional, small per-lot fee (depends on broker) |
| Overnight Fees | Swap financing for positions held past rollover |
| Conversion Fees | If base and account currency differ |
Benefits of Using an STP Broker
1. Reduced Conflict of Interest
Because the broker doesn’t trade against you, pricing tends to reflect market conditions more accurately than dealing desk models.
2. Quality of Execution
Trades are processed directly with real liquidity providers, often resulting in better fills and reduced requotes.
3. Useful for Most Strategies
STP suits scalping, day trading, and longer-term strategies that require competitive execution without manipulation.
4. No Fixed Spread Restrictions
Variable spreads allow the market to determine pricing, often much tighter during liquid sessions (e.g., London–New York overlap).
Limitations & Risks of STP Brokers
1. Spread Widening During Volatility
During high-impact events (e.g., central bank announcements), spreads can expand as liquidity evaporates.
2. Execution Slippage
Even in STP models, slippage can occur when prices move faster than orders can be filled.
3. Transparency Varies
Not all STP brokers disclose liquidity provider sources or depth-of-market, so transparency may differ.
4. Not Always Pure ECN
Some brokers blend STP and internal execution depending on volume or region, which can introduce ambiguity.
Common Order Types Supported by STP Brokers
- Market Orders: Immediate execution at best available price
- Limit Orders: Price-specific entry/exit
- Stop Orders: Triggered at risk levels
- Trailing Stop: Moves with price for dynamic risk control
- One-Cancel-Other (OCO) — in some systems
STP Brokers & Risk Management Tools
Good STP brokers support essential risk tools:
- Guaranteed Stop Loss (GSL): Locks price even during gapping (often premium-charged)
- Negative Balance Protection: Prevents losing more than account equity
- Margin Call Alerts: Signals when margin is low
- Trailing Stops & Brackets: For advanced risk control
These tools help you manage leveraged positions effectively.
Who Should Choose an STP Broker?
Best Suited For:
- Intermediate and advanced traders seeking competitive execution
- Traders who prioritize fair routing to liquidity providers
- Those who want lower risk of price manipulation
- Scalpers and active short-term traders (often restricted by market makers)
Less Ideal For:
- Absolute beginners seeking ultra-simple fixed pricing
- Traders needing full depth-of-market and order book visibility (ECN may be better)
STP Brokers vs Other Broker Types — Key Differences
STP vs Market Maker
| Feature | STP | Market Maker |
| Execution Source | External LPs | Internal inventory |
| Conflict Risk | Low | Higher |
| Spread Type | Variable | Fixed or variable |
| Price Manipulation Risk | Lower | Possible |
| Requotes | Rare | Can occur |
STP vs ECN
| Aspect | STP | ECN |
| Order Book | No public interbank book | Full order book visibility |
| Commission | Sometimes spread-inclusive | Commission + tight spread |
| Trader Access | Retail-oriented | Advanced professionals |
| Speed | Fast | Ultra-fast |
| Pricing | Aggregated | Market-wide liquidity |
How to Choose a Good STP Broker (Checklist)
To choose a reliable STP broker, check:
✔ Regulation — FCA, CySEC, ASIC, FSCA, or similar
✔ Segregated client funds and audit frameworks
✔ Execution transparency and best-price quoting
✔ Low spreads with minimal markup
✔ Availability of risk controls (stop loss, margin alerts)
✔ Mobile & desktop platforms
✔ Deposit/withdrawal options suited for your region
✔ Support channels & response quality
Examples of Reputable STP Brokers (Globally)
- Pepperstone — STP with deep liquidity, low spreads
- IC Markets (STP/ECN hybrid) — Raw pricing, ultra-tight markets
- XM Group (STP model) — Large global footprint
- FXTM (STP accounts) — Multiple risk tools
Note: Many brokers blend STP and ECN or vary execution by account type. Always confirm the execution model before opening an account.
Practical Example — Placing an STP Trade
Let’s assume EUR/USD is trading at:
- Bid: 1.0865
- Ask: 1.0867
- Spread: 0.2 pips
You place a buy (long) order of 1 lot:
- Entry: 1.0867
- Market moves to 1.0890
- Profit: (1.0890 − 1.0867) × 100,000 = 230 pips
- Cash profit = 230 × your pip value
Execution fills may vary slightly based on liquidity in the moment, but STP minimizes requotes. Always check rollover and any financing fees for holding overnight.
Regulation & Legal Notes
STP brokerage is widely recognized in regulated markets, but availability and legality vary by region. If you are in Ghana, UK, UAE, or other markets:
✔ Check local compliance and broker licensing
✔ Verify whether CFDs or leveraged products are permitted
✔ Understand tax implications of trading gains
Regulators’ guidelines (like FCA or CySEC) also influence leverage caps and client protections like negative balance safeguards.
Summary — Key Takeaways
- STP brokers route orders to external liquidity providers, reducing conflicts of interest.
- Variable spreads and fast execution make STP suitable for most retail and active traders.
- Spread selling models balance transparency and simplicity — better than market makers but less complex than pure ECNs.
- Costs involve spreads and occasional commissions — always review the broker’s pricing structure.
- Risk management tools are essential for leveraged trading success.
Frequently Asked Questions (FAQs)
- What does STP mean in forex trading?
STP (Straight Through Processing) means your trade is routed directly to liquidity providers without a dealing desk. - Are STP brokers better than market makers?
STP brokers typically offer fairer pricing and fewer conflicts of interest compared to market makers. - Does STP execution guarantee no slippage?
No — slippage can still occur during high volatility even in STP models. - Do STP brokers charge commissions?
Some charge small commissions; others bundle costs into spreads. - Is STP suitable for scalping?
Yes, many STP brokers support scalping, but confirm the broker’s policy first.
