STP Brokers

STP brokers offer some excellent benefits in comparison to other ECN and NDD brokers in the UK. We’ll explore the differences in this article, along with some of the best STP forex brokers and a list of key considerations to take into account when choosing between providers.

What Are STP Brokers?

STP (straight-through processing) refers to the automated process of electronic transfers, where there is no manual intervention. The term is both used in payment processing as well as trading. In trading, STP is essentially the process of settling trades that are passed through a brokerage.

An STP broker uses a non-dealing desk (NDD) model, whereby all trade orders are routed to the market. Liquidity providers (banks, hedge funds and large investors) act as the counter-party to the trader, whilst the broker connects the two.

STP Brokers Vs ECN Brokers

There are some similarities to note with another common execution model: electronic communication networks (ECNs). ECN brokers also use an NDD model, though the key difference is how trades are routed.

ECN brokers use a digital system that matches buy and sell orders automatically, without needing any middlemen. This allows the ECN to act as a hub of liquidity whilst also ensuring anonymity for traders.

Now that we’ve covered the key features of STP processing, let’s take a look at the main pros and cons and what to look for in a good STP broker.

Pros Of STP Brokers

There are some considerable benefits of trading with STP forex brokers:

• Comparatively short processing times – Non-dealing desk and automatic processing eliminates delays or the need to issue requotes.
• Direct Market Access (DMA) – Some brokers also offer a DMA/STP model, whereby orders are passed directly to the liquidity pool. True STP forex brokers will ensure that trade orders are filled at the most competitive prices.
• Market transparency – There’s a high level of anonymity as traders are connected directly to the broker’s list of top liquidity providers. This is particularly good for scalpers who don’t have the risk of slippage.
• No conflict of interest – There’s no manual intervention and brokers don’t hedge against traders, so they don’t profit from customer losses. Revenue is only generated from the small commission (mark-up) on each trade.

Cons Of STP Brokers

It’s worth noting the following drawbacks before choosing an STP broker:

• Orders can be requoted or rejected – Requotes are possible. For example, if a large order needs to be routed through the market but the price changes in that time, the order can be rejected.
• Spreads are less consistent – Spreads with STP brokers can vary dramatically during periods of high volatility.
• No micro-lots – Micro-lots are unavailable, so traders will need more trading capital and effective risk management.

Choosing an STP Broker

You may need to spend some time comparing a few options to find the right STP broker for you, as ultimately the decision will ride on several factors. These will vary depending on each trader’s experience level and trading style.

Regulation

Trading with a fully licensed STP broker will give you peace of mind and ensure you are receiving a high level of protection. Look for brokers that are regulated ideally by multiple tier-1 bodies, including the Financial Conduct Authority in the UK.

Security

Regulated forex brokers are also typically covered by robust insurance and use segregated client accounts. This ensures that, should the company go bankrupt, your trading funds will be kept safe and returned back to you. In the UK, for example, regulated brokers are backed by the Financial Services Compensation Scheme (FSCS), which covers claims up to £85,000.

Fees

The best STP brokers offer competitive fees and ideally no commissions on deposits and withdrawals. A reputable broker should also be transparent with this information before you sign up, so make sure to look out for any red flags. Note that a small mark-up is usually charged on each trade and this will vary between brokers.

Some of the cheapest STP brokers out there include eToro and FXTM, who offer extremely competitive pricing, with zero commissions and tight spreads.

Customer Support

Any trader can benefit from a good range of customer service options that can provide help around the clock. Top STP brokers usually offer a 24/7 live chat service or even a help centre. Admiral Markets, for example, offers support via a contact number, email, live chat, Facebook Messenger and Telegram.

Payment Methods

You can also expect a range of payment methods at good brokers, such as bank transfer, credit card and e-wallets. You might even find electronic payment methods such as Klarna and PayPal at some brokers, including FXCM. This can vary and you may need to look out for any deposit or withdrawal fees if applicable at your broker.

Education & Tools

Whether you’re a novice or expert trader, a variety of tools and educational resources on your STP broker’s website can be a huge benefit. This could include trading news and analysis, interactive training content, webinars or e-books. IG, for example, is suitable for all experience levels and offers top-quality education on their platform. For beginners, eToro is also an excellent choice if you’re looking for a range of learning resources.

Final Word On STP Brokers

Before deciding on an STP broker, the benefits and limitations discussed in this article should help you determine whether they’re a good option for your circumstances. Whilst STP forex brokers give you direct and transparent access to the market with competitive pricing, there are some downsides. Spreads are inconsistent due to the nature of volatility and beginners may struggle with the larger trading capital required.

For those who have decided to opt for an STP broker, make sure to consider the key factors above, including strong licensing, competitive fees and good educational tools.

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