STP broker
Also known as: straight through processing, STP
STP broker: An STP (straight through processing) broker passes client orders to one or more external liquidity providers, such as banks, instead of taking the other side of the trades itself.
How does an STP broker make money?
STP brokers typically earn by adding a markup to the prices received from liquidity providers, by charging a commission, or both. Spreads are usually variable, and orders can be filled with slippage when prices move quickly.
What is the difference between STP and ECN?
Both pass orders to outside liquidity. An ECN broker connects orders to a network where several participants’ prices meet, usually with raw spreads and a separate commission, while an STP broker routes orders to its chosen liquidity providers. The labels are used loosely in marketing, and some brokers combine STP with a market maker model for part of their flow; the order execution policy is more informative than the label: how to choose a forex broker.
Worked example
Illustrative only: a liquidity provider quotes EUR/USD at 1.08500 / 1.08506 (0.6 pip). The STP broker adds a 0.5 pip markup and shows the client 1.08498 / 1.08509 (1.1 pips). The client’s buy order is passed to the liquidity provider and filled at the broker’s quoted ask, if the price is still available.
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Related terms
- ECN broker
An ECN (electronic communication network) broker routes client orders to an electronic network where prices from several liquidity providers and participants meet, typically charging raw spreads plus a separate commission.
- Market maker
A market maker broker, also called a dealing desk broker, quotes its own bid and ask prices and acts as the counterparty to client trades instead of passing every order to outside liquidity providers.
- Spread
The spread is the difference between the bid (sell) price and the ask (buy) price of a currency pair. It is one of the main trading costs and is usually measured in pips.
- Slippage
Slippage is the difference between the price you expect when placing an order and the price at which it is actually filled. It can work against you (negative slippage) or in your favour (positive slippage).