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The Difference Between STP & ECN

Types of Trading Brokers: ECN Brokers

Most trader ask what is the difference between the STP and ECN?

STP Broker

STP has many liquidity providers, but selects the best one at any one particular time automatically/mechanically for the Gold trader. Therefore when a xauusd trader places a trade the trade orders will be passed directly to the inter bank network of liquidity providers - after a liquidity provider with the lowest spread is selected automatically by the STP model.

Therefore STP broker is like ECN broker the only difference is that the Straight Through Processing Brokers automatically chooses the best fill at that given time of trade execution and does it automatically for the Gold trader.

ECN Broker

An ECN broker connects with various liquidity providers, allowing a trader to view multiple options simultaneously and choose which provider to use for trading. It's akin to having access to ten different broker quotes for trading the same gold asset, with each quote originating from a distinct liquidity provider.

The ECN broker quoting system necessitates that a trader continuously monitors numerous streaming prices simultaneously, picking the one with the most favorable spread markup.

The distinction between an ECN broker and an STP broker is minimal, which is why some traders or brokers use the terms interchangeably. The sole difference between Straight Through Processing execution and Electronic Communication Network execution is that an STP broker typically routes orders to just one liquidity provider offering the best real-time markup, whereas an ECN utilizes numerous liquidity providers, presenting all their quotes to gold traders, allowing the trader to select their preferred provider for the transaction.

Reviews of brokers highlight that ECN and STP brokers often provide the lowest spreads. If low spreads are a priority, selecting an STP or ECN broker is a wise decision.

Most brokers don't want to clutter the Gold traders work-space with multiple streaming quotes from various different liquidity providers for the same xauusd at the same time because this might confuse traders, especially the beginner traders who don't know what's what from what, that is why most brokers might be ECN brokers but only choose to display only one streaming price quotes from only one interbank liquidity provider, thence becoming more of an STP broker rather than an ECN online broker, but the model of trade execution operation is basically one and the same.

Opening an account with an ECN broker would expose you to about ten distinct quotes for XAUUSD sourced from various liquidity providers: to execute a trade, you would have to select a quote from one of these sources. Having ten separate gold quotes per trading symbol would severely clutter your platform's workspace (an ECN Gold Broker displays spreads from numerous liquidity sources). Additionally, supporting the real-time streaming of these manifold quotes necessitates a significantly more complex platform, which generally results in suboptimal trading software. Moreover, opting for an ECN account mandates paying supplementary commissions layered on top of the existing spreads. This very fact argues for favoring an STP broker, as, unlike their ECN counterparts, STP brokers do not levy extra commissions beyond the spreads. Consequently, ECN execution is not the most cost-effective method, as it imposes extra commission charges on traders, thereby increasing overall trade expenses.

STP Brokers Provide Top Liquidity for Gold Trades

STP brokers do not use a dealing desk, which means trades are more open, and orders are filled faster and better. This openness means the broker doesn't make up a fake market for customers but shows them the real-time prices from a network of big banks, letting the trader join the actual market made by all the different people involved.

Straight Through Processing Brokers- is the name given to brokers that: upon receiving of a order they will pass on the orders directly to the network of banks through liquidity providers & as such there is no intermediary who will be involved in the trade order execution in other words the Straight Through Processing(STP)STP Execution Model will not be filtering orders through a Dealing Desk. The absence of a Dealing Desk is what makes the STP execution model the best choice for many online traders.

With absence of such an intermediary process such as the dealing desk the STP broker is able to process its clients orders without any delays. In addition STP brokers do not send requotes to their clients something that most traders regard as an advantage.

This also enables the Straight Through Processing(STP) Online Brokers to allow traders to trade during the announcements times of financial news without any restrictions. Other online brokers might not have the liquidity of an STP broker and might in turn lock out gold trading for a few minutes before and after a news release.

Brokers employing Straight Through Processing (STP) generally provide superior order execution capability, attainable due to the high internal liquidity maintained by their numerous liquidity providers and established inter-bank alliances.

Different types of brokers include STP (Straight Through Processing) Gold Brokers and ECN (Electronic Communication Network) Brokers. Each type operates differently, and their distinctions are essential to know for informed trading.

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