Why Traders Select STP Brokers & Difference Between STP Gold Brokers & ECN Gold Brokers

Straight Through Processing is the name given to online brokers that; when upon receiving a client order they will pass it directly to their Liquidity Provider. Liquidity providers (LP) can include Banks & as such there's no intermediary involved in the trade order processing in other terms the Straight Through Processing model does not filter the trade orders through a Dealing Desk, DD.

STP Brokers

With absence of an intermediary process (dealing-desk) the Straight Through Processing, STP will be able to process its client's orders instantaneously without any delays. This makes STP brokers the most recommended gold broker type because they do not re-quote their customers something which most traders regard as very important. The Straight Through Processing will also in effect allow its clients/customers to trade during the announcement of financial news data without any restrictions.

These brokers benefit from having several liquidity providers and an increase in the No. of liquidity providers in the trade system means better fills for the clients.

Before reading on, identify the difference between these two headings so that the headings below don't seem like a repetition.

Reasons why Top Brokers prefer this execution
Reasons why Top Traders prefer this execution

Reasons Why Online Brokers Select This Model

As the customers places their orders through the Straight Through Processing(STP) platform, the orders are then sent directly to the liquidity providers & as such the STP Online Broker executes trades efficiently & quickly thus providing better fills for their customers using this model.

Why Traders Select Straight Through Processing Execution

Client trade positions obtain better & faster fills through this technique and method.

The better & faster fills are received directly from the many competitive market bids and offers coming through the many LPs, which provide for more liquidity within the market & in turn this implies that the client gets the best fills.

Client transactions with an STP trading broker means there's anonymity for the client orders which are instead executed automatically through the interbank market network anonymously.

ECN Brokers

Electronic Communications Network ECN provides traders with real time data quotes straight from network of banks that form the Inter-bank markets.

ECN Gold Brokers will show the entire bid and ask offers presently available in the market from the banks. Electronic Communications Network allows investors to place their orders straight through to the online trading market. The liquidity is not provided by the online broker but by this inter bank network of large banks. This way traders transactions through an Electronic Communication Network and thence they can execute trades very quickly and instantly without getting re quoted.

STP Brokers and ECN Brokers Comparison

Most Traders ask which is the best between STP Broker and the ECN Broker? & What is the difference between these two? - Compare brokers ECN and STP execution models?

STP Online Broker

STP brokers have a lot of liquidity providers, but selects the best at any one particular time automatically/mechanically for the Gold trader. Therefore when a one places a trade and the trade orders will be passed direct to this inter-bank.

Therefore STP brokers are like Gold ECN brokers, the only difference is that the Straight Through Processing, STP model automatically chooses the best quote, at that given time of trade execution and does it mechanically/automatically for the trader.

ECN Online Broker

ECN brokers have a lot of liquidity providers from which one will see all at the same time and then choose which one to trade, It is like having 10 brokers to choose & select from which to trade.

For true Gold ECN brokers, one will have to look at many realtime quotes at the same time & select one, each will having varying spreads & the trader will try to choose the low spread for himself among the 10 illustrated & displayed for the same chart.

There's no much difference between these two, that is why some traders or some brokers will use this term interchangeably, because the only difference between the two is that the STP only chooses to display automatically the best quote chosen from a multiple of liquidity providers while ECN shows all of them at the same time & it is up to the investor to choose which one to open/execute an order with - as a trader you may & might not be able to chose the best as these quotes shift very fast.

According to reviews, this execution model also have the low spreads, henceforth if you are searching for the low spread it is good to choose an STP.

Most brokers do not want to clutter the platform workspace with multiple gold trading streaming trading quotes from various different places which might confuse the trader, especially the beginners who don't know what is what, that is why most online brokers might be implementing an Electronic Communications Network but decide to only display one streaming gold trading quote from only one interbank, thenceforth becoming more of an STP broker rather than an ECN broker, but model of operation is basically one and the same.

If you were to open an account with a ECN broker you would get like 10 quotes of each gold instrument from different banks and to trade you would have to chose from one of these banks - 10 price quotes for every chart would make your trading software workspace too crowded. Another thing is that you'd need a more complex gold platform to stream this amount of data, this type of software would not make the best option to trade with. Furthermore if you sign up an ECN account you will have to pay extra/additional commissions on top of spreads. This is also another reason why to choose and select STP since they do not charge commissions.

Because most brokers are MetaTrader 4 brokers and they want to make retain the platform as it's which makes it easier to operate & which is why this trading platform software is the most popular, these MetaTrader 4 brokers will only display the lowest spreads only after automatically/mechanically choosing it using their algorithms, then display and show this low spread alone all the time.

STP offer the best execution conditions for clients to make trade transactions

STPs execution technique/method provides for full trade transparency, faster & better order fills. The full transparency means a traders receives the real-time data allowing them to enter the market directly at the best fill level.

The best online brokers implement this model because this execution model is able to process its trader's orders without any delay. In addition this model does not re-quote something that most traders regard and consider as a huge advantage.

STP provides the best 24-hour access to market execution due to the high liquidity that they have from their reliable interbank partners.

Get More Courses and Topics:

Trade Gold Trading