Types of Market Brokers

Types of Broker Trading

STP or Straight Through Processing, is the name given to gold brokers that, when upon receiving a client trade order they will pass on the orders directly to their gold liquidity provider. XAUUSD Liquidity providers can include Banks & as such there is no intermediary involved in order processing in other words the STP doesn't filter the orders through a Dealing Desk. The absence of a Dealing Desk intervention is the factor that makes this electronic software platform a Straight Through Processing, STP.

With absence of an intermediary process (dealing desk) the STP, Straight Through Process execution will be able to process its clients/customers orders instantaneously without having any delay. This makes STP online brokers the most recommended broker type. The Straight Through Processing XAUUSD Brokers will also not send re-quotes to its clients/customers something that many traders regard and consider as very important. The Straight Through Process execution will also in effect allow its clients to trade during the release of gold news without any restrictions.

Straight Through Processing(STP)STP xauusd brokers benefit from having several liquidity providers and an increase in the No. of providers in the system means better fills for the clients. A big number of STP brokers will use banks trading on the inter-bank markets as their liquidity providers.

Before proceeding, observe the distinction between these two topic headers so that the subsequent sections do not appear redundant.

Reasons why XAUUSD Brokers select STP execution
Reasons why Traders Choose STP execution

Reasons why XAUUSD Brokers choose to be STP

Many traders like Straight Through Processing because it means that a client's losses don't benefit the broker. It's better for brokers if clients make profitable trades. The STP trade execution model usually means there is No Dealing Desk, which keeps the costs down, including staff salaries.

STP brokers earn money by adding a markup to the spread from their liquidity providers. They also charge commissions on each trade. Most providers are big banks in the interbank market. These banks offer fixed spreads. This setup lets STP XAUUSD brokers give clients fixed or variable spreads.

STP platforms always earn on client trades. Brokers add a tiny markup to spreads from liquidity providers. This covers bid-ask quotes. The STP broker boosts the bid and ask by a few pips. Then it sends the rates to clients through the electronic system.

As the client places the order through the STP platform, the orders are then sent directly to the liquidity provider & as such the STP executes the same orders as the client at a slightly better price which is the mark up.

Reasons why Traders Select STP online brokers

STP execution skips the dealing desk. Clients pick it for clearer broker dealings.

Traders hit the real market, not a fake one from a market maker. STP gives better, quicker fills for client orders.

The better and faster fills are received directly from the many competitive market bids and offers and provides coming through the Straight Through Processing(STP) liquidity providers, which provides for more liquidity within the market and in turn this implies lower execution prices for the client.

With an STP broker, client trades stay private. No dealing desk watches your orders. They run through the market network on auto and without names.

Another Type of Online Broker is ECN

What's an ECN?

Electronic Communications Network (ECN) brokers furnish traders with live, streaming trading quotes sourced directly from the network of banks that trade Gold in the Interbank market. Since these ECN XAUUSD Brokers channel these real-time data quotes through their proprietary ECN infrastructure, which connects directly to the Interbank network of financial institutions, they are recognized as ECN technology brokers (ECN for short).

An ECN broker shows all current bid and ask prices from banks. Traders send orders right to the market. The broker does not supply liquidity. Banks in the network do. With an ECN XAUUSD broker, you get deep liquidity. Trades fill fast without requotes.

Most Traders ask which is the best between the STP & the ECN? and What's the difference between these two?

STP

Has many liquidity providers, but selects the best at any one particular time automatically/mechanically for the Gold trader. Therefore when trader places a trade the trading orders will be passed direct to this inter bank.

Consequently, STP technology functions similarly to ECN: the key distinction is that STP Brokers automatically select the most favorable routing option for the Gold trader at any given moment without manual intervention.

ECN

It has many liquidity providers. You see them all at once and pick one to trade. Think of it as choosing from 10 XAUUSD brokers.

The ECN type lets you view many live prices at once. Pick one with the lowest spread from the changing options.

There is no much difference between ECN & STP, that is why some traders or some brokers will use this term interchangeably, because the only difference between STP execution from the ECN execution is that the STP only chooses to have only one liquidity provider while ECN implements a wide variety of liquidity providers and it's upto the trader to choose which liquidity provider to select from while trading.

According to reviews, these brokers also have the low spreads, therefore if you're searching for the low spreads it is good to choose an STP.

Most brokers opt not to overwhelm a Gold trader's workspace with an excess of real-time Gold quotes originating from diverse sources, which could confuse the trader, especially beginners unfamiliar with the different origins. This is why many brokers, even if technically ECN, might choose to display pricing from just one inter-bank source, making their operation resemble STP more than ECN, although the fundamental operating mechanism remains essentially the same.

If you were to open a account with an ECN you would get like 10 quotes of price from different banks and to trade you would have to chose the quote from one of the banks. 10 quotes for every trading symbol would make your platform workspace too crowded (An ECN Lists Spreads from many liquidity providers). Another thing is that you would need a more complex platform to live stream these multiple gold quotes, this type of platform would not make the best trading software to trade with. Furthermore if you sign up an ECN account you'll have to pay extra/additional commissions on top of the spreads. This is also another reason why to select STP since unlike ECN, STP don't charge commissions. This means the ECN is not the cheapest execution method & will charge the Gold traders extra commissions adding on to your trade costs.

STP XAUUSD Brokers offer the best liquidity conditions for clients to make trade transactions

STP brokers don't have a dealing desk and henceforth this provides for complete and full trade transparency, faster and better order fills. Full transparency means this type of gold broker doesn't create an artificial market for clients, but instead displays a trader the real time data quote from an electronic online network of banks and allows the gold trader to enter into the real market conditions created by various different market participants.

STP - is the name given to gold brokers that: upon receiving of a client order they will pass on the orders directly to the network of banks and as such there is no intermediary that will be involved in the trade order execution in other terms the STP Execution will not be filtering orders through a Dealing Desk. Absence of a Dealing--DeskDealing--Desk,--DDDeskDealing--Desk(DD) is what makes ECN the best choice for most traders.

Because there's no middle step like a dealing desk, the STP can handle its customers' orders right away. Also, these brokers don't send new price quotes to their customers, which many traders see as a big plus.

This also enables the STP XAUUSD Brokers to allow for its clients/customers to trade during the announcements times of financial news without any restrictions. Other online brokers may not have the liquidity of an STP and may in turn lock out trading for a couple of minutes before & after a news release.

STP XAUUSD Brokers ensure superior 24-hour trade execution and access because of their high internal liquidity reserves and established relationships with dependable interbank partners.

Kinds of Brokers in XAUUSD - Kinds of Brokers in Market - Kinds of Market Brokers - Kind of Broker in Trade - Kinds of Brokers - Kinds of Broker Gold Trading.

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