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 Reading Spot the difference between these two headings so that as the headings below don't seem like a repetition.

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

Reasons why XAUUSD Brokers choose to be STP

In addition to the fact that most traders prefer Straight Through Processing due to the fact that a client's losses are not a brokers profit. It's therefore in broker 's interest for the Client to make profitable trade positions, a STP trade execution model often implies that there is No Dealing Desk NDD & subsequently has less expenses through its staff salaries.

An STP gets compensated through a mark up on the spread that it obtains from its liquidity provider/providers &/or commissions imposed for every trade transaction. As most liquidity providers of STP execution are large banks on the Inter-bank market, the majority of which offer fixed spreads this allows the STP XAUUSD Brokers to provide both fixed and/or variable spreads to its clients/customers.

Every time a client trade positions through a STP platform, the STP will always make a profit. As STP brokers add a small mark-up to the spreads they receive and get from their liquidity provider when getting and receiving the quotes of the bid-ask rates. The STP Online Broker will apply this mark-up by a certain amount of fractional pips to the bid & ask price that it receives from its best bid/ask liquidity provider before passing these rates onto their client via the straight through processing STP electronic platform.

As the client places the trade 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

Clients often choose to execute trades via an STP as it often implies there is no Dealing Desk, which in turn means the broker is more transparent with clients/customers.

The Traders enter trades into a true market instead of an artificial market that might be created by a market maker. Client trades obtain better and faster fills through an STP.

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.

Client transactions with an STP broker means that there is anonymity for the client because there's no Dealing Desk DD monitoring the trade positions of orders coming in from each client. Orders are instead executed automatically through the market network anonymously.

Another Type of Online Broker is ECN

What's an ECN?

Electronic Communications Net-work - ECN broker provides traders with real time streaming data trading quotes straight from the net-work of banks that trade Gold- The Interbank market. Since these ECN XAUUSD Brokers offer real time data quotes from these net-work through their own ECN Broker net-work which connects direct to the Interbank network of banks, they are known as ECN technology brokers, short form is ECN.

ECN will show the entire bid and ask offers presently available in the market from the banks. An ECN will allow traders to open their orders straight through to the online trading market. The liquidity is not provided for by online broker but by this inter bank network of big banks. This way traders through an ECN XAUUSD Broker gets high liquidity and execute trades very quickly & instantly without getting requoted.

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.

Therefore STP is like ECN the only difference is that the STP Brokers automatically chooses the best one at that particular time and does it automatically for the Gold trader.

ECN

Has many liquidity providers from which one will see all at same time and select which to trade, It is like having 10 XAUUSD brokers to select from which to trade.

The ECN one will be required to look at many live quotes at the same time and choose one, this streaming quote will have varying spreads & a trader chooses the low spread.

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 do not want to clutter the Gold traders work space with multiple gold streaming quotes from various different places which may confuse the trader, especially the beginner traders who don't know what is what, that is why most brokers might be ECN but only select to display only one real time quotes from only one inter-bank, thenceforth becoming more of an STP rather than an ECN, but model of operation is basically one & 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 trade orders through a Dealing Desk. Absence of a Dealing--DeskDealing--Desk,--DDDeskDealing--Desk(DD) is what makes ECN the best choice for most traders.

With absence of such an inter-mediary process like the dealing desk the STP is able to process its client's orders without any delays. In addition these brokers do not send re-quotes to their customers something that many traders regard and consider as a huge advantage.

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 provide the best 24-hour execution and access to order execution due to and because of high internal liquidity rate and reliable inter-bank partners they have.

Types of Brokers in XAUUSD - Types of Brokers in Market - Types of Market Brokers - Type of Broker in Trade - Types of Brokers - Types of Broker Gold Trading.

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