Types of XAUUSD Market Brokers
Types of Broker XAUUSD 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 gold 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 gold orders through a Dealing Desk. Absence of a Dealing Desk intervention is what makes this electronic trading platform a Straight Through Processing.
With the absence of an intermediary process (dealing desk) the STP, Straight Through Process execution will be able to process its clients orders instantly without any delay. This makes STP gold brokers the most recommended XAUUSD broker type. The Straight Through Processing XAUUSD Brokers will also not send re-quotes to its clients something that most investors regard as very important. The Straight Through Process execution will also in effect will allow its clients to trade during the release of gold news without any restrictions.
Straight Through Processing gold brokers benefit from having several liquidity providers and an increase in the number of providers in the system means better fills for the client. A large number of STP gold brokers will use banks trading on the interbank markets as their liquidity providers.
Before Reading Spot the difference between these two headings so that the headings below don't seem like a repetition.
- Reasons why XAUUSD Brokers choose 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 gold brokers profit. It is therefore in Gold broker 's interest for the Client to make profitable trades, a STP execution model often implies that there is No Dealing Desk (NDD) & subsequently has less expenses through its staff salaries.
An STP is compensated through a markup on the spread it obtains from its liquidity provider and/or commissions imposed for each trade. As most liquidity providers of STP execution are banks on the Interbank 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.
Each time a client trades through a Straight Through Processing platform, the STP will always make a profit. As STP gold brokers add a small markup to the spread they receive from their provider when getting quoting of bid/ask rate. The STP Gold Broker will apply this markup by a certain amount of fractional pips to the bid and ask xauusd price that it receives from its best bid/ask liquidity provider before passing the rates onto the client via the straight through processing electronic platform.
As the client places the order through the STP platform, the gold orders are then sent directly to the liquidity provider and as such the STP executes the same orders as the client at a slightly better xauusd price which is the markup.
Reasons why Gold Traders Choose STP gold brokers
Clients often choose to execute trades via an STP as it often implies there is no Dealing Desk, which in turn means that the broker is more transparent with clients.
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 & faster fills are obtained directly from the many competitive market bids & offers coming through the Straight Through Processing liquidity providers, which provides for more liquidity within the gold market and in turn this implies lower execution xauusd prices for the client.
Client transactions with an STP means there is anonymity for the client as there is no Dealing Desk monitoring the transactions of orders coming in from each client. Trading Gold orders are instead executed automatically through the xauusd market network anonymously.
Another Type of Online XAUUSD 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 via their own ECN Gold Broker net-work which connects direct to the Interbank net-work of banks, they are referred to as ECN technology gold brokers, short form is ECN.
ECN will show the entire bid and ask offers currently available in the xauusd market from banks. An ECN will allow traders to place their gold orders straight through to the gold market. The liquidity isn't provided by the broker but by this inter-bank network of banks. This way gold traders trading through an ECN XAUUSD Broker gets high liquidity and execute trades very quickly and instantly without getting re-quoted.
Most Traders ask which is the best between the STP & the ECN? & What's the difference between these two?
STP
Has many liquidity providers, but chooses the best at any one time automatically for the trader. Therefore when trader places a trade the xauusd trading orders will be passed direct to this inter bank.
Therefore STP is like ECN the only difference is that the STP Gold Brokers automatically chooses the best one at that particular time and does it automatically for the trader.
ECN
Has many liquidity providers from which a trader will see all at same time and choose which to trade, It is like having 10 XAUUSD brokers to choose from which to trade.
The ECN a trader will have to look at many streaming quotes at the same time and select one, this streaming quote will have varying spreads & a trader selects the low spread.
There is no much difference between ECN & STP, that's why some traders or some gold brokers will use the 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 & it's upto the trader to select which liquidity provider to choose from while trading.
According to reviews, these gold brokers are also have the low spreads, therefore if you're looking for the low spreads it is good to choose an STP.
Most online gold brokers do not want to clutter the traders work-space with multiple gold streaming quotes from various different places which may confuse the trader, especially the novice gold traders who do not know what is what, that's why most XAUUSD brokers might be ECN but only select to display only one streaming quotes from only one interbank, therefore becoming more of an STP rather than an ECN, but the model of operation is basically one and the same.
If you were to open a account with an ECN you would get like 10 quotes of Gold price from different banks and to trade you would have to chose the quote from one of these banks. 10 gold quotes for every trading symbol would make your Gold platform workspace too crowded (An ECN Lists Spreads from many liquidity providers). Another thing is that you would need a more complex platform to stream these multiple gold quotes, this type of platform would not make the best platform to trade with. Furthermore if you open an ECN account you will have to pay additional commissions on top of spreads. This is also another reason why to choose STP since unlike ECN, STP do not charge commissions. This means that the ECN is not the cheapest execution method & will charge traders extra commissions adding onto your transaction costs.
STP XAUUSD Brokers offer the best liquidity conditions for clients to make trades
STP gold brokers do not have a dealing desk and therefore this provides for full trade transparency, faster and better order fills. The full transparency means this type of gold broker does not create an artificial market for clients, but instead shows a trader the realtime data quote from an electronic network of banks & allows the trader to enter the true market conditions created by the various gold market participants.
STP - is the name given to gold brokers that: upon receiving of a client order they will pass on the gold orders directly to the network of banks and as such there is no intermediary who will be involved in the order execution in other words the STP Execution will not be filtering orders through a Dealing Desk. Absence of a Dealing Desk is what makes the electronic communication network the best choice for many traders.
With absence of such an inter-mediary process such as the dealing desk the STP is able to process its client's trading orders without any delays. In addition these gold brokers do not send requotes to their clients something that most Gold traders regard as a huge advantage.
This also enables the STP XAUUSD Brokers to allow its clients to trade during the release times of financial news without any restrictions. Other online brokers might not have the liquidity of an STP and might in turn lock out trading for a few minutes before & after a news release.
STP XAUUSD Brokers provide the best 24-hour execution and access to order execution due to high internal liquidity rate and reliable inter-bank partners they have.
Types of Gold Brokers in XAUUSD - Types of Brokers in XAUUSD Market - Types of XAUUSD Market Brokers - Type of Broker in Gold Trading - Types of XAUUSD Brokers - Types of Broker Gold Trading.
