STP Brokers (Straight Through Processing)
An STP broker (Straight Through Processing broker) is a broker that passes client orders directly to external liquidity providers or the interbank market, without manual intervention in the dealing process. Instead of taking the opposite side of every trade as a principal, the broker acts more like a conduit between you and its liquidity sources.
Understanding STP
STP is often contrasted with dealing desk or "market maker" models, and sometimes used alongside ECN routing.
💡In simple terms, an STP broker is designed to send your order "straight through" to the market, rather than holding it on an internal book.
How Does an STP Broker Route Orders?
In an STP setup, the broker's trading system automatically forwards client orders to one or more external liquidity providers:
Order Received
The broker receives your order on its platform (e.g. MT4/MT5, web or app).
Electronic Routing
The order is routed electronically to the broker's connected liquidity pool (banks, LPs, ECNs).
LP Fill
A liquidity provider fills the order, and the broker passes the fill price back to your platform.
Broker Margin
The broker may add a small markup to the spread or charge a commission for providing access.
Key Idea: The trade is "processed" straight through to external counterparties rather than being manually dealt with on an internal dealing desk.
STP vs Dealing Desk (Market Maker) Brokers
STP and dealing desk describe different execution models:
Dealing Desk / Market Maker
The broker often acts as the direct counterparty to client trades, managing risk internally and deciding when to hedge externally.
STP Broker
The broker routes orders to external LPs and usually does not hold a large internal book against clients (although it may still manage some risk).
Reality Check: In practice, many brokers use hybrid models, internalising some flow and sending other flow straight through. The marketing labels are simpler than the reality.
How Is STP Different from ECN?
STP and ECN are related but not identical concepts:
ECN (Venue)
An electronic network where orders from many participants are matched. It's a venue for order matching.
STP (Routing Model)
It sends your orders to external liquidity, which may include ECNs, banks and other LPs. It's a routing model.
A broker can be STP-only (routing to LPs), ECN-only (routing mainly to an ECN), or a mix of both. Many "ECN/STP" accounts in retail FX/CFD combine these approaches.
Example: STP Order Flow on a Forex Pair
Imagine you trade GBP/USD on an STP account:
You place a buy order for 1 lot on your broker's MT5 platform.
The broker's bridge software instantly forwards your order to its liquidity aggregator.
The aggregator compares prices from several LPs and selects the best available quote to fill your order.
The LP fills the order, and you see the trade open on your platform at that price, with a small markup or commission applied by the broker.
Key Point: No dealer manually decided to take the other side; the process was electronic and routed "straight through" to external liquidity.
What Does an STP Model Mean for Retail Traders?
In theory, STP execution can offer several benefits:
Less Intervention
Reduced dealing desk intervention in order execution.
Aggregated Liquidity
Prices reflect multiple LPs rather than just one internal book.
Transparent Costs
Costs are often a combination of spread markup and/or commission.
However, real-world outcomes depend on how well the broker's STP setup is implemented:
- Quality and number of LPs connected.
- Latency and stability of the broker's bridge/aggregation system.
- Risk management policies (for example, when the broker chooses to internalise flow).
"STP" is a positive signal, but you still need to judge the broker by actual spreads, execution and regulation.
Common Misconceptions About STP Brokers
"STP means no conflict of interest at all."
STP reduces some conflicts compared to pure dealing desks, but brokers still earn from spreads and commissions and may internalise some flow. Business incentives don't disappear completely.
"All STP brokers are identical."
Execution quality varies widely depending on LPs, technology, risk policies and regulation. The label alone doesn't guarantee performance.
"STP always gives better prices than dealing desks."
In many cases STP can be competitive, but a well-run dealing desk can sometimes offer similar or better all-in pricing on certain products.
Quick Checkpoint: Do You Understand STP Brokers?
Test yourself on these questions:
- What does "Straight Through Processing" mean in the context of a broker?
- How does an STP broker differ from a dealing desk/market maker?
- How is an STP model related to ECNs and liquidity providers?
- What factors determine whether an STP broker delivers good execution in practice?
Tip: If you can answer these clearly, you have a solid understanding of one of the main broker execution models.
Frequently Asked Questions
Are STP brokers always "no dealing desk"?
In principle, STP describes a no-dealing-desk routing model. In practice, many brokers use hybrid setups where some flow is internalised and some is routed externally. It's important to read the broker's disclosures and monitor actual execution.
Do STP brokers have requotes?
True STP execution should reduce manual requotes, but slippage can still occur if prices move between order placement and fill. Some platforms still show "requotes" as part of their interface behaviour.
Is an STP account always better than a standard account?
Not necessarily. For some traders, a standard (spread-only) account can be simpler and, depending on costs and strategy, just as effective. The best choice depends on your trading style, frequency and sensitivity to spreads vs commissions.
Can a broker be both STP and market maker?
Yes. Many brokers use a hybrid model, acting as a market maker for some client flow and routing other flow STP to external LPs. Classification depends on how each type of flow is handled.
Summary: Where STP Brokers Fit in Market Structure
STP brokers use Straight Through Processing to route client orders electronically to external liquidity providers, ECNs or banks, instead of handling everything on an internal dealing desk. This model can offer more transparent and market-linked pricing, but real-world quality depends on the broker's partners and technology.
For retail traders, understanding STP helps you interpret broker marketing claims, compare execution models and choose accounts that match your strategy and expectations.
Next Steps: In the next lesson, you'll look at dealing desk brokers in more detail to complete the picture of how brokers can sit between you and the wider market.
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