Different Types of Forex Brokers - Difference Between STP and ECN - STP vs ECN Broker

Types of Forex Brokers: STP Brokers - Types of Forex Brokers: ECN Brokers

Most forex trader ask what is the difference between the STP and ECN?

STP Forex Broker

STP has many liquidity providers, but chooses the best one at any one time automatically for the trader. Therefore when a trader places a forex trade the orders will be passed direct to this interbank network of liquidity providers - after the liquidity provider with the low spread is selected automatically by the STP execution model.

Therefore STP forex broker is like ECN forex broker the only difference is that the Straight Through Processing Brokers automatically chooses the best fill at that particular time of trade execution & does it automatically for the trader.

ECN Forex Broker

ECN forex broker has many liquidity providers from which a trader will see all at the same time and choose which liquidity provider to trade with, It is like having 10 forex brokers forex quotes to select from which to trade - these ten quotes are for the same forex instrument - each quote from a different liquidity provider.

The ECN broker quotes model means a trader will have to look at many streaming forex quotes at the same time & choose one, this streaming quote will have varying spreads markups & a trader selects the low spread.

There is no much difference between ECN forex broker and STP forex broker, that is why some forex traders or some forex brokers will use the term interchangeably, because only difference between Straight Through Processing execution from Electronic Communication Net-work execution is that the STP forex broker only chooses to have display only one liquidity provider with the best markup at the time of trade while ECN implements a wide variety of liquidity providers & displays all their quotes to the traders & it is up to the trader to select which liquidity provider to select from while trading.

According to forex broker reviews, these ECN and STP brokers are also have the lowest forex spreads, therefore if you are looking for the low spreads it is good to choose an STP broker or an ECN broker.

Most online forex brokers do not want to clutter the traders workspace with multiple streaming quotes from various different liquidity providers for the same forex instrument at the same time because this might confuse forex traders, especially the beginner traders who do not know what is what from what, that is why most forex brokers might be ECN brokers but only choose to display only one streaming price quotes from only one interbank liquidity provider, therefore becoming more of an STP broker rather than an ECN broker, but the model of forex trade execution operation is basically one and the same.

If you were to open a forex account with an ECN forex broker you would get like 10 different quotes of EUR USD from different liquidity providers and to trade you would have to chose the forex quote from one of these liquidity provider. 10 quotes for every trading instrument would make your trading platform workspace too crowded (An ECN Forex Broker Lists Spreads from many liquidity providers). Another thing is which you would need to have a more complex software to stream these multiple forex quotes, this type of forex platform would not make the best trading platform software to trade with. Furthermore, if you open an ECN forex account you will have to pay additional commissions on top of forex spreads. This is also another reason why to choose STP forex broker since unlike ECN forex broker, STP forex broker do not charge commissions on top of spreads. This means that the ECN forex broker execution is not the cheapest execution technique and will charge forex traders extra commissions on tops of spreads adding onto your forex trading transaction costs.

STP Forex Brokers offer the best liquidity for forex traders to make trades

STP forex brokers do not have a forex dealing desk and therefore this provides for full forex trade order transparency, faster and better order fills. The full order transparency means this type of STP forex broker does not create an artificial market for clients, but instead shows a trader the real time price data quotes from an electronic network of banks and allows the trader to enter the true market conditions created by the various forex market participants.

Straight Through Processing Forex Brokers- is the name given to forex brokers that: upon receiving of a forex order they will pass on the forex orders directly to the network of banks through liquidity providers and as such there is no intermediary who will be involved in the order execution in other words the Straight Through Processing Execution Model will not be filtering forex trade orders through a Forex Dealing Desk. The absence of a Forex Dealing Desk is what makes the STP execution model the best choice for many online forex traders.

With absence of such an intermediary process such as a forex dealing desk the STP forex broker is able to process its clients forex orders without any delays. In addition STP forex brokers do not send requotes to their clients something that most traders regard as an advantage.

This also enables the Straight Through Processing Forex Brokers to allow forex traders to trade during the release times of financial news without any restrictions. Other online brokers might not have the liquidity of an STP forex broker and might in turn lock out forex trading for a few minutes before and after a forex news release.

Straight Through Processing Forex Brokers provide the best 24 hour forex order execution and access to trade order execution due to high internal liquidity rate provided by multiple liquidity providers and reliable inter-bank partners they have.

Different Types of Forex Brokers - The Difference Between STP and ECN - Difference Between STP Broker and ECN Broker - Types of Forex Brokers: STP Brokers - Types of Forex Brokers: ECN Brokers.