STP Brokers
In forex trading, Straight Through Processing (STP) brokers are considered a middle-ground solution between full market access models and internal dealing desk structures. STP refers to how client orders are processed—automatically and without manual intervention—by passing them directly through to external liquidity providers. This model removes the broker from taking the other side of the trade, creating a less conflicted environment and allowing for more market-based pricing.
STP execution appeals to traders seeking efficiency, low latency, and pricing transparency without requiring the infrastructure or sophistication needed for direct ECN or DMA models. The core idea is simplicity: client orders go straight to the market.
How STP Brokers Work
An STP broker acts as a conduit between the trader and a network of liquidity providers, which can include large banks, hedge funds, and institutional counterparties. When a trader opens a position, the order is automatically routed to one of these external providers who matches the trade based on available pricing.
Unlike a market maker, the STP broker does not take a position against the client. It does not quote its own prices but instead aggregates pricing from multiple sources and displays the best bid and ask to the client. This flow is handled electronically, reducing the chance of human error or manual price filtering.
The broker earns income through a small markup added to the spread (or occasionally through a fixed commission), not from trading against the client. This keeps the broker’s profit model more aligned with the client’s success.
Spreads and Execution
Because STP brokers source prices from real liquidity providers, spreads are usually variable and reflect the actual state of the market. During high liquidity, spreads can be tight, particularly on major currency pairs. However, they may widen during news events or low-volume sessions.
Execution under the STP model is generally faster and more reliable than with dealing desk brokers. Requotes are rare, and slippage tends to be lower in normal market conditions. However, as STP brokers are still dependent on their liquidity partners, execution quality can vary depending on who is on the other end of the trade and the broker’s relationships with them.
Advantages of STP Trading
STP brokers are often viewed as a cleaner option for retail traders who want better pricing than a market maker can offer but don’t necessarily need—or can’t afford—the direct connectivity of an ECN or DMA environment. Since the broker is not taking the opposite side of trades, there is less concern about manipulation or conflict of interest.
Traders also benefit from less interference in execution, fewer delays, and an environment that better mimics real market conditions. For those using strategies that rely on speed and market-based spreads—such as scalping or intraday trading—STP execution can provide a significant advantage over fixed spread models.
Limitations and Considerations
STP brokers, by nature, depend on the quality and depth of their liquidity providers. If the provider pool is shallow, orders may not fill smoothly during fast market movements. Also, while pricing is usually competitive, spreads are not as tight as those available through ECN brokers who allow direct order matching within a larger liquidity pool.
Because STP brokers work with aggregated pricing from external sources, execution speed is still slightly behind ECN models. Partial fills are less common than in ECN setups but may still occur during illiquid conditions. There may also be less transparency in how liquidity providers are selected and how spreads are marked up.
Finally, although STP reduces conflict, it doesn’t eliminate all risk. If a broker labels itself as STP but still selectively internalises trades or delays order routing, then the model is not truly neutral. Regulatory oversight and a clear execution policy are important when evaluating whether a broker is operating as claimed.
Regulation and Broker Integrity
STP brokers operate in both regulated and offshore jurisdictions. Traders should always prioritise those regulated by established authorities, as this ensures that client funds are protected, operations are audited, and misconduct can be investigated. Regulation alone does not guarantee fair pricing, but it creates a legal and financial framework that is generally more favourable to clients.
It’s also important to understand the specific structure of the broker’s business. Some brokers use STP accounts as part of a hybrid model, offering both STP and dealing desk services. Reading account terms and asking how execution is handled under different conditions can help traders choose the right broker type for their trading style.
Suitability
STP brokers are suitable for traders looking for a balance between cost, transparency, and execution speed. They are often chosen by:
- Swing traders looking for fair market access with lower slippage
- Intraday traders using technical setups based on real-time pricing
- Traders who want a lower-cost alternative to ECN without the conflicts of market making
They are not necessarily the best option for ultra-high-frequency or institutional-grade strategies that require raw spreads, deep liquidity, or direct market access. For those use cases, ECN or DMA brokers are typically more appropriate..
This article was last updated on: May 25, 2025