STP Forex brokers
Straight Through Processing (STP), brokers are examples of Market Making Brokers. STP brokers usually present their quotes, which are relative to those of the interbank. STP brokers work in a way that on receiving customers’ orders, they directly transfer it to their liquidity provider. A liquidity provider can be investment corporations, hedge funds, banks, or other brokers.
STP Forex brokers do not process clients’ orders through a Dealing Desk, which means that no middlemen are involved. The absence of a Dealing Desk is what makes the electronic trading platform Straight Through Processing. The absence of an intermediary gives the brokers the capacity to instantly process their clients’ orders and the passage of not having to send re-quotes to the clients. This is advantageous in the sense that it allows the customers to trade without limit.
STP brokers work with several liquidity providers, which has proved to be advantageous as this allows them to get better fills for the traders. Most of the liquidity providers used are banks. To get more information about the top STP Forex brokers, go through the table below.
- Forex Brokers
- Binary Options Brokers
- CFD Trading Brokers
- MT4 Forex Brokers
- MT5 Forex Brokers
- Mobile Forex Brokers
- Spread Betting Brokers
- UK Forex Brokers
- Swiss Forex Brokers
- Australian Brokers
- PAMM Brokers
- ECN Brokers
- US Forex Brokers
- Cent Account Brokers
- Scalping Brokers
- Lowest spread Forex Brokers
- VPS Forex Brokers
- Segregated Accounts Brokers
- 5 digit Brokers
- Hedging Brokers
- Banks with Forex Traiding
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History of Straight Through Processing (STP)
STP traces back to the early 90s when it was created by James Karat in London. This was to outline automated processing in the equity markets. James Karat invented the system so that the former process which was outmoded would be phased out. Initially, the process involved filling deal tickets, resulting in unalterably written and unreadable orders becoming problematic. It led to erroneous investments which were interpreted as big losses. The system aimed to minimize the risk involved in carrying out the trade and its compensation and clearing to take place concurrently.
Reasons why brokers choose to be STP forex brokers
There are many reasons as to why brokers prefer being Straight Through Process Brokers. The following are some of the reasons:
- They incur fewer costs that would have otherwise been used for payment of salaries. As earlier mentioned, STP brokers use No Dealing Desk hence they are saved on expenses.
- STP brokers can offer their clients both fixed and variable spreads. It is because they use banks as their liquidity providers on the interbank market
- STP Forex brokers will always make profits provided a client conducts trade via an STP trading platform. Since they do not work against the clients, all an STP broker has to do is add a little markup on the spread they get from their provider. This markup serves as their profit.
Reasons why traders choose an STP Forex broker
Forex trade is accompanied by a lot of risks, such that it may be required that a risk manager gets hired to protect the firm from losing assets. However, in the case of an STP broker such is not required as orders are directly programmed to a liquidity provider. This translates to less work for the brokerage.
Precise Revenue Forecasting
It is easier for STP forex brokers to establish the number of returns they will be getting. STP framework works in a way whereby, clients present their orders to the brokerage who in turn gives them to liquidity providers. The liquidity provider, in turn, gives the brokers rates which then the brokers add a given markup. This means that with each trade, the broker is bound to generate revenue. A broker is ascertained that once he increases the client base, the business is bound to grow.
Not affected by market volatility
An STP broker’s returns tend to remain constant despite the market conditions. Market makers and other brokers often face challenges in forecasting the market as the model they use to give an unsteady revenue in the event of unstable market conditions.
Dealers are faced with predicaments daily. Such include uncertainties, news events, and scalp trading. The only concern for STP traders, on the other hand, is maintaining the stability of its framework. Provided the traders keep the orders flowing, the broker has an easy time.
Regulations on STP Forex brokers
There is a need for all Forex brokers to be regulated. This is to ensure that there is no room for malpractice and that the Forex market maintains healthy competition. The most renowned regulator for STP Forex brokers is the Financial Conduct Authority (FCA).
Financial Conduct Authority (FCA)
The Financial Conduct Authority is a self-governing regulatory body based in the United Kingdom. The body is independent of the government and is responsible for regulating firms that offer services to clients and upholding integrity in the financial markets. FCA was established on 1st April 2013 after the abolishment of the former Financial Services Authority. Now you can find many FCA Forex brokers, with many STP ones among them.
The roles of the Financial Conduct Authority are:
- Overseeing promotional activities of financial products, that is, spelling out the minimum standards that the products should meet
- Enforcing legal action on brokers that violate marketing rules
- Ensuring fair treatment of customers
- Integrating efforts with the brokers to identify potential risks to curb them
- Motivate healthy competition and innovation
- Registration of brokers
- Safeguarding public documents
- Acceptance of annual returns
Factors to consider when choosing an STP Forex broker
Before settling for a particular STP broker, it is important to take a keen interest in several factors. This is because they do play an important role in the outcome of your Forex trade. The following are the factors to consider when choosing an STP Forex broker.
With the rising number of STP forex brokers, it is essential to do a background check. Know who the broker is working with before getting into any form of agreement. Such affects various aspects of the trade such as leverage. Different institutions offer different leverages, it is, therefore, important to know what you will be working with.
As the number of STP brokers keeps growing, so is illegitimate brokers. To ensure that you are working with a legitimate broker, make sure that the firm is registered and regulated by a reputable body. Also, one should check a broker’s website for any additional information on the broker. A broker short of the above should be questionable.
The quality of a broker’s spreads will play a significant role in the success of your Forex trade. For this reason, settle for an STP broker that has the lowest spreads to get maximum profits.
The leverage is what makes the Forex market advantageous. It is vital for a trader to first confirm whether his/her broker offers various trading options in terms of leverage. Both high and low leverage could be beneficial in different situations. For example, high leverage poses a bigger risk, which is suitable for a trader working with limited capital as it will offer favorable circumstances. On the other hand, with adequate capital, lower leverage would be the best choice.
Trading platforms are an important factor in Forex trade, as it is through this that clients can conduct trade. Ensure that the trader is using a reliable and popular platform. Also, the platform can be tailor-made to meet individual trading needs. It should also integrate technology to give various trading options such as mobile trading. The platform should allow the trader to make the most of Forex trade.
A good STP Broker will provide different account options to meet different trading needs. It is more advisable to work with brokers that offer different account types.
Unreliable customer support could cost a trader a significant amount of loss. Ensure that the broker offers 24/7 customer service that will assist you in the event of a technical or general problem.
Scams in STP Forex Brokerage
Straight Through Processing means that everything is done electronically. STP brokerage has over time been faced with a scam. Scam or fake STP brokers direct orders to other brokers who grossly overprice the rates than the fake broker gets a cut from it. They also send clients’ orders to a pseudo system that is actually of the same company. In such cases, you as a trader are not interacting with the real currency market but dealing with a market maker who wants to appear as an STP Broker. Remember that market makers work against the trader.
Popular STP Forex brokers
FXCM is an award-winning STP Forex broker that has been able to provide its clients with world-class trading experience. It gives a variety of platforms with user-friendly interfaces that make forex trade exciting. FXCM also offers Forex educational programs that equip the traders with knowledge and skill that contribute to their success in the trade. Last but not least, the brokerage has ensured that high-quality 24/7 customer support has been availed to the traders.
FXFair is an STP Forex broker offering different trading accounts that cover the various trading needs of individuals. The accounts are identical in terms of features and have the popular MT4 trading platform. The broker is regulated by FSA. To guarantee the security of the traders’ assets, the broker has the client's funds deposited in different accounts to avoid being channeled to unintended activities. Deposits and withdrawals are made through usual means such as the use of bank wires, credit cards, and Fasapay to make the transactions easy to execute by the traders. Finally, FXFair has reliable customer support ready to offer assistance to traders at any given time via several communication channels.