What is a Straight Through Processing broker?
A Straight Through Processing (STP) broker is a type of forex broker that operates in a fully automated manner, allowing investors' orders to be transmitted directly to the interbank market or other liquidity providers. The main feature of an STP broker is the lack of any interference in transactions, which means that clients' orders are executed automatically, directly in the market, without any form of internal processing. An STP broker does not act as a market maker, as is the case with a Market Maker broker, which can manipulate prices. Instead, an STP broker provides access to the interbank market, which is home to other financial institutions and large market players.
It is worth noting that STP brokers do not offer the same leverage as Market Maker brokers. Orders are transmitted to the market as they are placed by the trader, and the price of the trade execution depends on the market conditions at the time. As a result, the STP broker provides greater price transparency and a lower risk of conflicts of interest, which is an important advantage of this model.
STP broker activities
An STP broker acts as a forex broker, providing traders with access to the global currency markets by connecting them directly to liquidity providers such as banks, hedge funds, and other financial institutions. The STP broker works by automatically sending client orders to those providers who offer the best available prices on the market. Unlike Market Maker brokers, who can act as an opponent in a trade, an STP broker does not engage in the price formation of the trade, but transmits orders to the market without interfering with the execution process. This ensures that traders can be sure that the price they see on the trading platform is the market price, coming directly from liquidity providers.
The role of an STP broker is to provide the best possible trading conditions for their clients, offering them fast execution without delays and access to extensive market liquidity. The order execution process is automatic, minimizing the risk of delays and ensuring that the order will be executed at market prices. In this model, the broker does not become the opponent of the investor, but acts as an intermediary that allows participation in the global financial market, without interfering with the outcome of the transaction.
To provide the best possible conditions for their clients, STP brokers use advanced technologies that allow for fast order submission and access to a wide variety of liquidity sources. With these technologies, STP brokers can offer competitive spreads and mitigate the risk associated with trade execution. The advantage of this model is that traders can rest assured that their orders are executed according to market conditions, without price manipulation by the broker. The entire process is transparent and transparent, which provides greater confidence and security in the execution of transactions.
Another important activity of an STP broker, which we often talk about at Webinar Universe trainings, is to provide the investor with access to various sources of liquidity, which allows them to optimize the execution of orders. An STP broker connects its clients with multiple liquidity providers so that it can offer the most favorable trading conditions, such as lower spreads, better prices, and faster order execution. In practice, this means that an STP broker is not limited to a single source of liquidity, but can use multiple markets and institutions, which increases the chances of executing trades at an optimal price. This ensures that traders can be sure that their orders will be executed quickly and at the best available market prices, minimising the risk of unexpected price fluctuations. This type of flexibility in access to liquidity allows STP brokers to better respond to changing market conditions and adapt their offerings to the needs of their clients.
Commissions and fees
STP brokers make money mainly on spreads, i.e. the difference between the buy and sell price of a given currency pair. The spread represents the main source of income for the broker, as client orders are executed at market prices provided by liquidity providers, and the broker charges a commission in the form of the difference between these prices. It is worth noting that in the case of STP brokers, the commissions related to spreads are usually lower than in the case of Market Maker brokers, because the STP broker does not manipulate prices, but only sends orders to the market.
In some cases, STP brokers may also charge additional fees, such as commissions for executing trades, especially for large, professional traders. In addition, STP brokers may offer different types of trading accounts, which may have different fee structures, e.g., ECN (Electronic Communication Network) accounts, which offer very low spreads but come with additional commissions for order execution.
Another aspect that can affect the cost of using the services of an STP broker is the so-called swap, i.e. a fee for holding positions overnight. STP brokers may set their own swap rates, however, these rates are usually adjusted according to market interest rates and market liquidity, as we often talk about during online training on the Webinar Universe platform.
It is worth noting that unlike Market Maker brokers, who can make money by executing trades with clients, STP brokers are more transparent in terms of costs, as they mainly make money from spreads and commissions, rather than opposing investors.
STP broker on the Polish forex market
When it comes to STP brokers from Poland, there are not many companies in this category that are strictly STP brokers and at the same time operate exclusively in this model. However, one example that offers the STP model on the Polish market is TMS Brokers (Towarzystwo Maklerskie S.A.). TMS Brokers offers access to the interbank market in the STP model, providing clients with direct execution of orders on the forex market without interfering with prices.
TMS Brokers provides access to popular trading platforms such as MetaTrader 4 and its own TMS SmartTrader platform. The broker operates on the Polish market, has a license from the Polish Financial Supervision Authority, which ensures the safety of clients' funds and compliance with legal regulations. It earns mainly on spreads, but there may also be commissions and fees for holding positions overnight. TMS Brokers offers professional customer service, as well as educational materials and webinars for investors.
STP brokers are some of the most popular brokers in the forex market, offering transparency, fast order execution, and access to the interbank market. With no price manipulation and fair trade execution, STP brokers gain the trust of investors worldwide. In Poland, there is also a wide range of STP brokers who adapt their services to the needs of local investors. Choosing the right STP broker from the ranking of the best forex brokers can contribute to success in the foreign exchange market, while providing the right quality of service and competitive trading conditions. However, we talk about what to consider when making this choice during Webinar Universe trainings.