One of the first things you will learn as you enter the world of forex trading is that there are a few different types of forex brokers that you can choose to deal with. Some of these are the ECN forex brokers, the NDD forex brokers, and the STP forex brokers. In this article, we will focus on the DMA STP forex brokers, what they are, what advantages you can enjoy by working with them, as well as a list of the top STP forex in the world today.
In This Guide
ASIC, CBI, BVI, FSCA, IIROC, FFAJ, JFSA, ADGM FRSA
up to 40% bonus
$10 000 demo
FCA, IIROC, JFSA, NFA, CIMA, FSA, ASIC, CFTC
up to $5000 bonus
STP stands for Straight Through Processing. Just as the phrase suggests, this means that in the processing of traders’ orders. STP brokers go straight to the liquidity providers in the forex market instead of having to go through the intervention of dealing desks. By eliminating the extra and sometimes unnecessary steps, an STP forex broker speeds up the closing of transactions, which results in a number of huge benefits for the trader.
The STP method was first used in equity trading in the 1990s and recently, a lot of forex brokers have begun to switch to it as well because they have discovered the many advantages that it can actually give to them as brokers.
First of all, the STP method ensures that the broker spends a lot less in operational costs. To be specific, since the system does not require the use of dealing desks, this means less salary expenses for the broker or the brokerage firm.
There is not so much to deal with when it comes to risk management in the STP model because the broker does not really get affected by sudden market movements that can otherwise result in losses for a traditional broker. Instead, the STP broker just automatically passes the orders of the trader to the liquidity providers in the interbank market, so whether the market moves positively or negatively does not really matter much to the broker.
With the lower risks involved with the STP model, this also translates to less stress for the broker as they do not have to closely monitor not just the market prices but also news releases, which are no longer as relevant to their broker activities.
In a properly implemented STP system, the execution of orders happens automatically with absolutely no delays. There is also zero risk of human error because the system takes care of everything. With the higher accuracy and greater speed of execution, traders will be much more satisfied with the service of the broker, which ultimately also counts as an advantage for the broker.
One of the most apparent advantages of working with STP forex brokers is the lack of delay and re-quotes, which can potentially reduce the chance of the trader making a big profit on their trades. However, traders that choose to work with STP forex brokers understand that there is so much more to STP forex trading other than this simple gain. Here are some of the other advantages that you can enjoy if you choose to work with an STP forex broker.
Traditional brokers typically act as counter-parties to the positions of their traders. If the trader buys a particular currency pair, a forex broker might buy. If the trader sells, the broker might buy. The effect of this is that if the trader takes a loss, the broker stands to win. Thus, there is a conflict of interest because your broker does not really want you to profit as they will gain more if you lose.
With brokers engaged in the straight through processing method, they are not counterparties to the position of the traders. They do not wish for the traders to have a losing position because this would not serve them any good at all. They simply make their money from the commission that they charge from each trade or by adding a markup to the bid-ask spread.
Because there are no intermediaries that are in between the trader and the liquidity provider, this gives the trader a lot more anonymity. The direct link to the interbank market eliminates the need to interact with any other entity, which is highly advantageous for a trader that values anonymity.
Also, when trades have to pass through dealing desks, trading methods used by scalpers can get penalized with re-quotes and slippages. Sometimes, they might even get banned from the trading industry altogether. Thus, the reason why a lot of scalpers choose to work with STP forex brokers is because they do not have to face such problems because there are no dealing desks to go through.
STP forex brokers work with not just one but a lot of liquidity providers in the forex market. Because of their large network, they are able to provide access to a broader and deeper liquidity pool, which consequently gives traders a lot more options. Because the liquidity providers offer different pricing, the traders get to make more educated decisions and also get to make better market executions that will be most profitable for them.
Without a dealing desk, much of the extra processing is eliminated, thus allowing for the faster execution of trade orders. As a matter of fact, the execution of orders is processed by the system automatically without having to wait for human intervention or even a go signal so there really is no delay in the process.
If you want to reap the many benefits of working with STP forex brokers, the first thing you have to do is to find the most suitable STP forex broker to work with. With the hundreds of forex brokers all over the world, we understand how daunting this task can be, which is why we took it upon ourselves to do much of the research for you. We have compiled the 5 best forex brokers in the world today that use the STP model.
Not only that, but all of these brokers in our top 5 are properly regulated by the most trustworthy regulatory bodies in the forex industry today. All you have to do is to look through the list and pick the one that you think would match your trading strategy and preferences perfectly.
Based in Saint Vincent and the Grenadines, OctaFX is now in its 10th year of operation. They offer a variety of trading platforms that cater to different levels of traders, including the popular MT4 and MT5. They also have a great platform and powerful tools for copy trading. OctaFX also offers negative balance protection and they do not charge commissions on their accounts.
OctaFX has a very low minimum deposit requirement of only $5 and offers a leverage of 500:1. They offer both fixed and variable spreads, both of which are rather competitive. Hedging and scalping are allowed by this broker and they accept a wide variety of funding options. They are regulated by FSA and CySEC.
FBS has been one of the most reliable STP forex brokers since they were established in 2009. They are based in Belize but cater to traders from most countries. They use the trading platforms MT4 and MT5, and they have powerful web and mobile platforms as well. FBS also has their very own CopyTrade platform that supports social trading. Both deposits and withdrawals are very easy and stress free with FBS as they have an array of funding options. Aside from bank transfers and credit and debit cards, they also accept transfers from online wallets like Neteller, Skrill, SticPay, Bitwallet and Perfect Money.
The minimum deposit requirement for traders under FBS is only $1 making it very easy for any investor to start trading. FBS also offers a wide range of tradable investments compared to many other STP brokers around. They also have very competitive spreads that start at 0 pips and offer impressive leverage of as much as 3000:1. This broker is well-known for their top-caliber customer support, which is not common among brokers. Top-tier regulators CySEC and IFSC ensure that FBS is a very trustworthy broker.
XM was established in Cyprus in 2009 but right from the start, it was designed to be an international forex broker company that is meant to cater to any trader around the world. Today, XM has branch offices in Greece, Belize, UK and Australia and also has members in nearly 200 countries. It is easy to see that XM exerts every effort in taking care of their traders simply from the fact that their customer service is available in more than 30 languages.
Traders of XM can choose from MetaTrader 4, MetaTrader 5 or the broker’s very own proprietary platform, XM WebTrader. They also have a demo account that you can use to see if their features and tools are what you are looking for. XM offers more than 55 currency pairs that you can trade, all of which have very tight spreads.
With a minimum deposit requirement of $5 and competitive spreads starting at 0 pips, XM is definitely one of the favorites of STP forex traders from all over the world. Their leverage offer is 888:1 but this does not apply to every entity under the XM group of companies. They have a very solid set of top-tier regulators, including ASIC, CySEC and IFSC Belize.
Exness was established in Cyprus in 2008. They are considered by many to be one of the best forex brokers today because they offer several advantages that are not matched by other brokers. For starters, their fees are very low all around, and this includes the spread, the commission and the swap fees. They also have superior live chat support that you can access 24/7. Exness offers copy trading, unlimited leverage and instant deposits and withdrawals.
With a leverage of 2000:1 and a minimum deposit requirement of just $1, traders definitely have the potential to earn a lot with this STP forex broker. Their spread offer is also very competitive across multiple currency pairs. Exness is regulated by CySEC, FCA, BaFin, FSP and CRFIN.
One of the older STP forex brokers, Forex.com was founded in 2001 and is one of the companies under NASDAQ-listed StoneX Group Inc. Its longer track record alone makes it a much more preferable choice compared to many of the other STP forex brokers today, but that is certainly not their only advantage. Forex.com also has more than 90 currency pairs to choose from and very low forex fees. Their research tools are also rather enviable and have actually received several awards over the years.
Unlike the other brokers in our top 5, Forex.com has a higher minimum deposit requirement of $100, which is actually just about the industry average. They have a decent leverage offer of up to 400:1 and their spreads start at 0 pips. Forex.com does have a very impressive lineup of regulators, led by NFA and CFTC of the USA, FCA of the UK, ASIC of Australia, IIROC of Canada, FSA of Japan and CIMA of the Cayman Islands.
STP forex brokers are definitely becoming very much in demand in the forex trading industry so you can expect to see more of them over the coming months or years. If you want to succeed as an STP trader, you should pick your broker very carefully, check that they are regulated and make sure that they are on the same page as you when it comes to trading strategies and goals.
STP stands for Straight Through Processing, which means that trade orders go directly from the trader to the forex market without the need for intermediaries.
ECN trading connects traders with liquidity providers and other participants in the market while STP directly connects traders with the liquidity providers.
STP brokers are the right way to go if you no longer want to trade through a market maker broker. True STP forex brokers earn money exclusively through commissions. Their market model should have very tight spreads and reduced trading costs.
Some of the most common reasons are the faster execution of trades, lower expenses and a not so pressing need for risk management.
Traders experience fewer delays in trade execution and enjoy broader access to the forex market. They can also enjoy a higher level of anonymity while trading.
In both types of forex trading, trade orders are executed by the system automatically without having to pass through a dealing desk and thus, there is no need for re-quotes.
If you are making your first steps into forex trading, one of the most important decisions you’ll ever make is choosing a forex broker on whose platform you will trade. Online forex brokers dominate the internet which is good news. However, having so many options to choose from can be quite challenging especially if you are a novice with minimal information and little or no experience.