Why choose STP?
STP or Straight Through Processing, is the name given to an execution method that, when upon receipt of a client order, will pass on the orders directly to the liquidity provider. Liquidity providers can include a Bank, a Hedge Fund, Investment corporations or another broker and as such no intermediary in the order will be involved – in other words the STP system will not be filtering the orders through a Dealing Desk. The absence of a Dealing Desk intervention is what makes the broker’s electronic trading platform STP.
With the absence of such an intermediary process (Dealing Desk) the STP execution method will process the client’s orders without any delay and in addition the STP broker will not send re-quotes to the clients; something that most investors will regard as a huge advantage, as the STP broker in effect will allow its clients to trade during the release times of financial news without any restrictions.
PriorFX as an STP broker benefits from having several liquidity providers, as an increase in the number of providers in the system means the better the fills for the client. We also use banks, which trade on the Interbank market (the top-level foreign exchange market where banks exchange different currencies) as our liquidity providers.
Reasons why clients choose STP Forex Brokers
In addition to the fact that most traders prefer an STP broker, for the fact that a Client’s losses are not a brokers profit and as such it is in the Brokers interest for the Client to make profitable trades as opposed to losing ones. Unlike Market Maker (or Dealing Desk, 85% of all) brokers, who can change the price to cause losses to their clients, for maximising their own profits. An STP broker has No Dealing Desk (NDD). If an STP broker does not show live market prices, they will be facing serious consequences with the regulatory governing bodies.
Clients often choose to execute their trades with an STP broker as it implies No Dealing Desk, which in turn means that the we are more transparent with our clients Trades as the client is in fact entering trades into a true market instead of an artificial market that may be created by a market maker. Client’s trades obtain better and faster fills through STP execution. An STP Forex broker is instead compensated through a mark-up on the spread it obtains from its liquidity provider imposed for each trade.
Each time a client trades through our STP platform, we as an STP broker will always make a profit from each trade made. As an STP broker, we do not trade against our clients orders, and we simply add a small mark-up to the spread we receive from our provider when quoting a bid/ask rate. We will apply this mark-up by a certain amount of fractional pips to the bid and ask price we receive from our best bid/ask liquidity provider before passing the rates onto the client via our electronic platform.
As the client places the order through our platform, the orders are sent directly at the lower/higher rate (depending if it is a bid/ask offer) to the liquidity provider and as such we execute the same orders as the client at a slightly better price subsequent to the mark-up.
The better and faster fills are obtained directly from the fact that there are usually many competitive market bids and offers coming via our liquidity providers, who provide for more liquidity within the market and in turn this implies lower and lower obtainable execution prices for the client.
Client transactions with an STP broker means anonymity for the client as there is no Dealing Desk monitoring the transactions of orders coming in from each client. The orders are instead executed automatically via the market network anonymously.
Process in more detail
As soon as we receive your order, our pool of liquidity providers consisting of major banks, compete to offer us their best prices for your order execution.
With our advanced IT infrastructure and price aggregator system that instantly and continuously receives quotes from our liquidity providers, we analyze the prices and identify the best price available to fill your order with. The prices are 100% transparent and can be disclosed to you at any time should you wish to authenticate them.
Finally we add our mark-up to the prices that we received from our Liquidity providers and we will then execute your order at best market price in a matter of milliseconds with no dealer involvement. The mark ups of the trades depend on your account type with PriorFX. Each account type has its own set of markup.