Online trading is very lucrative but like any other type of investment, you need to find a reliable brokerage that directs your orders to the market. There is quite a large number of CFD brokers out there, so choosing the right one is crucial and can make a huge difference in your trading experience.
Most CFD Brokers are ‘Market Makers’, which means that they take all clients’ orders and make a fully independent market, without any outside liquidity provider, hence, they are making a market. While there are some major advantages to trade with a market maker broker, many traders feel that the conflict of interest between the trader and the broker is a serious issue. Unfortunately, some market maker brokers have been found to trade against their clients, though it remains a grey area.
Consequently, new types of execution models have appeared in the market, with Straight Through Processing (STP) being a step closer to creating a fully transparent and unbiased marketplace. Nowadays, many brokers claim to be an ECN/STP broker without any cover. Furthermore, you will find plenty of listings and guides about the top ECN/STP brokers which present false information. This is where the phrase ‘True ECN/STP broker’ comes from.
In this guide, we will include three top STP brokers, and explain the reasons as to why we chose these brokers.
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Best STP Trading Platforms in 2020
In simple terms, Straight Through Processing (STP) is a type of execution model that sends all clients’ orders directly to liquidity providers without the involvement of a dealing desk, and therefore, it is a no-dealing desk (NDD) broker. An STP broker gets quotes from several liquidity providers and acts as a market but has no intervention in the trading activity.
There are few brokers out there that offer a true STP execution model. Here are our top picks for the best STP Brokers in 2020.
2. Cryptorocket - A True Innovative ECN/STP Broker
CryptoRocket is a new Straight Through Processing (STP) broker offering high leveraged trading through the popular MetaTrader4. According to CryptoRocket, when you place a trade on its platform you will not have to worry over any dealing desk manipulation or re-quotes; the STP execution removes any potential conflict of interest between the trader and CryptoRocket. The broker also connects users to institutional grade liquidity providers, meaning it has established liquidity arrangements with major global investment banks.
Founded in 2019, CryptoRocket has made an effort to provide a friendly platform for bitcoin users. Users are able to deposit and withdraw funds using bitcoin, to withdraw funds with Lightning Fast Withdrawals feature (no withdrawal fee), and to store funds on CryptoRocket web-server completely safe from hackers. Furthermore, CryptoRocket offers a high margin trading as it provides a leverage ratio of 1:500.
- CryptoRocket enables users to deposit and withdraw funds with bitcoin
- MetaTrader4 (MT4) is available
- High leverage ratio of 1:500
- A fixed commission of 6 USD per standard lot
- CryptoRocket is not a regulated broker
3. UFX - Best STP Trading Platform
UFX is a Straight Through Processing (STP) broker which offers its own web-trader (MassInsight Technology), the MetaTrader, and the Trading Central (a financial market research and investment analytics tool). As an STP broker, UFX executes clients' orders automatically via top liquidity providers, avoiding any conflict of interest.
UFX offers a wide range of assets across various markets. Those include FX currency pairs, stocks, indices, commodities, ETFs, and cryptocurrencies. Overall, UFX is a great option if you are looking for a reliable and true STP broker. The only problem we have noticed during our review is that UFX charges high spreads for the mini accounts.
In terms of regulation, UFX is regulated by the Cyprus Securities and Exchange Commission (CySEC), the Vanuatu Financial Services Commission and is fully compliant with the EU-MiFID and ESMA standards.
- An extensive range of educational and research tool including but not limited to the Trading Central
- Highly regulated CFD broker
- UFX offers a true Straight-through-processing (STP) execution model
- MT4 is not available
- Not available in the United States
What Should You Look for in an STP Trading Platform?
STP brokers work with several liquidity providers, which is a great advantage for traders and removes any potential conflict of interest. Yet, there are other factors you should take into consideration when you are about to choose a trading platform.
Regulation and Safety of Funds
The regulatory framework of a broker is a key factor to determine whether to choose a certain broker. Generally speaking, STP brokers are more reliable than market maker brokers, however, you want to make sure that the broker has sufficient approval from top regulators and security features. A regulated broker means that the broker needs to fulfill all regulator’s requirements such as keeping funds in segregated accounts, maintain a low leverage ratio, and compensate investors in the case of a default. However, while brokers such as UFX and Forex.com are highly regulated, CryptoRocket has not yet gained regulatory licenses but the broker efforts to protect clients funds in new unique methods.
Spreads and Fees
If you choose to trade with an ECN/STP broker, you are more than likely to receive tighter spreads. STP brokers can offer both fixed and variable spreads, but most STP brokers offer variable (floating spreads) with an additional fixed commission.
Nevertheless, it’s important that you always look for an STP broker with variable spreads because this way, the broker can select the best bid/ask prices available on the market from different liquidity providers. Spreads via STP brokers are usually lower (sometimes even zero) – This is perhaps the best solution for scalping and day traders. If the broker offers fixed spreads, make sure that the spreads are competitive compared to other brokers in the market.
Number of Liquidity Providers
The main advantage of Straight Through Processing (STP) brokers derives from the ability to create an internal market using different top liquidity providers. A larger number of liquidity providers will be better for the client.
Most brokers prefer not to disclose their liquidity providers, in particular not on their official websites. However, if you reach out to the broker and ask them, they most likely provide their connections o the market. At the end of the day, STP brokers don’t want traders to lose because they don’t trade against them but rather make money on the spread or commission.
Trading Platform/Trading Tools
Most STP brokers offer services for active traders, which means they offer professional trading platforms such as MetaTrader4, MetaTrader5, NinjaTrader, etc. Some of the brokers may also charge you for the use of the platform and its features. If you decide to trade with an STP broker, then you are more than likely looking for a stable connection to the market and advanced research tools. From the choices above, UFX appears to be the most suitable broker for professional traders with top trading platforms and the Trading Central, which is an industry-leading provider of technical analysis and market research.
Forex.com, for example, offers the level 2 order book which is a completely different type of trading experience than you will find at most brokers. Trading the order book is more transparent, allowing you to feel the market as you can view buyers and sellers at any given moment.
Range of Markets and Products
Any trader wants to get access to a broad range of markets and products. The selection of your broker is highly Depended on the market you decide to trade on and the diversity of products. For example, if you decide to trade cryptocurrencies, then CryptoRocket is the broker of choice. If you decide to trade the forex market, Forex.com is the ideal broker and if you decide to trade shares and ETFs, you should go with UFX.
But sometimes you have to look beyond it; a diversification of a simple futures contract and options contract (available on Forex.com) allows you to integrate hedging strategies and new trading opportunities, which is a great advantage for any market and product.
Some may say that the best execution model is the STP, along with the hybrid model through NDD that involves a blending of ECN or DMA and STP models together. The liquidity through and STP brokers tends to be greater since these brokers extract data from a number of liquidity providers rather than one liquidity provider, which ultimately means that the traders get better quotes, tighter spreads and full execution without slippages.
In conclusion, STP brokers are less common than ECN and market but there’s a reason why many traders consider the STP execution model the best among all choices. The fact that there are zero manual intervention and no intermediaries are involved with STP brokers make this system the ultimate bridge between online traders and the markets.
What is an STP Broker?
STP stands for Straight Through Processing and refers to an online broker that forwards clients' order to external liquidity providers which have access to the interbank market. In that sense, STP means that the broker plays the role of a bridge between the market and the trader, without any human intervention and the ability to manipulate either the client nor the prices.
What is the difference between STP and ECN brokers?
There are many similarities between ECN and STP brokers, with the most notable of them is the fact that both models operate as no-dealing desk NDD brokers. However, the primary difference between the two is the way the brokers get the quotes and the way the brokers route clients' orders. STP broker gets quotes from many different liquidity providers while ECN brokers mostly use one major provider. Therefore, STP brokers mostly are able to offer tighter spreads and better execution.
What are the benefits of an STP broker?
The major points of an STP broker are the tight spreads and the removal of any potential conflict between the client and the broker. Other notable advantages include the absence of human intervention which eliminates any human error, better quotes from liquidity providers, and execution fills.
How much money do I need to start trading with an STP broker?
Most STP brokers maintain a low initial deposit requirement and a leverage ratio. From the choices above, CryptoRocket maintains the lowest deposit requirement of $10 (and a leverage ratio of 1:500) while Forex.com requires a minimum deposit of $50.