What is an STP Broker?

Straight-Through Processing (STP) Brokers

An STP broker—short for Straight-Through Processing—routes client orders directly to external liquidity providers without manual dealing-desk intervention. Instead of taking the opposite side of your trade, the broker acts as a conduit, aggregating quotes from banks, non-bank market makers, and ECNs, then passing your order to the venue offering the best available price. STP became popular among forex traders seeking a middle ground between fully internalized brokers and commission-based electronic communication networks (ECNs).

How the STP Model Operates

When you submit an order, the STP broker's bridge technology scans connected liquidity providers for executable prices. The broker may add a small markup to the raw spread or charge a commission per trade to monetize the service. Once routed, the order fills externally, and the broker earns the markup or commission rather than profiting from your losses. This setup reduces the classic conflict of interest associated with “B-book” dealing desks that internalize flow.

Key Advantages

STP brokers offer several advantages to active traders:

• Access to Multiple Liquidity Sources: Aggregating banks, ECNs, and non-bank liquidity providers can tighten spreads and improve depth.
• No Dealing Desk Intervention: Orders route automatically, minimizing the chance of dealer discretion, requotes, or asymmetric slippage.
• Scalability: STP infrastructure supports higher trade volumes, making it attractive for algorithmic and high-frequency strategies.

Considerations and Trade-Offs

STP execution depends on the quality of connected liquidity. During major news releases, spreads can widen when liquidity providers widen quotes or pull orders entirely. Because the broker is passing your trade to the market, they cannot guarantee fixed spreads. Additionally, markups may vary across account types; always compare the all-in cost (spread plus commission) against true ECN brokers to determine which model suits your trading style.

Hybrid Models and Misconceptions

Many brokers operate hybrid books, routing some flow externally while internalizing smaller tickets or less profitable clients. This does not automatically make them dishonest, but traders should understand which orders go where. Some firms use STP for larger or riskier clients and B-book others to manage costs. Review the broker's order execution policy, and if possible, test with tools that detect slippage direction to ensure fills align with an external routing model.

When an STP Broker Makes Sense

If you want a simpler cost structure than ECN commissions but prefer not to trade against your broker, STP can be a balanced choice. Scalpers and day traders value the continuous spreads and quick fills, whereas swing traders may appreciate lower all-in costs compared to ECNs once markups are accounted for. Ultimately, evaluating an STP broker means testing live execution, monitoring slippage statistics, and ensuring the firm has the financial strength to maintain relationships with top-tier liquidity providers.

Straight-through processing is a useful model in the forex ecosystem, but it is not automatically superior to other execution types. Educate yourself on how the broker routes orders, what it charges for access, and how it manages market stress so you can choose the structure that best supports your strategy.