STP execution

What STP execution means

STP stands for straight-through processing. In a broker context it describes an execution model in which your order is passed on electronically to an outside liquidity provider, such as a bank or another market maker, without a dealing desk stepping in to decide whether to accept, delay or take the other side of the trade. The path from your click to the counterparty is automated from start to finish.

The term is used mostly by forex and CFD brokers. It sits between two other labels: dealing desk (also called market maker or B-book), where the broker may take the opposite side of client trades, and ECN, where orders are matched in a network that can include other participants. In practice STP and ECN overlap a lot, and marketing uses the words loosely.

For a retail client the main question is not the label but how the broker earns money and how orders are handled. An STP broker typically earns from a markup added to the spread it receives from its providers, a commission, or both.

How it works

The flow has several steps.

1. The broker connects to one or more liquidity providers and receives their streaming bid and ask quotes.
2. A pricing engine aggregates those quotes. It may show the best bid and best ask, or a blend, and adds the broker's markup.
3. You click buy or sell. The order goes to the broker's server, which checks margin and account rules automatically.
4. The server sends the order to the liquidity provider whose price matches, with no manual approval.
5. The provider confirms the fill, and the position appears in your account at the executed price.

Some STP brokers pass every order through, while others use a hybrid approach: a share of flow is routed out and the rest is kept internally, depending on risk rules. This is why the label alone does not prove that no trade is ever internalized. Order execution policies, which regulated firms must publish, describe the actual practice.

A worked example

The numbers below are illustrative. A provider streams EUR/USD at 1.08500 bid and 1.08512 ask, a raw spread of 1.2 pips. The STP broker adds a markup of 0.4 pips on the ask side.

• Ask shown to you: 1.08512 + 0.00004 = 1.08516
• Bid shown to you: 1.08500 - 0.00004 = 1.08496
• Spread you see: 1.08516 - 1.08496 = 2.0 pips

You buy 0.5 lots (50,000 units). A pip on this size is about 5 USD.

• Cost of the spread: 2.0 pips × 5 USD = 10 USD
• Of this, 1.2 pips (6 USD) is the provider's spread and 0.8 pips (4 USD) is the broker's markup

Compare this with a fixed-spread model where the broker quotes 1.5 pips all day. At quiet moments the STP price might be tighter, while around a data release the aggregated spread can widen well beyond 2.0 pips, and a fast market may produce slippage on the fill. The STP model usually passes market conditions through, for better or worse.

Why it matters

Execution model affects three things for a retail trader: conflicts of interest, price quality and cost. With a pure dealing desk the broker profits when clients lose, which creates a potential conflict. In a straight-through model the broker's income depends more on trading volume, so its interest is more aligned with keeping clients active, although a conflict can remain in hybrid set-ups.

Price quality depends on the liquidity providers behind the broker, how many there are and how well the quotes are aggregated. Fills may include slippage in both directions and requotes are less common than at manual desks, but rejections can occur if a provider withdraws a quote.

Cost structure also differs: variable spreads that reflect the market, sometimes plus commission, rather than a single fixed price.

How to use it in practice

1. Read the broker's order execution policy and look for how orders are routed and whether internalization is used.
2. Check whether the account type is described as STP, ECN or market maker, since one broker may offer several models.
3. Compare average and typical spreads during active hours, not only the minimum advertised.
4. Ask about commissions: low spreads with a commission can cost more or less than wider commission-free pricing, depending on your trade size.
5. Test the platform on a demo or small live account, and compare the fill price with the screen price for several trades.
6. Review the policy on slippage, rejections and minimum distance for stops.

Common mistakes and misconceptions

• Thinking STP means no conflict of interest at all. Hybrid models can still internalize part of the flow.
• Assuming STP always means tighter spreads. Markups can make the total spread wider than expected.
• Treating STP, ECN and "no dealing desk" as exact synonyms. The meanings overlap but are not identical.
• Expecting no slippage. Orders are filled at the available market price, which can differ from the click price.
• Judging a broker only by its execution label rather than by its published policy and regulated status.

Risks and limitations

STP does not remove market risk, and leveraged products such as forex and CFDs can lose value quickly. Execution quality varies with the liquidity providers and with market conditions: spreads can widen sharply during news and rollover, and fills in fast markets may be worse than expected. The label is not regulated as a standard, so claims need verification in the execution policy. Rules on best execution, disclosure and client protections differ by jurisdiction.

How Brokeli looks at it

We record the execution model a broker states in its documents and note whether it is a market maker, STP, ECN or hybrid, alongside typical spreads, commissions and slippage policy. Because the labels are used loosely, we rely on the published order execution policy and the fee schedule held in our research snapshots, and we describe differences by account type and country where they exist.