An STP account in forex is a type of trading account offered by brokers that use Straight Through Processing to handle client orders. In plain terms, an STP broker routes trades electronically to external liquidity providers (banks, hedge funds, other brokers) instead of filling them internally through a dealing desk. This model aims to speed up order processing and reduce manual intervention, and it changes how trading costs and execution behave compared with other broker types. Trading carries risk; this article is educational and not personalized financial advice.
The basic idea: Straight Through Processing
Straight Through Processing (STP) originally described an electronic workflow that removes manual steps in transaction processing. In forex, the term evolved to describe brokers that forward retail orders to a pool of liquidity providers automatically. When you trade with an STP account, your order does not (typically) sit in a broker’s dealing desk; instead the broker attempts to match or hedge that order with an external counterparty.
That process can be fully automated and very fast, but “STP” in retail marketing can mean slightly different things across brokers. Some STP brokers truly act as a matched or “riskless” principal — they immediately place an offsetting trade with a liquidity provider and therefore do not keep open market risk. Others may route only some orders externally or blend internal liquidity with external pricing. It’s important to read a broker’s execution policy to understand which applies.
How an STP account works (step by step)
When you click “buy” or “sell” in an STP account, several automated steps typically happen behind the scenes. First, your platform sends the order to the broker’s matching engine. The broker’s system then looks for the best price from its connected liquidity providers and either sends a back-to-back order to a provider or fills the trade from a pooled internal liquidity feed. If it places a back-to-back order, that is often called a matched-principal or “riskless principal” execution because the broker hedges its exposure with the provider simultaneously.
For example, imagine you place a market buy for 1 standard lot of EUR/USD at a quoted ask of 1.1000. The broker’s system will try to secure the same or a similar price from an external liquidity provider. If the LP confirms a fill at 1.0999, the broker can complete the transaction on your account at that price (usually adding any disclosed markup). If the market moves during the routing process, the executed price may be higher or lower than the price you saw—this is slippage, and it can be positive or negative.
Execution speed and slippage risk depend on the broker’s technology, number and quality of liquidity providers, and network latency. Many STP brokers colocate servers near major market hubs to reduce delays, but no electronic route is immune to volatility and fast-moving markets.
Pricing: spreads, markups and commissions
STP accounts commonly make money in one of two ways. Some STP accounts are marketed as “commission-free” and include the broker’s fee inside a slightly wider spread. Others show raw spreads from liquidity providers and charge an explicit per‑lot commission. Compared with ECN accounts, which often present raw interbank prices plus a transparent commission, STP accounts usually offer a simpler cost picture for traders who prefer not to think about a separate commission line.
Because STP pricing comes from aggregating multiple LP quotes, spreads are typically variable (floating). During normal liquidity conditions spreads can be tight, but during news or low-liquidity periods the spread may widen as the broker’s liquidity sources withdraw or reprice.
STP vs ECN vs Market-maker — how they differ
An STP model sits between pure ECN and traditional market‑maker models. ECN (Electronic Communication Network) systems commonly display an order book and route orders into a network where participants can match directly; traders on ECN often pay a clear commission and may see raw, very tight spreads. Market makers, by contrast, often fill trades internally and may offer fixed spreads while taking the opposite side of client trades.
STP brokers generally do not act like pure market makers who profit when clients lose. Instead, they pass orders to LPs or hedge them. But because STP arrangements vary, some hybrid brokers may at times internalize flow. Compared with ECN, STP is often simpler for retail traders and may avoid separate commission charges, while ECN tends to offer the deepest liquidity and tightest raw spreads for high-volume or professional traders.
Who typically uses an STP account?
STP accounts are popular with retail and intermediate traders who want faster, more market‑based execution than a typical dealing‑desk market maker, but don’t want to manage separate commission structures. They suit traders who prefer variable spreads and want to trade on mainstream platforms like MetaTrader. Scalpers and automated strategy users can use STP accounts, but they should check broker restrictions on fast trading, hedging, and EA use because rules differ between providers.
Practical examples to make it concrete
Suppose a retail trader uses an STP account and places a market order during a calm European afternoon. The broker aggregates prices from several banks and fills the order at a price within the quoted spread—execution is fast and close to expectations. Now imagine the same trader places an order at the moment a major economic release arrives. Liquidity providers may withdraw or repricing may happen; the broker’s back‑to‑back hedge might execute at a different price. The trader could experience negative slippage (filled at a worse price) or positive slippage (filled at a better price). That variability is a normal feature of STP routing.
What to check when choosing an STP account
Not all STP accounts are equal, so it’s useful to investigate the broker’s execution practices before opening a live account. Look for clear disclosures about whether the broker hedges orders externally or sometimes internalizes flow, how many liquidity providers they use, and whether they charge a commission or include markups in the spread. Test the execution via a demo and a small live deposit to observe real fills, slippage behavior, and average spreads across different market conditions. Also consider platform compatibility, minimum deposit, available instruments, and customer support responsiveness.
Risks and caveats
Trading with an STP account reduces some conflicts inherent to market‑making models, but it does not remove market risk or execution risk for the trader. Variable spreads, latency, and slippage can change trade outcomes—especially around news or in thin markets. Brokers’ claims of “no dealing desk” or “commission-free” should be read alongside their fine print; some STP providers blend internal liquidity or apply markups that affect costs. Regulation and client protections differ by jurisdiction and broker, so verify the broker’s regulatory status and account protections where possible. Always manage position size, use risk controls such as stop orders, and practice on a demo account before risking significant capital. This information does not constitute personalized advice.
Key Takeaways
- An STP account routes orders electronically to external liquidity providers, avoiding a traditional dealing desk and usually offering variable spreads.
- Execution is often done by matching or hedging with liquidity providers; this can reduce broker market exposure but introduces potential slippage during fast markets.
- STP typically earns either through spread markups or by charging commissions; compare live spreads and execution performance before choosing a broker.
- Trading carries risk; test execution on a demo or with small amounts and confirm a broker’s execution policy and regulatory status prior to trading.
References
- https://www.vantagemarkets.com/trading/accounts/stp/
- https://www.fxpro.com/help-section/traders-glossary/stp-straight-through-processing
- https://www.babypips.com/learn/forex/stp-forex-brokers
- https://www.stptrading.io/
- https://b2broker.com/news/stp-vs-ecn-forex-brokers-whats-the-difference/
- https://www.avatrade.com/trading-info/broker-type
- https://www.vantagemarkets.com/academy/stp-broker/
- https://quadcode.com/blog/what-are-ecn-and-stp-forex-brokers