SPOILER ALERT ECN and STP are the same as far as trade execution is concerned. They differ only in terms of the way they are marketed. Continue reading to understand more about this. The Forex industry has done an awesome job of confusing the life out of a trader with acronyms, much like the various spying agencies around the world have done the same.

STP — Straight Through Processing As the acronym says, STP stands for Straight Through Processing. In an STP broker business model, the broker does not assume any risk from your trades.

Money A2Z

If you lose, you lose directly to the interbank market. If you win, you win from the interbank market.

Typically STP brokers charge a commission for each side of the trade. This is typically known as a round trip commission.

So when asking an STP broker about their commission, be sure to verify if the commission amount quoted is for one side or round trip. The spread may or may not be marked up by an STP broker. What does that mean? Anything from 5 points to 15 points is considered to be an industry acceptable markup on spreads these days. Pre, I have seen spreads being marked up by points and traders had no choice. At Manhattan Global Markets, we do not believe commissions are fair on traders.

Hence for our STP accounts we charge ZERO commission on all trades and only make money from the spread which is always 5 points on top of the RAW ECN spread.

ECN — Electronic Computer Network? Sounds so high tech…no?

STP Vs. ECN - SMB Capital

Well, if there were no ECNs, there would be no retail Forex trading. So what is the difference?

As you can see, both STP and ECN acronyms are about the way a broker prices himself in the market. It has very little to do with how the broker processes your trade. Both ECN and STP trade execution has to go straight to the network without any manipulation in between. So effectively ECN and STP are the same as far as trade execution is concerned and different only in terms of the way they are marketed. Dealing desk brokers are now starting to pose as ECN brokers, offering you instant execution, raw spreads and low commission to secure your account.

Instant execution is only possible if you are a dealing desk broker executing the trade instantly when you receive it from your trader. Trading in Forex is speculative in nature and not appropriate for all investors. Investors should only use risk capital when trading futures, options and Forex because there is always the risk of substantial loss.