STP forex brokers use 'Straight Through Processing' of trade orders as they pass on the orders to the external liquidity providers to execute trade orders. Check which are the best STP forex brokers in the UK.
Forex brokers can be grouped under 3 categories namely ECN, STP, and Market Maker. Forex brokers can be differentiated based on the execution method they use to execute the trade orders.
The difference in market execution technique also affects the cost of trading for the traders and revenue generation for the brokers. We have thoroughly described STP/ECN trade execution model and compared it with market makers.
We have prepared the list of the top 5 best STP forex brokers in the UK to help traders in selecting the best brokers for themselves.
STP, which stands for “Straight Through Processing,” refers to a type of forex or CFD broker that directly sends client orders to liquidity providers without any interference or dealing desk involvement. In essence, when a trader places an order with an STP broker, the order is transmitted directly to the interbank market or other liquidity providers for execution.
Essential characteristics of STP brokers include the absence of a dealing desk, ensuring transparency in price quotes and execution, and the lack of a conflict of interest between the broker and the trader’s profitability. As STP brokers do not take the opposite side of their clients’ trades, their revenue usually comes from the spread or a small commission on each trade.
STP execution often results in faster trade execution compared to brokers with internal processing through a dealing desk. However, it is important to note that not all brokers claiming to be STP brokers operate in the same manner. Traders should conduct thorough research, read reviews, and verify the broker’s regulatory status to ensure they are dealing with a reputable and genuine STP broker.
5 Best STP Forex and CFD Brokers in the UK
The following are the best brokers in the UK that use the STP method for trade execution. There are several brokers in the UK that use the STP execution technique. We have selected these brokers based on more than 12 factors that can affect the trading experience in the UK. These brokers are listed in an unranked order.
Pepperstone is an FCA-regulated forex and CFD broker that follows a 100% STP method for trade execution. Pepperstone was launched in 2010 and is regulated by several other financial regulatory authorities apart from FCA.
Regulation: Pepperstone UK Limited is the legal entity of Pepperstone regulated by the FCA under license number 684312. They are also regulated by ASIC in Australia, BaFIN in Germany, DFSA in Dubai, CySEC in the European Union, CMA of Kenya, and SCB of the Bahamas. Pepperstone can be considered safe to trade forex and other CFDs in the UK.
Fees: Pepperstone offers two types of accounts with different pricing structures. The Standard account is a spread-only account with spreads starting from 0.7 pips. The Razor account involves the trading commission of $3.5 per side for a standard lot apart from the spreads that are as low as 0.1 pips.
The average typical spread for EUR/USD at Pepperstone is 0.17 for the Razor account and 0.77 for the standard account.
Trading Conditions: Pepperstone offers different configurations of trading accounts to suit the trading conditions of various traders. They also offer GBP as the base currency of the account.
Pepperstone supports all three major trading platforms namely MT4, MT5, and cTrader. This is a major advantage of choosing Pepperstone in the UK as traders can select the best-suited platforms for themselves.
eToro is an FCA-regulated broker in the UK that allows trading on various financial instruments. eToro follows a hybrid model for order execution as most CFD assets are traded via the STP method while for some other assets, eToro becomes the market maker for order execution.
At eToro, trade orders involving CFDs on forex pairs are processed through liquidity providers as STP processing. eToro does not take the other side of the trade and does not earn revenue from the losses made by the traders.
Regulation: eToro (UK) Ltd is an FCA-regulated financial service provider with reference number 583263. They are also regulated by CySEC and ASIC and can be considered safe for trading in the UK.
Fees: They offer a single account type that involves spread and swap fees as the only trading fees. The average typical spread for EUR/USD currency pair at eToro is 1.1 pips. They do not charge any trading commission apart from stocks.
Among the non-trading charges, eToro charges a withdrawal fee of $5 on each withdrawal regardless of the method used. They also incur monthly inactivity fees of $10 if no trade orders are placed in 12 consecutive months.
Trading Conditions: eToro allows trading on its proprietary trading platform and does not support any other platform like MT4, MT5, or cTrader. Their trading platform is user-friendly, and resourceful, and offers a convenient copy trading service.
eToro allows trading on more than 2500 stocks, 49 currency pairs, 76 cryptocurrencies, etc.
Regulation: XTB Limited is regulated by the Financial Conduct Authority of the UK under license number 522157. They are also regulated by several other financial regulatory authorities globally.
Fees: XTB offers standard and swap-free account types with slight differences in the spreads. The spreads with the Standard account start from 0.5 pips while the lowest spread with the swap-free account is 0.7 pips. The average typical spread for EUR/USD at XTB is 1.2 pips which is slightly higher than some of the peers in the UK.
Trading Conditions: XTB allows trading on a proprietary trading platform called as xStation which is available on all types of devices. It is a user-friendly platform with limited patterns and indicators. The platform allows clients to trade on more than 2100 financial instruments.
ETX capital is an FCA-regulated STP broker that has been providing financial services since 1965. It offers the best spreads in the UK and supports multiple trading platforms. The name of ETX capital has been recently changed to OvalX Markets.
Regulation: ETX Capital is the trading name of the legal entity Monecor Limited regulated by the Financial Conduct Authority (FCA) of the UK. It is one of the oldest forex brokers in the UK that uses the STP model for the execution of trade orders.
Fees: They offer a single account type with spreads-only trading fees. The average typical spread starts from 0.6 pips which are among the lowest in the UK. They also support trading accounts with GBP as the base currency.
Trading Conditions: Traders can choose between the most widely used MT4 platform and a proprietary platform called ETXTrader which is now renamed OvalX.
Both Platforms allow traders to trade on more than 6000 financial instruments including 79 currency pairs.
ETX Capital Pros
ETX Capital Cons
ForexTime, popularly known as FXTM is an FCA-regulated forex and CFD broker that uses 100% STP method for order execution. They offer excellent research and education service with multiple trading platforms but their spreads are slightly higher than average.
Regulation: Exinity UK Limited is a legal entity of FXTM that is regulated by the Financial Conduct Authority of the UK under license number 777911. They are also regulated by the FSCA of South Africa, CySEC of EU, and FSC of Mauritius. They also have a local office in London.
Fees: FXTM offers 3 types of accounts namely Micro, Advantage, and Advantage Plus with different trading conditions.
The Micro account is an STP account that can be opened with GBP 10 minimum deposit and involves no trading commission with spreads starting from 1.5 pips. This account does not give access to stock CFDs.
The Advantage account is an ECN account and requires a minimum deposit of GBP 500. The spreads are as low as 0.1 pips with this account but it also incurs a trading commission of $0.4 to $2 based on volume.
Trading Conditions: The Advantage Plus account is an STP account that also requires a minimum deposit of $500 and no trading commissions are involved with this account. The spreads are lower than that with the Micro account.
FXTM uses MT4 and MT5 trading platforms for trading on all types of devices. They offer a rich variety of tools that can enhance the trading experience.
The liquidity providers can be banks or large financial institutions that execute the trade orders made by the clients. Brokers that use the STP method for order execution do not earn revenue on losses booked by traders.
Brokers that use this method generally offer very low spread and trading commissions. ECN system is also used by a few liquidity providers to execute trade orders.
A market maker can earn revenue on the losses of traders apart from the spreads and commissions. The profits for the traders can be losses for the market maker.
If we sum up the basic difference between STP/ECN broker with a market maker, we can conclude:
If you wish to only trade with an STP broker, the first step is to check whether the broker is STP or a market maker. This is a tricky task as some market makers do not want traders to know that they are market makers.
There are multiple ways in which traders can ensure that the broker they have chosen is STP/ECN and not a market maker.
If a broker is regulated by top-tier regulators like FCA in the UK, it does not ensure that it is an STP broker and not a market maker. There are several FCA-regulated brokers in the UK that are market makers and make revenues on the losses booked by clients.
However, the customer support service executives of the FCA-regulated brokers in the UK are generally honest with their trade execution techniques. Their regulatory license can be revoked if they lie to their traders about the trade execution method and the proof is presented to the regulatory authority. FCA-regulated market makers are very likely to accept that they are market makers.
2. Execution Speed
By checking the journal on the trading platform, traders can note down the time taken for the trade order to get executed. The execution speed for the STP brokers is faster compared to market makers. If the trade execution speed is between 80 ms to 120 ms, it is most likely an STP broker. Faster execution of trades also reduces the slippage risk.
In general, STP brokers are more transparent with their clients about the trade execution summary. Traders can check the order book summary at the STP broker and find out proof of trade execution through a bank or liquidity provider from the best available price. Market makers do not provide such details to the clients.
Since the market makers can make revenue from the losses of traders, the spread is not the only source of revenue. For STP brokers spreads are the major source of revenue. Hence, in general, a market maker may offer narrower and more attractive spreads to traders. However, it is not mandatory that each market maker will have a lower spread compared to the STP brokers. Some STP/ECN brokers have lower spreads than market makers.
There are many brokers in the UK that use the STP method for trade execution. For a better trading experience, traders must check and compare multiple aspects for STP brokers in the UK. The following are the major aspects that must be considered while choosing STP brokers in the UK.
It is important to check the authenticity of the regulatory license held by the broker. FCA is the financial regulatory authority in the jurisdiction of the UK. It is important to ensure that the brokers you are about to choose are regulated by the FCA in the UK.
STP brokers as well as market makers can get a regulatory license from the FCA. Traders need to check their website and ask through the customer support service about the market execution technique. Multiple regulatory licenses from top-tier regulatory authorities like ASIC, FSCA, etc can further increase the safety ratings of a broker.
Each STP broker in the UK will incur different trading and non-trading fees. Traders must check and compare the fees and commissions charged by the brokers. Brokers with STP/ECN execution have low spreads and can also charge commissions for even lower spreads.
All trades are executed through trading platforms and it is important to check whether you are familiar and comfortable with the available trading platform or not. An STP/ECN broker or market maker may offer the same trading platform but can have different execution methods. MT4 and MT5 are the most chosen trading platform in the UK but some proprietary platforms like eToro and Plus500 are also preferred by many traders.
Customer support services can greatly affect the trading experience at any broker. Traders can test the quality of support services by raising random queries through live chat, email, or phone before opening their accounts. Brokers with local phone support services are more trustworthy.
Deposit and Withdrawal
Deposits and withdrawals are major concerns for a forex trader. Traders must choose a broker that offers fast and convenient deposits and withdrawals. Most brokers are fast with deposits but take a longer time to process the withdrawals. It is always good to test the deposits and withdrawal services with a small amount at the initial stage.
The fees associated and the time taken to process the transaction is different for each broker. Traders must check these details before opening their accounts.
STP execution is intended to offer several advantages:
Faster Execution: Orders are processed quickly since they’re sent directly to the market without intermediaries.
Transparency: Traders can see the real-time market prices and execute trades at those prices, increasing transparency and reducing the potential for manipulation.
No Conflict of Interest: With STP, the broker doesn’t take the opposite side of the trade, eliminating the conflict of interest that may arise with dealing desk models.
Potentially Tighter Spreads: Since trades are executed at the best available market prices, traders may experience tighter spreads, which can reduce trading costs.
Reduced Slippage: STP execution can help reduce instances of slippage, where trades are executed at a different price than expected due to market volatility.
|Spread Betting Platform||Typical EUR/USD Spread||Minimum Deposit||Max. Leverage|
Straight Through Processing (STP) execution method is nearly similar to Electronic Communication Network (ECN) method. ECN brokers route the trade orders to interbank markets directly while the STP brokers can choose to transfer the trade order to liquidity providers like banks, interbank exchanges, etc.
Straight Through Processing (STP) is an execution method of trade orders placed by retail traders through electronic trading platforms. In this method, the orders are routed to the liquidity providers which can be banks, interbank exchanges, or large financial institutions.
STP execution technique is somewhat similar to the Direct Market Access (DMA) as both are non-dealing desk NDD techniques. In the STP method, orders are passed to external liquidity providers while in DMA, orders can also be forwarded to large market makers apart from banks and interbank exchanges at the prevailing rates.
Yes, Pepperstone is a 100% NDD broker that uses the STP method for trade execution.
A dealing desk broker is also called a market maker as such brokers can either match opposite trade orders placed by the clients or can also take the opposite sides of the trade themselves. Brokers with dealing desks can take part in the trades of clients and can earn revenue from the losses booked by the traders. Such brokers can also face losses if clients book profits.
Brokers that are regulated by FCA can be considered safe for trading in the UK. If the broker is regulated by multiple top-tier authorities, listed on the stock exchange, and is transparent with the financials or audit report, it becomes more trustworthy for the traders. According to our analysis, Pepperstone and eToro are among the most trusted forex brokers in the UK.
ECN brokers process the trade orders through electronic software which may involve multiple liquidity providers. In STP method, the orders are forwarded to a liquidity provider where they are matched at prevailing rates. In comparison, the STP method is more beneficial for the traders as the orders will be processed faster and the spreads can be slightly narrower.
STP brokers make money through spreads and commission. An STP broker may offer commission-based trading with low spreads or a spread-only fee structure. With the ECN method, the spreads are lower as the best pricing among the liquidity providers is chosen by the electronic software. The brokers may offer the same spread to traders with commission or can increase the spread incurred from traders.
Yes, IC Market is an STP broker that has no dealing desk. This means that it does not take part in orders placed by the clients and does not earn money on the losses booked by the traders. It passes the trade orders to external liquidity providers.
No market makers do not pay to brokers. Market makers match traders with similar orders and can also take other side of the trade. STP brokers pass on the trade orders to liquidity providers.
No, brokers that use the STP method do not participate in the trading positions placed by the clients. NDD brokers earn revenue through spread and commission. These brokers do not earn when traders lose and do not lose when traders book profits.