📖 Financial Lexicon Term
What is STP?
Straight Through Processing. A broker model where client orders are passed directly to liquidity providers with zero manual intervention.
Detailed Explanation
STP is similar to ECN. The broker routes your trades directly to an LP. However, instead of charging a separate commission, STP brokers usually slightly mark up the spread. For example, if the raw spread is 0.2 pips, the STP broker might quote 0.8 pips to the retail trader, keeping the 0.6 pip difference as profit.
💡 Practical Trading Example
A trader executes a buy order on an STP account with zero commission, paying a 1.2 pip spread instead of a commission fee.