I’ve been trading with several brokers recently, and I keep encountering ECN and STP.
I’m not entirely sure how they differ. The marketing stuff just blends together for me.
ECN connects you directly to liquidity providers. STP uses dealers before executing trades.
The main difference is in trade execution and costs.
ECN generally offers better execution during volatile markets due to more available liquidity, but you will pay commissions on top of spreads.
STP is more straightforward. Your trades go directly to liquidity providers, so you only pay spread costs. Execution quality relies on their chosen providers.
ECN brokers match trades from multiple liquidity providers and let you see market depth. This means you trade against other clients’ orders. STP brokers send your trades directly to liquidity providers without a shared order book. ECNs typically charge a commission while STPs profit from spreads. Both options offer tight spreads, but ECNs provide greater transparency in trading.