STP Forex brokers
The Straight Through Processing (STP) helps the customers of Forex brokers to save time. This is possible because the orders of the Forex brokers’ customers are directly into the liquidity providers. So, the orders are filled without delays and no re-quotes, in order to optimize the most of the trading process.
The highlight of the STP execution is that the brokers cannot do profits from the client’s losses. Otherwise, the way that STP brokers make profits is from small commissions or markup to the spread. The conflict of interest between the traders and the brokers is a very rare event. This is because the broker gets the same markup regardless of whether the client wins or loses. The aforementioned is crucial for the market makers. For example, the market maker brokers make profits from the trader losses. In the case of the STP brokers, they benefit better from winning traders that will prevail and the broker will get more commission/markup fees.
There is a wide variety of brokers, from brokers that only offer 1 liquidity provider to brokers that provide access to the trader to a vast liquidity pool. FXCM is an example since it offers liquidity from over 10 banks. Therefore, the more the liquidity provider there are the better order executions.
On the other hand, the interbank forex market is offered by No Dealing Desk (NDD) brokers. They are similar to STP brokers. Since they offer no filling order delays, no re-quotes, and no interest conflicts. NDD forex brokers can offer either STP or electronic communication networks (ECN) execution.
Forex financial experts can offer electronic communication networks ( ECN). They used it to provide direct access to the client to other participants in the currency markets. These forex financial experts are called ECN brokers.
The ECN brokers can consolidate price quotations from several market participants. This gives the ECN brokers the ability to offer a tighter bid/ask spreads to the clients that they would be otherwise available to them.
Breaking Down ECN broker
The ECN broker cannot trade against the client since they can only match market participant trades. Moreover, ECN brokers charge a fixed commission to the clients, due to the narrower ECN spreads.
The function of the ECN broker is to ease trades for concerned investors across the ECN. This way of how the ECN works, allows the ECN brokers to offer lower fees and additional trading time availability.
Understanding the ECN
In order to bring the buyers and sellers closer and execute trades, the ECN provides a robust electronic system. The ECN provides access to information according to the orders being entered. It also eases the execution of these orders. In the case of the unavailability of a specific order information, it will show the prices of the highest bid and the lowest risk listed on the open market.
Benefits of the ECN
A viable option from traditional trading hours is the ECN. Which offer to the investors a wider availability. The investors who cannot be involved in time on the market or who prefer flexibility are the most concerned about ECN. The investor also like the lower commissions and fees. In addition, ECN offers privacy guarantees since it can supply a level of anonymity to those who want it. This is a big deal for investors that are up to larger transactions.
Because all ECN brokers have access to the same feed and trade at the precise price, the price feed transparency can be noticed as another ECN benefit. On the other hand, the ECN allows easier analysis of the market particular trends. This can be done thanks to the updated price history that is also available. This can hinder unscrupulously actions since ECN helps to limit the price manipulation because the current and past information is available to all. Additionally, there is no exclusivity to take advantage of, since they all have equal access to the information.
The Cyprus Securities and Exchange Commission (CySEC)
Cyprus must fulfill the legislation of the European Commission (MiFID) since is a member state of the E.U. Cyprus Securities and Exchange Commission (CySEC) is a financial regulatory authority.
CySEC is well regarded by a noticeable number of forex companies and binary options brokers. They have been regulated by CySEC. The forex brokers consider CySEC regulation as a quality indicator that improves the trader confidence.
CySEC has gone through a series of strong changes in financial services registrations and legislation. E.U. regulatory authorities and security dealers are concerned about the changes since they are constantly monitoring with scrutiny.
Micro Account Forex Brokers
To accomplish flexibility, traders look for smaller contract sizes that help to diversify their trading portfolios. The diversity can be achieved by allocating smaller quantities of money to more currency pairs. Due to the aforementioned, the forex brokers trend to decrease the standard contract (around 100,000 currency units) to smaller contracts. These smaller contracts can consist of mini lots of 10,000 units, micro lots of 1,000 units or even nano lots.
The reduced contracts or better known as micro trading can be useful for those traders and novice that wants to give a try to the services of a broker without risking too much money. This allows the traders to experiment with their skills or the broker with a limited risk.