⭐ STP is a Technology NOT a Dealing Model

The most common confusion in the Forex industry is that STP is a Dealing model alongside with DD and NDD (Dealing Desk and No-Dealing Desk).

The fact is, STP is not a model, it is a technology.

A Market Maker can use STP to send orders to their own internal warehouse.
An Agency Broker can use STP to send orders to a Tier-1 Bank.
A C-Book Broker uses STP to decide between the two.

The Marketing Confusion of STP Dealing

Forex Brokers use "STP" as a marketing tool to make themselves sound as if they are not trading against you. It creates an immediate illusion that STP = Agency Execution, where no conflict of interest exists and money are made on commission only.

The Marketing Confusion of STP Dealing

Why this illusion is wrong?

A Forex broker can be 100% STP and still be a Principal and a Counterparty because:
- they use STP technology to route Clients' orders to an own parent company
- they use STP technology to route Clients' orders to an internal pool of other retail traders, where they will try to match Buy orders with Sell orders of Clients.

How to approach STP definition correctly

To find the exact Dealing model, Traders have to look past the word "STP" and look for phrases like:
"We act as the sole execution venue..." (Means we act as Principal/Market Maker)
"Orders are hedged back-to-back with external providers..." (Means we are a Matched Principal)

Conclusion

STP is a technology, a tool.
DD or NDD is a Dealing model, a risk model
A-book, B-book or a Hybrid (A+B) is a strategy.

And example of a typical Forex Broker could be as follows: Market Maker using STP technology to run a Hybrid/C-Book model where they act as the counterparty but selectively hedge risk to remain market-neutral.

If you trade with a Market Maker who claims to have ECN pricing, you are relying on their honest promise only, not a legal obligation (or restriction) to do so. A broker is acting as a Matched Principal, but their legal status is Market Maker.

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