EagleFX: Your Best Link to The Trading World

0
473
Forexinvestment

Why You Should Use an STP Brokerage House for Your Investment Needs

There was a time not so long ago when all trade took place in the exchange house, with frenzied brokers conducting verbal transactions. Fortunately, that era has now been taken over by online trading platforms. These platforms provide rock-solid safety and security features that ensure that your deposits are perfectly safe with them.
However, online trading really came into its own with the invention of digital currency. This is primarily because such virtual platforms are pretty much the only way to buy virtual currency.

There is a plethora of platforms out there that allow people to trade on their smart devices with a simple swipe of their fingers.

ECN Brokers and How They Help Coordinate Forex Trade

An ECN broker is usually a forex expert. The forex (FX) is a global marketplace where different national currencies are freely traded by people from all over the world. An online ECN brokerage such as EagleFX uses electronic communications networks or ECNs to give their customers direct access to all the other participants present in the currency markets.

Since the ECN broker is able to consolidate different price quotations from multiple market participants simultaneously, it is able to offer its customers tighter bid spreads. In other words, if the customers were to try to purchase a basket of currencies directly from the market, they may not be able to benefit from the spread rates offered by an ECN brokerage firm.

The ECN broker is, however, only able to match the trade between different market participants. This means that it is not able to trade against their customers. This is an oft-repeated allegation that is often directed against unscrupulous forex brokers who are involved in retail trade only.

ECNs Have Narrower Spreads

ECN spreads are generally much more narrow than the ones that are used by the more mainstream retails brokers. This is why ECN brokers typically charge their customers a fixed rate of commission for every transaction.

An ECN brokerage basically facilitates trading for interested investors present all across the network. This is why working with such brokers often results in considerably lower fees and additional trading time.

STP Brokers and Investments

An STP or ‘Straight Through Processing’ broker passes on the client’s orders directly to their liquidity providers. These can include hedge funds, banks, investment corporations or even other brokers as well. The STP broker ensures that there are no other intermediaries of the order.

Lack of Dealing Desks or Other Intermediaries

This means that the STP broker will not filter any investment order or route the same via a dealing desk. In fact, it is this precise absence of a ‘Dealing Desk’ intervention that makes any brokerage’s electronic trading platform an STP center.
In real-world terms, this means that the absence of the whole dealing desk intermediary process will enable the STP brokerage house or network to process the customer’s orders without any sort of hindrance or delay.

Apart from that, the STP broker will also dispense with the concept of sending re-quotes to its clientele. This is a very important feature of the STP brokerage house. It is considered to be a tremendous advantage because the STP brokerage house is able and willing to allow its customers to freely conduct their trade—even during the critical release times of financial news. What’s more, they can do so without any sort of restrictions, whatsoever.

Basically, the STP brokerage can also benefit from having multiple liquidity providers as well. This will lead to an increase in the overall number of providers in the whole system. In the long run, it will lead to higher profit rates for the STP brokerage house’s clients.

As a general rule, most STP brokers and brokerage houses usually work with banks more often than they do with other financial institutions as far as their liquidity provisions are concerned. This way, they can continue to trade on the interbank market rate. This is the highest foreign exchange market where the banks can exchange different national currencies with each other.

Conclusion

In light of the above, we can see that both ECNs and STP brokerage houses are an excellent online means of investment and trade. Such virtual brokers are taking over the market and with the passage of time, their popularity is sure to increase.

LEAVE A REPLY

Please enter your comment!
Please enter your name here