This question often tops our list of inquiries. Understanding ECN and STP can be somewhat intricate, mainly because of the diverse interpretations across the industry. Typically, Forex brokers adopt one of three primary business models, each characterized by their specific order execution process and transaction methods: ECN, STP, and Market Makers.
ECN: Representing ‘Electronic Communication Network,’ ECN is essentially a technical term. It illustrates the intricate system by which banks and liquidity suppliers connect to produce bid and offer prices. Within the Forex sphere, this term is instrumental in recognizing providers that utilize this mechanism to present raw interbank rates to retail traders. When associated with a broker under this model, traders can expect their transactions to be paired with another client, a liquidity provider, or occasionally retained within the broker’s internal mechanisms. This modus operandi often ensures quicker trade executions, differentiating it from order executions that might involve a liquidity provider.
STP: Standing for ‘Straight Through Processing,’ STP is employed when a Forex and CFD service provider pushes all trades directly based on market rates sourced from liquidity providers — this avoids any broker-manipulated pricing. Its dynamics share similarities with the ECN model, especially in the absence of any dealing desk interventions during trade operations.
Market Maker: Market makers typically operate a dealing desk, formulating unique pricing strategies. These prices might be influenced by their specific trading stances or broader risk evaluations and might not always mirror the foundational interbank market rates. It’s essential to note that Walfiner abstains from Market-Making activities strictly in line with our licensure stipulations.
In essence, Walfiner is the principal provider of the products we put forth. We resonate with the identity of a forex service provider emphasizing the ECN pricing model. Our modality is clear-cut: we obtain pricing data from distinct, unrelated liquidity providers via an ECN. These rates, free from any dealing desk mediations, are subsequently presented to you. Our strategy is systematic; we avoid hedging every single position with our liquidity vendors. This isn’t solely about interbank price assurance or swift execution but predominantly about crafting a superior trading experience for our clientele.