STP / NDD Broker

STP, NDD, and ECN are related broker-model concepts that describe variations of the same fundamental approach: route client orders directly to liquidity providers without taking the opposite side internally.

STP (Straight-Through Processing): - Orders flow from client through broker to LP without manual intervention - Broker earns markup on the spread (typical: 0.5-2 pip markup added to LP's raw spread) - Single-LP relationship is common — the broker connects to one prime broker who aggregates multiple LPs - Simpler infrastructure than full ECN - Suitable for retail volumes

NDD (No Dealing Desk): - Broader term meaning no human dealer involvement - Encompasses STP, ECN, and DMA models - Marketing-friendly term used to distinguish from market-maker (dealing-desk) brokers

ECN (Electronic Communication Network): - Broker connects to an aggregated network of multiple LPs simultaneously - Best bid/ask shown is the best across all connected LPs - Client orders compete with other client orders on the network — peer-to-peer matching is possible - Typically lowest spreads (0.0-0.3 pip on majors) plus commission ($3-$7/lot round-turn) - Higher infrastructure complexity than pure STP

DMA (Direct Market Access): - Client orders go directly to exchange or LP without broker intermediation - Often used for stocks/futures; less common in OTC forex (which has no central exchange) - The broker is essentially a connectivity provider

In practice: terms are often used loosely in marketing. A broker marketing as 'ECN' may actually be STP with multi-LP aggregation. The technical distinctions matter less than the underlying behaviour: does the broker take the opposite side of client trades (B-book) or pass them through (A-book/STP/NDD/ECN)?

Verification: examine broker disclosure documents (required for regulated brokers in some jurisdictions). FCA-regulated brokers in the UK must disclose their order-handling model. ASIC and CySEC have similar requirements.

For EA traders, STP/NDD/ECN brokers are typically preferred because: 1. No conflict of interest — broker doesn't profit from client losses 2. Generally tighter spreads (raw + commission usually beats wider-spread no-commission) 3. No last-look or dealing-desk discretion (typically) 4. Better execution quality for time-sensitive strategies

Trade-offs: STP/NDD/ECN brokers may have higher minimum deposits, charge commissions explicitly (more transparent but feels more 'expensive' than spread-only pricing), and have stricter slippage rules. For most algo traders, these trade-offs favour STP/NDD over market-maker brokers.