STP Brokers South Africa – Straight Through Processing
In this article
A lot of traders don’t understand the difference between STP and ECN brokers. They might be two major components of a forex market, but there is a significant difference between them.
It is because STP brokers in South Africa allow traders to process their orders instantly. After all, they are so popular. However, a wide variety of brokers offer STP, so choosing the right one can be challenging. This guide will help you to understand STP brokers in South Africa.
Introduction about STP broker
An STP broker makes it easy for traders to process their orders directly with liquidity providers. Most liquidity providers are based on a few financial institutions, such as investment corporations, hedge funds, and banks.
Another important feature of an STP broker is that it won’t process the trader’s order via a deal desk. As a result, all orders are processed following each other, and that too without causing any delays.
Once the orders are routed directly to its liquidity providers, they will access the interbank market. As a result, almost all STP brokers use a variety of liquidity providers to quote their bids and offers.
How does an STP broker work
An STP broker with five different liquidity providers will have five different bid pairs and request quotes from each. These pairs will represent each liquidity provider.
This is the broker system, which sorts the bids and asks for quotes from best to worst. Then, there will be a broker who will add a price to each liquidity provider’s quote.
Spread is added to the quotes. It is used as compensation for sourcing any liquidity and quotes for all traders. The broker will later send an order placed by a trader for a particular trading pair to the liquidity provider.
The main reason why STP brokers have variable spreads is due to changing bids and asking for quotes. Therefore, if liquidity providers increase their spreads, STP brokers will also increase their spreads.
STP brokers may offer fixed spreads to some clients, but they usually offer variable spreads to others
What are the benefits of using STP brokers? Important reasons to highlight
It is not just the broker who can enjoy the great benefits of STP systems. It is equally beneficial for the traders as well. Now the question is why a trader should choose an STP broker. Let’s dive into few major reasons below:
1. No conflict of interest
STP brokers never act as market makers. This generally means that there is no need to take an opposite position against the clients. Therefore, an STP broker can never have any benefit from a customer loss. Instead, they will generate some revenue via a small commission, which they normally charge per trade.
STP trading often provides superior privacy because it allows the traders to connect themselves with liquidity providers with whom the brokers have partnered. This is how a customer will be able to access more liquidity and perform better interbank rates.
This is a great opportunity for the scalpers who are too curious about the concerns like slippage and re-quotes.
3. Suitable for new traders
We highly recommend STP broker to be an excellent platform for new traders. All the new traders can keep themselves away from a market maker or increase rates once they connect with an STP broker. There is no need to fear order cancellation.
4. Access a wider market
Through an STP broker, a trader can access a wider market for a professional trading experience. In addition, brokers who are using this model will aggregate prices from numerous liquidity providers. As a result, traders can enjoy better transparency, a great execution system, and an increase in pricing.
5. Quick order execution
Another major reason to use STP brokers is the fastest execution processing. Orders are not processed through the dealing desk, due to which their speed of execution is generally high. In addition, the system will automatically handle the trading process with no delays or re-quotes.
What are the pitfalls of using an STP broker?
It’s a fact that where there are pros, there will be some cons as well. Therefore, before you head to the selection of any STP broker, make sure you know about its positive and negative points as well. Let’s see a few major pitfalls below:
1. No micro-lots
Defining micro-lot, it is one thousand units of the base currency. But STP brokers do not offer micro-lots at any stage.
On a certain occasion, market participants hold a position of 0.1 lot (10,000 currency units). You cannot open a trade position for a 0.01 lot because it is too small.
Liquidity providers have steep service costs and trade requirements. It will help do some research to determine which broker type suits your trading requirements, style, and budget.
If you are on a small budget and do not want to trade on large positions, opening an account with an STP broker is the best option.
2. Lesser spreads
When a financial market is facing volatile stages, the spread widens a lot. Therefore, it is important that the spreads.
3. Trade costs
With a bit of research, you will find a few best STP brokers, which are quite costly. This might be due to commission which is charged on every single trade order. If you are not aware, these are known as pips (percentage point).
Some of the brokers often charge a certain markup of pips for each of the lots. This lot is then later on added into the spreads so the retail clients can see it.
To avoid any risk in trading, it is important to check terms and conditions. For example, if you know it will cost you to trade, you should avoid creating a new STP account for trading.
How to sign up with an STP Broker – Tutorial beginner guide
After discussing the pros and cons of STP brokers, the next step is to let the traders know how to sign up with STP brokers. Foremost of all, select a reliable broker platform that covers all trading requirements and meets your budget.
To get started with STP broker, follow the below-mentioned steps carefully:
Step No 1: Search for a reliable STP broker
If you are still unsure which STP broker is best for you, don’t panic and see the list of the top famous STP broker platforms discussed in this guide.
We have listed a long list of brokers for you along with pros/cons and a detailed summary to help you make a better decision.
Step no 2: Open your broker account.
Once you have made the final choice, the next step is to open a broker account. And to open an account, you have to register yourself first. So first, you have to fill an application form with your full name, residential address, date of birth, and little other financial information.
Step no 3: Verification is needed.
Before you are permitted to use an account, KYC, as a legal obligation, will perform a regulated process to verify your account.
With this KYC process, the broker will make sure that your financial information is legitimate and accurate. In addition, a scanned copy of my passport and ID is also attached for further easy approval.
With time, the broker might demand some additional documents as proof, such as utility bills, phone bills, or any official letter.
Step no 4: Confirmation of account
Once your account is created, you will receive a confirmation message on your provided email address.
For any queries against the broker system, you can get in touch with the customer support team of that STP broker. All brokers are different from one another in terms of procedures and pricing.
Step No 5: Getting started.
It’s time to get started with your trading journey! Login into your new STP account with your username and password! Do not share your login details with any other third party. Then, choose the payment option and start depositing the funds.
It would be better to look for the STP broker with a demo account to easily understand trading basics.
Why should you trade with an STP broker? Major reasons to know
You should trade with an STP broker because:
1. Liquidity provider diversity
STP broker is available with a variety of liquidity providers with which you get into a pool of trading with vast opportunities.
The STP system will accumulate the prices from different liquid providers at once. In this way, a trader can access more competitive prices.
2. DMA (Direct Market Access)
Various STP brokers have direct market access, also known as DMA. This is one such feature that is common between STP and ECN brokers.
A trader can connect with the market to better execute orders with various liquidity providers with the DMA framework. This is performed through electronic trade executions.
Few common DMA features are accessing books, five-digit pricing, market execution, transparent execution, and variable spreads.
3. Availability of various assets
STP brokers offer a variety of assets to start trading on. This includes futures, energies, metals, stocks, currency pairs, indices, and Cryptocurrencies.
4. Never trade against their clients
STP brokers are free from facing any conflict of interest. It never takes the opposite position and will never benefit from its client losses.
STP brokers create a small profit by charging lower commission fees on every single trade. This commission fee is also known as markup.
5. No re-quotes
Due to a huge variety of liquidity providers, STP broker is available with the best pricing and spreads on all its options. So as you face these quotes, you won’t find yourself in the hassle of re-quotes, which is its best feature.
In certain conditions, if any of your trading orders are rejected due to a change in asset price, you will face a small re-quote. Hence, the re-quotes are detrimental based on your trading accomplishments in the long run.
List of best STP brokers South Africa reviewed
Below is a comprehensive list of best STP brokers South Africa reviews to see which aligns with your trading requirements.
eToro is an excellent forex broker with FSCS and FCA regulated. The best thing about eToro is that it won’t charge you with any commissions once you place any trade. You need to pay attention to the spread.
eToro has spreads that are quite tight. They have spread as low as one pip for major pairs, i.e., EUR/USD and USD/JPY.
In addition, eToro also offers a variety of currencies to start trading on, with which a new trader can open some exciting trading opportunities for themselves. The extensive charting function of eToro has a variety of indicators for smoothly conducting technical analysis.
Apart from it, eToro also offers a handy news feed with an economic calendar to stay updated with the latest market conditions. Furthermore, the minimum deposit with eToro is $200 with no inactivity or monthly account fees.
Avatrade provides a risk-free trading environment for new traders. They ensure that the trade orders are facilitated quickly through their advanced STP technology.
In addition, Avatrade is available with a variable spread structure in which a spread will vary based on market conditions. Although it is extremely tight, it starts from0.8 pips on a few major pairs.
More than 50 currencies are available to trade on with a leverage ratio of 1:400 for specific trades. In addition, the minimum deposit requirement is just $100.
Pepperstone is an excellent STP broker for active traders. Operating since 2010, this platform offers trading with standard and razor account types. Choosing this broker is an incredible option for traders who are extremely active in the trade market.
You can start trading with no commissions with a standard account, but a small spread is applied fees. On the other hand, the Razor account has tight spreads, but a commission is charged on each trade.
Opening an account with Pepperstone is extremely simple, with no minimum deposit requirements. In addition, a variety of funding options is available for the withdrawal or deposit process.
FXTM is a reliable and ideal broker for all experienced traders. This broker is available with six account types and is regulated by CySEC and FCA.
Account type will vary based on the trader’s requirements. This includes a stock CFDs account, standard account, and pro account. The best thing about the FXTM broker is that it works as both STP and ECN brokers for various traders.
As regards the account fee, FXTM‘s fees will vary based on account type. Some accounts have variable costs depending on position sizes and account balance.
The minimum deposit requirement is $10, with an easy process of account opening. In addition, a variety of deposit options are available with no charges applicable to them.
Last we have Capital.com, which is another top leading STP broker in the forex market. Operating since 2016, this platform has been regulated by CySEC and FCA.
The best thing about this broker is its no commission charged policy on any of their trades. This will allow the trader to save so much money in the long run.
In addition, they have spreads that are quite competitive, as low as 0.8 pips for the EUR/USD. Sometimes the value of the spread even differs according to market conditions.
Apart from an attractive fee structure, Capital.com is trader-friendly and has numerous educational materials such as articles, guides, and tutorials.
Above all, Capital.com is extremely low with its minimum deposit requirement, which is only $20. This is excellent for the new traders. In addition, various deposit and withdrawal methods are available, including debit cards, credit cards, e-wallets, or bank transfers.
Comparison table of best STP brokers South Africa reviewed
|Broker||Minimum deposit||Minimum spread||Maximum leverage||Currency Pairs|
Important factors to consider when choosing the best STP broker
Below are a few of the important factors which you need to consider when choosing the best STP broker platform:
1. Tier-One Licensing
It is highly recommended to choose an STP broker that is fully regulated and is a licensed one. Take one step forward and see if the tier-one body issues the respective license or not. This includes FCA – the UK, CySEC – Cyprus, or ASIC – Australia.
Best STP brokers are the ones that are regulated by more than one tier-one body. They are improved with their features and have a supportive customer system. Make sure they are covered with insurance too.
2. Fees & Commissions
When we talk about commissions and fees, transparency plays a major role. Best STP brokers will provide competitive commissions and low fees over trading activities. Some of the brokers won’t even charge you with a single penny for withdrawing or depositing funds.
Hence, a small markup is always there on each trade which might vary from one broker to another. Therefore, when opening an account with an STP broker, you should have a larger capital to start trading with.
Check the terms and conditions of various brokers and see which one of them is easy with its fees and commission charges.
3. Customer Support
A professional STP broker is excellent with its customer service, which is quick and simple to get in touch with. In addition, you should look for a broker which is available with 24/7 support to boot.
When you visit any broker for the first time, it is obvious that financial assets and dealing with various trades become daunting. This is when good support and a powerful contact network come to your rescue.
4. Deposit & withdrawal options
Furthermore, it is always the best option to look for the STP broker, available with various withdrawal and deposit options. When it comes to funding options, each broker has a different working scenario,
STP brokers have various payment method options, including prepaid cards, credit cards, debit cards, bank transfers, e-wallets, and so on. Check the payment options before you connect yourself with any broker.
5. Tools & trade resources
Last but not least, always search for the STP broker who is already based on offering a variety of trading resources and helpful tools.
Some of the common tools or resources on the broker include trading analysis, economic calendar, risk management tools, technical indicators, and financial market news. More resources mean better options to trade smoothly and with vast opportunities.
Technical indicators are a great option to study forthcoming price movements and forex trends.
Frequently asked questions-FAQs
1. Can you get the best pricing when trading through an STP broker?
STP broker provides competitive pricing on various liquidity providers. A trader can have access to pricing by different financial institutions such as banks, hedging, etc.
2. Does an STP broker work faster?
STP brokers are generally processed automatically, without any involvement of the dealing desk. And therefore, the processing execution speed of the STP broker is extremely fast without any delays.
3. Can a trader get prices in real-time?
STP brokers generally display the asset prices in real-time for the traders. This will enable them to choose and start trading with those prices without any inconvenience.
If you are trading as a beginner for the first time, choosing an STP broker can end your whole trading experience smoothly.
Choosing an STP broker over a market maker is beneficial to enter trades in a true trading market. With numerous liquidity providers on STP brokers, you can access more competitive market bids. Orders are executed with high precision and great speed.
Check the reviews of all famous STP brokers from our list shared above and pick the one which suits your trading requirements and has competitive pricing.
Jason Morgan is an experienced forex analyst and writer with a deep understanding of the financial markets. With over 13+ years of industry experience, he has honed his skills in analyzing and forecasting currency movements, providing valuable insights to traders and investors.
Forex Content Writer | Market Analyst