Exclusive: How Much Do Retail Traders Really Care about STP and Market Making?

The industry has long been battling over market making vs straight-through processing (STP) of FX orders. In the first case brokers are internally netting positions and are taking risk onto their books, on the second occasion brokers are sending their clients’ orders through to the broader FX market through a Prime Broker Prime Broker Prime brokers are the designation given to individuals handling a package of services offered by investment banks, wealth management firms, and securities dealers to hedge funds which need the ability to borrow securities and cash in order to be able to invest on a netted basis and achieve an absolute return.There are two types of prime brokers - bank and non-bank corporations. Traditionally major global investment banks have been the predominant players in the space, however recent years have p Prime brokers are the designation given to individuals handling a package of services offered by investment banks, wealth management firms, and securities dealers to hedge funds which need the ability to borrow securities and cash in order to be able to invest on a netted basis and achieve an absolute return.There are two types of prime brokers - bank and non-bank corporations. Traditionally major global investment banks have been the predominant players in the space, however recent years have p Read this Term.

What we don’t normally know is how much traders care whether they are betting against the house or the market. Assuming that a market-making broker is delivering fair pricing to its clients, there really shouldn’t be any questions on the matter. However in real life, there are about two different types of brokers - fair ones and unfair ones. So which seem more equitable to retail traders worldwide?

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To find out whether STP and market making really matters to traders, the Finance Magnates Intelligence department conjured up a poll. The loyal trader-readers of our sister website Forexlive have been asked which Execution Execution Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Read this Term type they prefer.

Survey Results

The question that was posted to traders was: “When deciding who to trade with, do you take into consideration whether a broker is a market maker or an STP provider?”

As you can see below, the results are quite intriguing - even the savvy audience of retail traders that read Forexlive didn’t know that there was such a classification amongst brokers. Almost 30 percent responded that they didn’t know what the difference was.

Most traders do prefer an STP provider - about 45 percent of the total 403 respondents. Close to 16 percent of traders don’t mind if their broker is a market maker, in fact they prefer it.

About 11 percent of Forexlive readers answer that a broker’s brand is enough to convince them to open an account with it.

The Winner is Honesty

Let's be impartial for a minute here and forget about the grudges in the industry on market making vs. STP.

In my experience as a trader, I have been a client of brokers from both sides of the aisle. I’ll be honest - market maker or STP provider, the only commodity that sells is a company's fairness towards its clients. Most traders would hardly notice which one of the two their broker is - as long as their order execution is fair and square there is no real advantage to subscribe to one or to the other.. or is there?