The Straight Through Processing or STP Account, is a type of technology used by
brokers to electronically transmit trades directly to the market. Clients are sent
directly to liquidity providers such as banks or interbank exchange houses via STP
forex brokers executing trades on their behalf. Transactions don't go through a
"Dealing Desk" - they go directly to the market.
Using an STP account, all
trades will be routed first to the liquidity pool, and then all orders will be filled
at the best possible price.
The STP overall improves the gain ratio by transferring the funds at the time of major market movements allowing the transfer of the investment to the better and fast-growing potential companies instead of just watching investment fall into losses.
Earn interest even when transferring money from one fund to another.
Portfolio can be stabilized by maintaining the parity between debt funds and equity funds as and when required.
Tactical assets allocations and rebalancing; easily moving funds from debt to equity and vice versa.
STP brokers are a type of NDD (No Dealing Desk) brokerage, this means they do not use a dealing desk to complete transactions. Dealing desk brokers on the other hand, also known as market makers, fulfill the other end of a client's transaction. This is done either by finding another client to take the opposite side or by taking the trade themselves. As market makers are not directly connected to the broader market, the number of clients who can take the opposite side of a trade is limited. Therefore, the broker will often buy the stock a client is selling, hence, making the market themselves. Regulated STP forex brokers are known as A-book brokers while market makers are known as B-book brokers.