When you compare forex brokers, two labels come up again and again: ECN and STP. Both describe brokers that pass your orders on to the wider market instead of trading against you, which is why they are often grouped together as "no dealing desk" brokers. But they route orders differently, price trades differently and suit different kinds of traders. This guide explains how each model works, where they overlap, how they compare with market makers, and how to tell which one a broker actually uses.

The short answer

An ECN (Electronic Communication Network) broker connects your order to a network where many liquidity providers, such as banks, other institutions and sometimes other traders, post competing bids and offers. You trade against the best available price in that pool. An STP (Straight Through Processing) broker sends your order directly to one or more of its own liquidity providers, without it ever passing through a dealing desk. Both avoid taking the other side of your trade, but ECN pricing usually reflects a deeper, more transparent pool of quotes.

How an ECN broker works

An ECN is a marketplace. Liquidity providers stream prices into it, and the network shows the best bid and best ask at any moment. When you place an order through an ECN broker, it is matched against those quotes. The broker does not decide the price you get; the market does.

• Pricing: raw, variable spreads that come straight from the pool of quotes. In liquid conditions they can be very tight; in thin conditions they widen.
• How the broker earns: typically a commission per trade or per lot, sometimes with a small markup.
• Market depth: some ECN platforms show depth of market, so you can see how much volume sits at each price level.
• Anonymity: your order is one of many in the network, and counterparties do not know who you are.

For a deeper look at this model on its own, see What Is an ECN Broker?

How an STP broker works

An STP broker has relationships with a set of liquidity providers. When you place an order, the broker's system automatically forwards it to one of them, often the one quoting the best price at that moment. There is no human dealer deciding whether to fill it.

• Pricing: usually the liquidity provider's price plus a markup added by the broker, so spreads may be slightly wider but often commission-free.
• How the broker earns: mainly through that markup on the spread.
• Liquidity: depends on how many providers the broker connects to. A broker with one or two providers offers less depth than a broad network.
• Execution: generally fast and automated, with fills at the provider's quoted price, subject to normal market slippage.

ECN vs. STP: the key differences

1. Where your order goes

ECN orders enter a shared network of many participants. STP orders go to one of the broker's chosen liquidity providers. The practical effect is that ECN prices are formed by more competition, while STP prices depend on the broker's particular panel of providers.

2. How you pay

ECN accounts usually show very low raw spreads plus a separate commission. STP accounts usually fold the broker's fee into a wider spread with no separate commission. Neither is automatically cheaper; you need to add both parts together to compare. Our guide to forex spreads, commissions and trading fees shows how to work out the real cost of a trade.

3. Transparency

Because ECN prices come from a visible pool, it is easier to see that you are getting market pricing. With STP, you rely on the broker to route fairly and to keep its markup consistent.

4. Spread behaviour

Both models normally offer variable spreads. ECN spreads can be extremely tight during busy sessions and widen sharply around news or at the daily rollover. STP spreads include a markup, so they rarely reach the very lowest levels, but they can feel a little more stable.

5. Who they suit

• ECN tends to suit scalpers, high-volume traders and automated strategies, where every fraction of a pip and fast, consistent execution matter.
• STP can suit traders who prefer a single all-in spread and simpler cost tracking, and who trade less frequently.

Where market makers fit in

The third model is the market maker, sometimes called a dealing desk broker. A market maker creates its own bid and ask prices and usually takes the other side of client trades, either holding the risk itself or hedging part of it.

• Pros: often fixed or predictable spreads, and fills even in quiet markets because the broker is the counterparty.
• Cons: a potential conflict of interest, since the broker can profit when clients lose, and the possibility of requotes in fast markets.

Market makers are not automatically bad; many are well run and closely supervised. But if avoiding that conflict of interest matters to you, an ECN or STP broker is the more natural choice.

Hybrid models

In practice, the lines blur. Some brokers run a hybrid: they may route larger or more consistently profitable flow to the market (STP or ECN) and internalise smaller trades. Others offer different account types that use different models. That is why it is worth looking past the label on the homepage and reading the broker's order execution policy.

How to tell which model a broker really uses

1. Read the order execution policy. It should explain how orders are routed and whether the broker ever acts as counterparty.
2. Look at the pricing structure. Raw spreads plus commission point towards ECN. Commission-free spreads with a markup often point to STP or a market maker.
3. Watch spreads during news. Genuinely market-based spreads move with liquidity; perfectly fixed spreads during big events suggest a dealing desk.
4. Check for requotes. Frequent requotes are more typical of dealing desk execution.
5. Ask support directly. A good broker will explain its model clearly. If the answer is vague, treat that as information.

Which is better for you?

There is no single best model. Start from how you trade:

• If you trade often, hold positions briefly or run automated systems, the tight raw spreads and fast execution of an ECN account usually matter most.
• If you place a handful of longer-term trades, the difference in cost between ECN and STP may be small, and other factors such as platform, deposit options and support can matter more.
• Whatever the model, cost is only one part of the picture. Read How to Choose the Right Forex Broker in 2027 for a full checklist.

Where Clarity FX fits

Clarity FX operates as an ECN broker on the TradeLocker platform, giving traders access to forex and crypto pairs without a dealing desk. You choose your leverage when you open an account, and you can start with a demo account before going live. To see the options, visit the account types page, or check the FAQ for how ECN execution works in practice.

Key takeaways

• ECN and STP brokers both send your orders to the market instead of trading against you.
• ECN matches orders in a network of many liquidity providers, usually with raw spreads plus commission.
• STP forwards orders to the broker's own providers, usually with a markup built into the spread.
• Market makers set their own prices and often take the other side of client trades.
• Compare total cost per trade, execution quality and transparency, not just the label.

Trading forex and crypto on leverage carries a high risk of loss and may not be suitable for all investors. This article is educational and not financial advice. Read our risk disclosure.