But that’s actually inaccurate.
While they’re both similar in the sense that they both transfer market risk, they are actually two different ways to execute an order.
In this lesson, we will explain the difference between A-Book and STP execution.
“Straight-Through Processing” is a term that is commonly shortened to “STP”.
You may have seen this acronym mentioned by some forex brokers on their websites.
It’s important to know that the term STP (Straight-Through Processing) has been hijacked by the retail forex trading industry.
And it has given the name a different meaning.
STP, as a term, originated when electronic trading became available back in the day.
It described the procedure that companies use to optimize the speed at which they process transactions.
Electronic trading enables “straight-through processing” (STP), by which trades entered electronically can likewise be processed (cleared and settled) electronically.
Because STP involves no paperwork and little human intervention, it mostly eliminated errors, which dramatically lowers operational costs and risks.
No Manual Intervention
In a nutshell, STP enables the entire trade process to be conducted electronically with no re-keying or manual intervention.
That’s how STP was originally defined, but then the retail forex industry got creative with its usage.
Nowadays, it’s used as marketing jargon to imply that the forex broker is not “touching” or interfering with your orders.
Nor is the broker benefitting from your losses because it supposedly “routes (or sends) your orders straight through to the market.”
As you’ve already learned, your orders are never routed or sent to the “market”.
This is because your forex broker is your sole counterparty and always takes the opposite of your trade.