What Is Straight Through Processing (STP) ?

UOB Kay Hian (UKH) uses a Straight-through processing (STP) methodology for its Forex operation. STP is an end-to-end method of matching orders directly with our clients and our liquidity providers who have access to the interbank market without the use of manual intervention or dealing desk broker.

Unlike market makers, with STP there is no conflict of interest between the broker and the clients. UKH does not take opposite positions against the clients unlike market markers; hence there would be no conflict of interest.  UKH does not profit from clients losses. UKH on the other hand only make its commission from the spread on forex trades taken by clients.

How it works?
Below is an illustration of STP process.  When a client wishes to trade, he will see prices on UTRADE MT4 platform. These prices are provided by UKH’s liquidity providers. When the client decides to buy, the client will buy at the price he is agreeable, which is provided by one of UKH liquidity provider. The client’s trade is matched with that liquidity provider. UKH will be counterparty to both LP and client.

Advantages of STP Forex Broker
No conflict of interest

Client and UKH can both profit together. There is no zero sum game here where one party has to lose in order for the other party to profit.

Better price liquidity and volume
With more liquidity providers, there is better price liquidity and volume which is better for clients.

Protection on stop orders
Stop orders reside on UKH sides which liquidity providers are unable to see. This prevents LP from triggering client’s stop orders. Stops are sent out only when the price is triggered into the liquidity pool for matching.

This article is contributed by Duncan Soh from Alternative Products

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