Ecn vs Stp
Look-alike pair
ECN and STP are both labels for how a retail order reaches the market, and the single difference that matters is whether your order can match against another client's order. An ECN pools client orders and permits internal matching; an STP setup routes your order straight to an external liquidity provider with no client-to-client matching.
Side by side
| Ecn | Stp | |
|---|---|---|
| Core mechanism | Orders from multiple clients are pooled and may be matched against each other inside the venue. | Orders are passed straight through to an external liquidity provider; client orders are not matched against each other. |
| Who takes the other side | Another client of the same venue, or an external provider if no internal match exists. | The external liquidity provider, bank or market maker that receives the routed order. |
| Price formation | Best bid and best offer are drawn from the pool of participants, so the spread can vary with internal flow. | Price comes from the external provider's quote; the spread is whatever that provider is showing. |
| Execution model | Matching engine pairs compatible buy and sell orders, then routes any residual. | Routing engine forwards each order to one or more providers without an internal matching step. |
| Field mark | Order confirmation shows a counterparty or match reference from the venue itself. | Order confirmation shows the external provider or venue the order was routed to. |
| Typical use | Traders who want their orders exposed to other clients and to external flow. | Traders who want their orders sent to an external provider without internal matching. |
Which word to use
Use ECN when the venue matches client orders against each other; use STP when every order is routed straight to an external provider with no client-to-client matching. Note that the exact features, naming and regulatory treatment of both models vary by broker, country and regulator.
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