The difference between MM, ENC and STP
Forex broker is a intermediary between the individual investor and the currency market; he mediates between the speculator and the bank or other contractor, that take part in the transaction.
The choice of the broker online is an extremely important step for everyone, who wants to start their adventure with the currency market, because that choice will affect the way our transactions will be made. The choice is important, because there is no possibility of trading at Forex without a broker – he is the mediator in the transactions by giving the adjusted platform for the speculator. It is his business to give the trader the optimal conditions on the currency market – his profit depends on the profit the investor makes, so the offer he gives must be interesting, making the investor willing to come back on the platform again and again. Broker FX works mainly on the rules of cooperation, but also a competition with the trader.
There are three types of brokers: MM, ENC and STP, where MM is about competition. You probably ask yourself which type of Forex broker will be the right one for me?
MM (MARKET MAKER)
Is a broker, which competes over his income with the speculator – the company is the other side of the transaction – he earns on both the income and loss of the investor. His job is to create an artificial currency exchange market (the values are generated basing on the average rates of the currency in the international banks). Market Maker delivers fluency, but the cost of trading depend on the constancy of the spread.
ENC (ELECTRONIC COMMUNICATION NETWORK)
Broker which gives you the ability of cooperating with other contractors. He mediates in the transactions with banks or other speculators and gets profit out of the profits generated by the investor. Broker ENC is responsible for creating a system of competiting tasks in the actual time, which means that he participants trade in prices, that are offered by the other investors. The costs depend mostly on the spread (which has a variable value) and on the amount of the commission taken by the broker, who earns on the users profits.
STP (STRAIGHT THTOUGH PROCESSING)
A Forex broker, which passes the order directly on to the deliverer of the fluency – in this case to the bank, which offers the actual price on the market, chosen by the investor. It means that the broker mediates only in the transaction without being one of its participants. STP does not mediate between the other participants of the market. His profits are generated based on the spread, which is set depending on the type of the offer – the difference between the actual and investment on the Forex platform can be constant or variable. Moreover the broker can add the margin to the bank prices.
While choosing the broker, the investor has to make a decision, which will influence the type of transactions made on the platform. Depending on the needs he can decide to compete with the broker, which offers constant costs (constant spread) or cooperate with the broker, whose income depend on the income on the investor, which is connected to having margin put on the income by the broker and extra commission fees. As you can see on the examples given, there are companies offering different accounts. So the choice belongs only to the client. Before choosing we recommend checking the information at the broker, because they can place changes in their offers. We invite you to our ranking in order to choose from the most popular brokers in the world.