An initiative used by companies in the financial world to optimize the speed at which transactions are processed. This is performed by allowing information that has been electronically entered to be transferred from one party to another in the settlement process without manually re-entering the same pieces of information repeatedly over the entire sequence of events.
STP brokers pass on prices from multiple market participants, such as banks and market makers, as well as other traders connected to the STP, and display the best bid/ask quotes on their trading platforms based on these prices.
STP brokers also serve as counterparties to forex transactions, but they operate on a settlement, rather than pricing basis. Unlike fixed spreads, which are offered by some market makers, spreads of currency pairs vary on STPs, depending on the pair's trading activities.
During very active trading periods, you can sometimes get very low spreads, particularly in very liquid currency pairs such as the majors (EUR/USD, USD/JPY, GBP/USD and USD/CHF) and some currency crosses.
Authentic STPs, such as ArgusFX, do not play any role in making or setting prices, therefore, the risks of price manipulation are reduced for retail traders.