Straight Through Processing: What is it?
The name STP or Straight Through Processing relates to a progressive financial operations processing system, which basically means immediate and continuous processing.
The term is mostly found in the field of finance, perhaps most notably in connection with brokers. Those who use STP deal with orders and quotations as they come.
The term was created in the US, when a reform which consisted in reducing the time limit between the settling and the delivery of stock share transactions to 3 days was established. Prior to that, the timeframe was much too long. Ever since, this system has been used by the vast majority of banks and brokers who use electronic gateways which allow for the quasi-instantaneous processing of clients’ orders.
The purpose here is of course greater consistency as well as faster tracking of developments according to issued orders.
Straight Through Processing advantages:
From an investor’s point of view, the Straight Through Processing system presents clear advantages. The first of these advantages concerns the guarantee that the issued order will be issued live. Otherwise, there can be a significant difference between the price at which a position is bought or sold and the true price of the asset, which can entail serious losses.
This same STP has a similar advantage for brokers who could, in the same way, lose money, because it is through them that the clients’ orders were issued.
Nowadays, the vast majority of stock market brokers use this progressive transmission process which guarantees an optimal use, both for their clients as well as themselves.
How can you tell if a platform uses Straight Through Processing?
As we’ve just seen, the vast majority of online trading platforms already use STP. However, if you want to make sure they do, you can simply check the platform’s description on its website and check and see if STP is mentioned somewhere.
If you still can’t find this information, do not hesitate to contact costumer service.