This is one of the most frequently asked questions. The difficult part in understanding ECN and STP meanings is that those have been interpreted differently by many people. There are three main business models used by Forex brokers which differ by the way the transactions are handled and orders are executed: ECN, STP and Market Makers.
ECN: ECN stands for 'Electronic Communication Network' which is simply a technical term that is used to describe how banks and liquidity providers connect to each other to form a bid and offer price. In the Forex industry, it can be used to identify providers who use this type of pricing mechanism in order to offer raw interbank pricing to retail traders. Under this model your broker will stream raw prices and your trades will be offset with another client, a liquidity provider or held internally by the broker. This usually results in faster trade execution. This is distinct from order execution that may result in an offsetting order placed with a liquidity provider.
STP: This term stands for 'Straight Through Processing' and is used when a Forex and CFD provider processes all trades at market prices obtained from a liquidity provider, this price is simply passed on by the broker. This is not dissimilar to the ECN pricing model in that the price is not altered and there is no dealing desk intervention when the trade is processed, hence it is known as STP.
