When setting up a forex trading platform, there is one issue that cannot be avoided: the clearing process for forex trading platforms. Have you often heard technical terms like “MM” and “STP”? These refer to trading platform models built based on different clearing methods, and these models give rise to another technical term related to clearing: the “clearing bridge.”In this article, we will explain these clearing issues related to building a forex trading platform.
To truly understand how forex platforms settle trades, you must first distinguish between the different types of trading platform models.The first is the MM (Market Maker) model, also known as the single market maker or “betting against clients” model. The concept is straightforward: the forex broker acts as the market maker itself, profiting by directly betting against clients. This is a zero-sum game where the platform profits when clients lose, and clients can only profit if the platform loses;The second is ECN (Electronic Communications Network), commonly referred to as the “full clearing model.” In this model, orders placed on the platform are directly “routed” to international markets via a clearing bridge. The platform merely charges a commission, thereby fully transferring the risks associated with forex trading;The third type is STP (Straight-Through Processing). This model also uses a clearing bridge to directly “pass” the platform’s trade orders to banks, executing trades almost instantly at the bid and ask prices provided by the banks.
After learning about the three different platform models, it’s easy to see that both ECN and STP clearing methods mention a term: “clearing bridge.” As the name suggests, its purpose is to help the platform build a bridge to international markets through which forex trading orders can pass.Generally speaking, clearing bridges are developed through significant effort by technical teams or technology companies. But since the first model—the MM model—allows the platform to act as its own liquidity provider, why develop a clearing bridge at all? Because the MM model poses enormous risks to both clients and the platform.From the client’s perspective, if they know the platform they’re trading on operates under the MM model, they’re highly unlikely to consider it safe or reliable to deposit funds there, as the platform could very well disappear overnight. For the platform, every trade carries the risk of settlement, and there’s always the possibility of incurring massive losses.Therefore, if a platform wants to grow and become stronger, the best approach is to use the ECN or STP model, transferring the clearing risk to the international market via a clearing bridge. After all, once a platform has a large client base, simply collecting transaction fees from each client already generates substantial revenue.
If you’re considering setting up a clearing bridge, you’ll likely find that some forex platform providers that offer clearing bridge services also stipulate a minimum clearing lot requirement.The so-called minimum clearing volume refers to the minimum number of lots for which you must pay clearing fees to the clearing provider. For example, if the minimum clearing volume is set at 4,000 lots, and the platform’s actual clearing volume reaches 2,500 lots, you will still be charged clearing fees based on 4,000 lots.Therefore, when deciding which clearing bridge provider to choose, you should carefully consider this issue.
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