Hi,
I understand that the broker makes money on the spread which is the difference between the bid and ask. They sell to you on the bid price and immediately try to buy it back from the market at the ask price. This is why they are market makers. They make the market for you.
But when a broker is STP which means they pass your order straight through to their liquidity provider, that liquidity provider such as a bank becomes the market maker. How can the STP broker still make money from the spread since they are not doing the buying and selling between you and the market?
I understand that the broker makes money on the spread which is the difference between the bid and ask. They sell to you on the bid price and immediately try to buy it back from the market at the ask price. This is why they are market makers. They make the market for you.
But when a broker is STP which means they pass your order straight through to their liquidity provider, that liquidity provider such as a bank becomes the market maker. How can the STP broker still make money from the spread since they are not doing the buying and selling between you and the market?