Direct Market Access (DMA)

Direct Market Access (DMA) is a trading execution method that provides traders with direct access to the interbank market, allowing them to place orders with liquidity providers (LPs) directly.

For forex traders seeking maximum transparency and control, a DMA account is an excellent choice. Although DMA accounts have direct access to liquidity, the orders are still submitted in the broker’s name rather than the trader’s. In this arrangement, the broker acts as an “agent,” facilitating direct trading with LPs, while from the LP’s perspective, the trades are still conducted through the broker.

This setup can be likened to the broker “vouching” for the trader. Full market depth provides traders with access to various levels of liquidity, offering greater insights into the market and the ability to trade at the best bids and offers sourced directly from liquidity providers.

DMA allows traders to submit buy or sell orders directly to the order book of the underlying market, whether it be over-the-counter (OTC) or on an exchange, effectively bypassing all intermediaries. This method is suited for serious traders who require deep liquidity and the ability to capitalize on rapid price movements.

DMA offers more flexibility and transparency compared to traditional dealing methods, often referred to as OTC. With DMA, traders can place trades directly on the order books of exchanges. DMA traders have visibility into the orders on the exchange’s books and are charged on a commission basis rather than through the spread.

This approach can provide advanced traders with a more comprehensive view of the market, allowing them to see the best available prices.

Limit orders placed through the DMA trade ticket are immediately sent to the execution venue, where they become bids or offers for other participants in the liquidity pool to engage with. Traders must ensure they have sufficient margin for a limit order at the time of entry and when the stop or limit price is triggered.

Stop Loss orders placed via the DMA trade ticket are held at the execution venue and depend on a price trigger before being exposed to the liquidity pool.

DMA enables trading based on underlying market prices and depth, but what you actually receive upon placing a trade is a CFD from your CFD provider. The process works as follows:

• DMA shows the best bid and offer prices available for a specific market, along with additional prices on either side of the order book.
• You place an order, and your CFD provider immediately conducts a margin check to confirm you have enough funds to cover the margin for your proposed trade.
• If the margin check is successful, an order is placed in the market, and simultaneously, a parallel CFD is created between you and your CFD provider.

While you are trading at market prices, you do not gain ownership rights over the equities or currencies that are the subject of your CFD.

DMA and ECN share many similarities in terms of pricing, as both provide clients access to the interbank market, resulting in tight pricing and depth of book transparency. However, in a typical anonymous ECN model, individual clients must secure their own credit line from a traditional Prime Broker or Prime of Prime provider to participate in the ECN.