Direct Market Access

Direct Market Access explained by professional forex trading experts, All you need to know about What is Direct Market Access.

What is Direct Market Access

Direct market access (DMA) is a term used in financial markets include CFDs, Shares and Forex marketsto describe electronic trading facilities that give investors wishing to trade in financial instruments a way to interact with the order book of an exchange. Normally, trading on the order book is restricted to broker-dealers and market making firms that are members of the exchange. Using DMA, investment companies (also known as buy side firms) and other private traders utilize the information technology infrastructure of sell side firms such as investment banks and the market access that those firms have, but control the way a trading transaction is managed themselves rather than passing the order over to the broker’s own in-house traders for execution. Today, DMA is often combined with algorithmic trading giving access to many different trading strategies. Certain forms of DMA, most notably “sponsored access,” have raised substantial regulatory concerns because of the potential for a malfunction by an investor to cause widespread market disruption.

Foreign exchange direct market access

Foreign exchange direct market access (FX DMA) refers to electronic facilities that match foreign exchange orders from individual investors and buy-side firms with bank market maker prices. FX DMA infrastructures, provided by independent FX agency desks such as DMALINK, consist of a front-end, API or FIX trading interfaces that disseminate price and available quantity data from multiple bank contributors and enables buy-side traders, both institutions in the interbank market and individuals trading retail forex in a low latency environment.

Other defining criteria of FX DMA:

  • Trades are matched solely on a price/time protocol. There are no re-quotes.
  • Platforms display the full range (0-9) of one-tenth pip or percentage in point consistent with professional FX market quotation protocols not half-pip pricing (0 or 5).
  • Anonymous platforms ensure neutral prices reflecting global FX market conditions, not a dealer’s knowledge or familiarity with a client’s trading methods, strategies, tactics or current position(s).
  • Enhanced control of trade execution by providing live, executable price and quantity data enabling a trader to see exactly at what price they can trade for the full amount of a transaction.
  • Orders are facilitated by agency brokers. The broker is not a market maker or liquidity destination on the DMA platform it provides to clients.
  • Market structures show variable spreads related to interbank market conditions, including volatility, pending or recently released news, as well as market maker trading flows. By definition, FX DMA market structures cannot show fixed spreads, which are indicative of dealer platforms.
  • Fees are either a fixed markup into the client’s dealing price and/or a commission.

Direct Market Access Conclusion

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