DMA, or Direct Market Access, is a type of trade execution where traders are offered direct access to the interbank, enabling them to place trading orders with liquidity providers (LPs).
Trading with a Direct Market Access (DMA) account is ideal for forex traders looking for maximum transparency and control. While a DMA account has direct access to liquidity, orders are still sent in the broker’s (not the trader’s) name.
The broker is basically acting as your “agent”, allowing you access to trade directly from LPs, but from the LP’s perspective, they’re still trading with your broker.
Think of it as your broker “vouching” for you.
Full market depth exposes traders to multiple levels of liquidity that allows them greater insights into the market and control to trade on the best bids and offers sourced directly from liquidity providers.
DMA enables traders to submit buy or sell orders directly to the order book of the underlying market (OTC or exchange), bypassing all intermediaries.
It’s for serious traders who demand deep liquidity and the control to take advantage of rapid price opportunities.
It’s a way of placing trades that offers more flexibility and transparency than traditional dealing (which is usually referred to as OTC, or over-the-counter).
With DMA, traders place trades directly on the order books of exchanges.
DMA traders can see the orders directly on the books of the exchange that they are dealing with and are charged on a commission basis instead of via the spread.
DMA can be a good way for advanced traders to get a more comprehensive view of the market, and see the best possible prices available.
How do orders get filled in a Direct Market Access account?
Limit orders placed via the DMA trade ticket will be immediately passed to the execution venue where they effectively become bids/offers for other participants in the liquidity pool to interact with.
Traders must have sufficient margin for a limit order at the time of entry and when a stop or limit price is triggered.
Stop Loss orders placed via the DMA trade ticket are held at the execution venue and are contingent upon a price trigger before being exposed to the liquidity pool.
How does CFD trading with DMA work?
DMA allows you to trade on underlying market prices and depth, but what you’ll actually receive on placing a trade is a CFD from your CFD provider.
It works like this:
- DMA displays the best bid and offer price available for a particular market, plus further prices on either side of the order book
- You place an order, and your CFD provider instantaneously conducts a margin check to ensure you have sufficient funds to cover the margin on your proposed trade
- If the margin check is satisfied, an order is placed in the market, and at the same time, a parallel CFD is created between you and your CFD provider.
So while you’re trading at market prices, you won’t gain any ownership rights over the equities or currencies that form the subject of your CFD.
What’s the difference between DMA and ECN?
There are many similarities between the two models in terms of pricing. Both provide clients with access to the interbank market which creates tight pricing with a depth of book transparency.
In a typical anonymous ECN model, the individual client must have secured their own credit line from a traditional Prime Broker or Prime of Prime provider in order to participate in the ECN.