DMA Brokers

Direct Market Access (DMA) is a popular form of No Dealing Desk (NDD) trading. DMA brokers provide unique opportunities to cut execution speeds and fees when trading forex, CFDs and stocks. Easily confused with other brokerage models, our review sheds light on the differences. We also cover the pros and cons of DMA brokers and list some of the best options available to UK traders.

What Is DMA Trading?

DMA trading connects investors directly to the broker’s liquidity providers. Aimed at active retail investors and institutions, it promises ultra-fast processing so traders can capitalise on immediate opportunities. It’s a form of no dealing desk trading meaning zero manual intervention. This helps cut costs and allows clients to trade with the tightest bid-ask spreads.

How DMA Brokers Work

Sell-side firms, including brokers and market makers, have direct market access. Normally a broker acts as an intermediary, facilitating trades between the individual trader and the exchange. By offering DMA technology to investors, buy-side firms and traders benefit from full transparency on exchanges and their order books. This can reduce costs and provide superior access to liquidity, but also runs the risk of offering market-making capabilities to buy-side investors.

DMA trading is often compared to Straight Through Processing (STP) and Electronic Communication Network (ECN) models. All three are NDD systems and we’ll run through the differences, but first let’s consider dealing desk systems.

Dealing Desk Vs Non-Dealing Desk

Dealing desk trading is the process of executing trades via a market maker. The broker sets the bid and ask price, and other criteria, profiting from spreads and commissions. For some, especially smaller retail traders, this has many benefits. Brokers take care of the sell-side which makes the trade more convenient for the individual. Fixed spreads are usually promoted as close to the real market price as possible. This can be more lucrative for traders vs fluctuating real-time spreads offered by NDD providers.

In recent years, as technology has advanced, the demand for dealing desks has decreased. Trades are now more often quoted and executed using automated STP and ECN models.

Non-dealing desk trading provides access to a range of liquidity providers, banks and exchanges to get competitive prices. NDD models, therefore, allow traders to access the best spreads available to retail customers. NDD brokers often take their cut through a commission charge.

DMA Brokers Vs STP Brokers

DMA and STP can easily be confused as they both offer a means of connecting traders directly to liquidity providers. The main difference is that STP works by feeding orders to a broker’s liquidity providers who compete for the best bid-ask spreads, with the broker then charging a mark-up for its services. DMA brokers, on the other hand, offer zero intervention reducing execution speeds and trading fees.

DMA Brokers Vs ECN Brokers

The fundamental difference between ECN and DMA brokers is that ECNs connect traders to a network of anonymous liquidity providers. No direct contracts are held when ECN trading, whereas DMA traders form contracts directly with each liquidity provider.

ECNs aim to improve interconnectivity between a diverse range of market participants. But because of the anonymity, liquidity providers may withhold their best spreads within the network. The anonymity of ECNs can also result in slippage and requotes. Whilst ECN spreads are still very tight, transaction costs, execution and processing fees also factor into the equation; with ECN trading sometimes costing more than DMA methods. Both are aimed at larger investors with minimum lot sizes from 0.1.

Choosing A DMA Broker

• Regulation – It is important, especially when trading in serious volumes, to look for a regulated broker. In the UK, Financial Conduct Authority (FCA) regulation is a good indication that the broker is trustworthy.
• Access – What instruments does the broker offer? Do you want to trade forex, stocks, cryptos, commodities? Does the broker allow scalping and hedging? These are all questions you may want to answer before opening an account.
• Software – DMA brokers usually offer sophisticated software to facilitate rapid executions. Make sure they also offer powerful platforms to conduct technical and fundamental analysis. MetaTrader 4 (MT4) and MetaTrader 5 (MT5) are popular among retail traders.
• Costs  – As high-volume retail or institutional traders, you may be able to negotiate commission rates. The best DMA brokers typically offer better margin rates for active traders. It’s always worth reviewing commissions and spreads before you start trading.
• Support – Naturally, good customer support should be available should you run into issues. Top DMA brokers offer 24/5 support via live chat or phone during the standard trading week.

Pros Of DMA Brokers

• Costs – By reducing intervention from intermediaries, costs are usually lower.
• Speed – Without manual intervention, DMA brokers offer fast executions appealing to scalping strategies, for example.
• Transparency – DMA brokers usually adopt an open door policy to an exchange’s order books. This can help paint a picture of market trends.
• Algo trading – DMA brokers and platforms can usually be integrated with algorithmic trading software, which can help investors increase the volume of trades across financial markets. Automated trading strategies can also remove interactive human error when identifying patterns and making trading decisions.

Cons of DMA Brokers

• Risk – By offering DMA technology to buy-side investors, there is an increased risk of investors accessing market-making capabilities.
• Size – Minimum lot sizes at DMA brokers tend to come in at 0.1 lots (10,000 CCY), meaning it’s not always suitable for beginners.
• Regulation – This can be a double-edged sword. Whilst strict regulation protects market participants, it also reduces flexibility often provided by dealing desks and OTC trading.
• Spreads – Whilst variable floating spreads are often more competitive, low fixed spreads offered by some other brokers can prove lucrative for savvy traders.

Final Word On DMA Brokers

Whether you opt for one of the top DMA brokers or an alternative model will largely depend on your needs. For experienced, high-volume retail traders, DMA brokers can help improve execution speeds and reduce costs while integrating with sophisticated algo trading software. Transparency and live market pricing are also solid benefits. If you do want to open a trading account with one of the best DMA brokers, see our list.

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