Direct Market Access

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Systems that connect brokers or securities trading companies (sell-side companies) directly to the most important securities markets are referred to as Direct Market Access (DMA) .

Through a sell-side company with DMA, end customers or so-called buy-side companies gain direct access to the markets on which the highest turnover is made in the respective securities . The buyers use the infrastructure (for example the trading system ) of the intermediary on the sell-side, but have direct access to the prices and spreads of the leading exchanges to which they are connected via DMA.

For example, DMAs use large and liquid trading venues such as Xetra , the London Stock Exchange or NASDAQ . At the same time, however, some DMA systems also allow access to alternative trading venues such as the multilateral trading systems (MTF).

advantages

For buy-side companies or private investors, choosing a broker with DMA market access has the following advantages compared to a broker that only acts as a market maker :

  • DMA platforms offer low transaction costs for the following reasons:
    • DMAs that access several exchanges and trading venues always route the orders directly to the leading exchanges and from there to the trading venue with the best price.
    • Due to the higher liquidity, the spreads at the major trading venues are narrower. This usually guarantees both a faster and a cheaper execution.
  • Due to the direct routing to liquid exchanges, the orders are placed and executed faster.
  • The trader has access to the real order book of the exchange with market depth (the so-called level 2). Here the buy-side receives information on trading volumes and quotations that are otherwise only available to the market maker.

development

DMA was first offered by independent sell-side companies, but the high level of acceptance on the buy-side has increasingly led to established sell-side companies also offering trading via DMA.

In addition to foreign exchange trading , trading in Contracts for Difference is predestined for DMA, as quick and correct exchange rates are particularly important for leveraged products .

Web links

Individual evidence

  1. ↑ Vladimir Kazakov and Tom Vasak: DMA trading and crossings on the Australian Stock Exchange (Research paper), Quantitative Finance Research Center, University of Technology Sydney (PDF; 353 kB), accessed on December 9, 2009