Direct Market Access (DMA)
What is DMA?
Direct Market Access is service directed to the large-scale investors, allowing the market participants to trade shares, indices, futures and options directly on the floor of the key world exchange markets. The expenses related to the trade through the direct connection with the international markets are minimized with the direct market access. Typical for the investors is that they strive to the best price of execution of the deals and minimization of the expenses.
With DMA the clients use a brokerage platform but keep full control on their deals, by trading at price on the floor of the exchanges and receiving full transparency upon execution of the orders. The direct market access holds out opportunity before the large-scale investors, trading with the exchange prices, to minimize their expenses, through the narrow exchange spread and the typical low commissions.
The direct market access to the stock exchange enables the clients to trade directly on the floor of the exchange, minimizing this way the expenses upon bigger volumes and enabling the clients to trade with an exchange spread. The spread is the difference between Bid and Ask. DMA enables the separate investor to trade with all kinds of financial instruments with the quotations of the stock exchanges, without broker’s spread and upon automatic execution of its orders.
Example: a trade in Barclays. Say Barclays is currently trading in the market at 577/578. - Click Here! - You decide to view Level 2 prices for the stock, using L2 Dealer to see the full market depth of orders to buy and sell.Judging from the weight of existing orders, you choose to place an order to buy 10,000 shares inside the market spread at 577.5. Click here! - Your deal ticket is accepted and the order now appears on the order tracking screen. Your order is initially flagged as waiting to be filled.
After a brief wait the order is filled and a CFD is automatically created to reflect your new position. (Of course there is no guarantee that your order will be filled, and you can cancel a live order from the order tracking screen at any time.)
You now have a position in 10,000 Barclays shares at 577.5, for an initial margin outlay of 10,000 shares x 577.5 x 5% = £2887.50.
Closing your position
Over the following day the market price of Barclays steadily rises and you decide to sell. Using L2 Dealer you see that there is sufficient volume of buying orders for you to sell 10,000 shares at 583. You place an order to sell.Click here! Your order is matched and your corresponding CFD position is automatically closed. You have made a profit on the trade of 583 - 577.5 x 10,000 shares = £550.
To calculate your overall profit you would also have to take account of the commission on your CFD trade and any interest and dividend adjustments while your CFD position is open.