Foreign Exchange Direct Market Access (DMA)
Originally the majority of retail traders were unable to access the direct underlying market due to the size and frequency of their trades. Trading was originally restricted to banks, inter-dealer brokers, hedge funds and local (proprietary) traders. The OTC market is based on bilateral credit lines between institutions, which have counterparty risk.
As technology has advanced, electronic screen based trading and opened up trading to the masses. The shift in technology has removed many of the barriers to entry, reducing the gap between institutions and individual traders. True DMA trading passes market orders directly to an order book to negate the use of a brokerage’s execution traders and enables the trader to place orders within the spread.
The market depth/liquidity will affect the price at which the order is filled, as this needs to be matched with an opposite order. This can lead to price improvement or negative slippage, depending on market volatility and flow.
Orders are executed with leading liquidity providers such as banks, brokers and market makers. Each institution will be providing limit orders into the liquidity pool, orders are matched and the market makers will manage their risk book with propietary positions.
Characteristics of true Direct Market Access
Market execution (The order is executed at the best available price)
Variable spreads, adjusting to volatility and flow
Commission or a fixed mark up on the spread to remunerate the broker for their costs
Both price improvements and negative slippage
Very limited capabilities to offer swap-free, without restrictions
Benefits of direct market access with Abshire-Smith:
Allow scalping and news trading
High frequency trading accepted
FSA regulated broker
Abshire-Smith acts as your Prime Broker
API & FIX connectivity
Multiple liquidity providers such as leading bank, hedge fund and proprietary trading desk liquidity
Reduced impact of orders due to multiple liquidity providers
Commissions based on trade volume*
*For further details regarding trade volume and pricing please contact us.