Compare The Best DMA Brokers

Are you interested in trading with a DMA broker but unsure about where to start? Look no further, wecompareonlinebrokers.com is here to help you.

DMA brokers are extremely popular, however there are plenty of brokers to choose from, making it difficult to know where to start when attempting to choose one.

We’ll also list some key features of the best DMA forex and CFD brokers.

We have put this quick guide together to help explain what DMA trading is, why some traders prefer DMA trading, the benefits & risks involved and some key considerations to explore before choosing a DMA broker.

We hope this guide helps assist you in your search!

Leading DMA Brokers Comparison Table:

Broker     Official Site   Max. Leverage Regulations Min. Deposit    Spreads From Review
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500:1 $100 From 0 pips
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500:1     $200 From 0.1 pips
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400:1 $100 From 0.9 pips
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What is Direct Market Access?

DMA stands for Direct Market Access. DMA trading allows for traders to place their buy & sell orders direct to the market (exchange), rather than going through a dealing desk or market making broker.

Trading with a DMA broker is an excellent way for traders to gain access to some of the best and lowest spreads in the industry. This is made possible due to DMA brokers having access to a wide range of liquidity providers, all competing for the same business. This results in lower trading costs for DMA trader.

DMA is most commonly used by professional traders and investment firms due to its ability to accept algorithmic trading strategies. This makes the entire trading process simple and effective, with faster trade execution times and lower trade costs.

What is a DMA Broker?

A DMA broker is an online broker that offers trading services to retail customers on a direct market access basis by connecting them to the relevant exchange’s order books. This differs from a Market Maker broker, who buys & sells for you, on your behalf.

Only non-dealing desk brokers can provide DMA access, as dealing desk brokers execute client trades in-house and do not pass these trades to the market.

How Does DMA Trading Work?

The concept of DMA trading is actually relatively simple.

When you trade DMA CFDs, a trader is able to interact direct with a stock or currency exchange, using a DMA broker. If you place a DMA CFD  trade, the DMA broker will take the position in the underlying market and, in return, you will receive a CFD. DMA CFD trading is a derivative trading product that allows you to speculate on the price movement of an asset, without having to own the asset in question.

Your DMA broker will be contracted to a number of liquidity counterparties in order to get the best prices possible. The DMA broker then collects, compares and provides the best bid & offer quote, and then places these on their trading platform. All you have to do is wait until you see a price that you agree with and then enter your trade.

How Do You Compare DMA Brokers?

Finding the best DMA broker to fit your individual trading needs is not an easy decision to make. There are plenty of DMA brokers out there – here are a few key considerations to factor into your decision making process.

Costs

Mobile forex tradingAll DMA brokers will charge you to trade on their platform, that is a given, the key is to find out how much they will charge you and to then try negotiate a better deal, particularly if you intend to trade larger volumes. Many direct market access brokers offer discounts for certain trading volumes.

Before you begin DMA trading, ask a few brokers the following:

  • What is your spread on the following markets (name a few markets you are going to trade)?
  • What is the commission charged on the following markets (name a few markets you are going to trade)?
  • Do you charge overnight financing? How much on these markets (name a few markets you are going to trade)?

Regulation

DMA brokers with solid and sufficient regulatory licenses will provide you with peace of mind and protection. Never trade with an unregulated broker, otherwise your money is at risk.

All brokers listed on this website are fully regulated by top-tier regulators like the FCA in the UK, ASIC in Australia and the FMA in New Zealand.

Technology & Speed

As DMA works by connecting traders direct to the best liquidity providers, it is important that your DMA broker offers solid technology that can facilitate fast execution of orders.

Range of Markets

Always check that your new DMA broker offers the instruments that you wish to trade, as not all brokers offer every market. For instance, Saxo Markets offers over 30,000 products, whereas BlackBull Markets focuses on a small few. Please check before committing to a broker.

Disadvantages of Direct Market Access

  • Not Suitable For Smaller Traders. DMA trading is only really recommended for large, active traders who trade in large volumes because of the complexity and risks involved.
  • Connectivity. If you are having internet issues, this will also impact your direct market access connection.
  • Heavily Regulated. As DMA trading is significantly regulated, it is less flexible than trading via over-the-counter (OTC). This is a good and bad thing, depending on which side of the fence you are on.
  • Penalty Fees. It is not cheap to operate a DMA brokerage and so some brokers may charge you inactivity fees if you do not place a trade, usually within 3 months.



Advantages of Direct Market Access

  • Potentially Lower Trading Costs. As there is no manual intervention (dealing desk) with DMA trading, trading costs are typically lower than market making broker models.
  • 100% Transparency. There is no hiding with DMA trading – you can see what other traders are doing and gauge market sentiment to help make your own trading decisions. This creates an equal playing field between all market participants.
  • Best Pricing. As a DMA brokers’ pricing is sourced from numerous banks and liquidity providers, it means they can provide better pricing than MM brokers.
  • Execution Speed. DMA trading is fast and trades are executed very quickly, usually with next to no slippage.
  • Human Error. As DMA brokers do not operate with a dealing desk, there is less potential possibility of human error.

What Is The Difference Between a DMA Broker and a Market Maker Broker?

Market Maker (MM) brokers make their profit from the spread and client losses, whereas DMA brokers make their profit through the commission a trader pays them.

As the name suggests, Market Makers make a market that is derived from the underlying market pricing, although it is not the exact same price as the exchange. For instance, the UK100 index may be priced at 7,000 on the London Stock Exchange. An MM broker might price this as 6,900 – 6,901 on their trading platform, however a DMA broker would quote this as something like 7,000 – 7,001.

When you trade with a MM broker, you are trading against them as they typically take the opposite side of your trade. This means that they do not place your trades into the underlying exchange like a DMA broker does. In essence, MM brokers are aware that 70% – 80% of traders lose money and so they do not hedge your trades (unless they are heavily exposed) and when you lose, they profit.

What Is The Difference Between STP And DMA Trading?

Straight-Through Processing (STP) trading is very similar to DMA trading, with both operating non-dealing desk models. The main difference between the two is that STP brokers take the best prices offered by their liquidity providers, whereas the pricing on a DMA platform is pre-determined by a trader and then passed directly on to the broker.

What Is The Difference Between ECN Brokers And DMA Brokers?

ECN brokers are also non-dealing desk, however instead of individual CFDs being passed on with DMA, ECN brokers act as a hub of providers, where there is no direct contract/s involved. ECN brokers are usually characterised by low spreads and commission charges.

Difference Between Dealing Desk and No Dealing Desk Brokers

Dealing desk (DD) brokers are more often than not market maker brokers. This is because all market markers have an in-house trading/ dealing desk function that manages its company’s risk parameters. A dealing desk is usually an entire department which runs the back end of the trade order & execution process of a brokerage. There is a conflict of interest when trading with a DD broker as they are holding positions against you in the hope that you get the trade wrong and lose money. They profit when a trader loses, and they lose money when a trader wins.

Non-dealing desk (NDD) brokers do not handle trade orders in-house. Instead, they re-route orders from a trader direct to the interbank where liquidity providers will fill these orders at the price requested by the trader. There is no conflict of interest with a NDD broker, as the non dealing desk broker is simply a bystander in the trade process.