Compare brokers that offer Direct Market Access (DMA) trading platforms authorised and regulated in the UK by the FCA. Find the best DMA provider and you could get direct market access for CFD trading, spread betting and forex. Choose a cheaper DMA broker to save money and you could reduce your trading costs to help you profit.
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What is a DMA broker?
A DMA broker is a financial services firm that offer trading and investment services to it's clients on a direct-market-access basis by connecting them directly to the exchange order books rather than buying and selling on their behalf.
How to compare DMA Brokers
The best CFD brokers that offer DMA (Direct Market Access) tend to be well-established players with a mainly professional or institutional client base.
Trading CFDs via DMA gives a trader an edge over the more retail-focused CFD broker because they can buy at the bid and sell at the offer. Trader buy and sell orders go straight onto the order book and can be worked in a professional manner using order types such as iceberg, limit and market or limit stops.
It is particularly important to use a CFD broker that offers DMA if you are a large trader dealing in over the normal NMS (Normal Market Size) on the main markets or in illiquid markets where you don’t want to show your entire order in one go. In smaller assets, big orders can move the market before you get a chance to get in.
If you are looking for an institutional account you can find a prime broker here.
All these brokers are well capitalised and have experienced brokers to assist with account set ups and look after their customers well.
How to open a DMA account
To open a DMA account you will need to contact a broker which offers this service. Like opening any normal trading account you will also need to provide proof of identity like a passport or driving licence, your bank details, an email address and contact details. However, keep in mind that DMA trading is usually for more experienced investors, professionals and institutions. It may not be suitable for traders with little experience.
All of the brokers in our comparison are authorised and regulated by the FCA
DMA providers will normally ask questions about your experience levels to ensure you understand the risks of this type of trading.
You will also need to consider your strategy for trading on the markets through DMA, due to the speed of trading, human error or failings in computer software may increase the risk of losses.
A sensible risk management strategy is essential before you begin.
What is Direct Market Access?
Direct market access, also commonly referred to as DMA, is a service offered on some platforms by brokers that enables trading brokers with sufficient experience to place buy and sell orders directly on the electronic facilities and order books of stock exchanges around the world.
Rather than placing trades through a Retail Service Provider, DMA brokers enable you to place trades directly the central market.
Direct market access is commonly used by investment firms and sophisticated traders as it allows for the implementation of strategies based on algorithmic trading and can help make the trading process more efficient due to the overall speed of execution and the lower costs associated with trades.
With a DMA trading, you may be better able to make the most of opportunities within the market, even if they are only short-term opportunities.
Direct Market (DMA) Spread Betting Brokers
If you want to get inside the bid-offer you need to be trading with direct market access (DMA). However, this is a tricky thing to do if you want a spread betting broker to provide direct market access.
The reason is quite simple. The mechanics just don’t work. Spread betting is over the counter (OTC), in that it is conducted off-exchange and structured as a bet. There is no exchange to access and the quotes provided by the spread betting brokers are based on the prices in the underlying exchanges.
However, ProSpreads will offer a form of direct market access. They will give you a trading platform and access to the markets, when you trade they hedge everything and convert it in to a spread bet post-trade.
There are a few other spread betting brokers that provide Level-2 and Direct Market Access through CFDs, but then you lose the tax advantages.
You need a big account to trade with ProSpreads as your trade size needs to be the minimum one exchange lots size. In the FTSE it’s £10 per point for example.
In reality, though, spreads nowadays are so tight. Especially with new brokers offering no-frills trading like Core Spreads with FX spreads of 0.7 and FTSE spreads of 0.8. The real market is only 0.5.
Where to find DMA brokers UK?
If you are looking for UK DMA brokers we've highlighted some of the major ones above. The only DMA UK brokers we feature on this site offer direct market access and are good standing and properly regulated by the FCA.
Direct market access trading platforms advantages and disadvantages
The main advantages of direct market access trading platform is that you get clean pricing directly from the exchange order book. You can place your DMA orders directly on the exchange and get in between the bid and offer price.
Some of the main disadvantages of direct market access trading platforms is that if you are familiar with spread betting or using a CFD broker that widens the spread rather than charging a commission there is an added layer of administration because you have to include commission in your profit and loss calculations.
Pros of DMA
- Speed of execution of trades
- Better prices due to fewer middle man cuts
- Lower potential for human error by a broker acting on your behalf
- Anonymity can be higher for
Cons of DMA
- Commission charges to factor into profit and loss
Where to find a list of direct market access providers?
Compare DMA brokers here to choose a broker which best suits your needs. All of the brokers here offer Direct market access and cater for larger private and institutional accounts.
Our comparison table only includes brokers which offer DMA trading and are regulated by the FCA.
Generally it's only worth using a direct market access provider if you are trading with over £50,000 and are a regular and experienced trader.
Where can you find DMA Forex brokers?
Most forex brokers don't offer DMA because you have to be trading in significant size. However, if you want a DMA forex broker you need a futures broker because the Forex market does not operate like the stock market with order books and centralised regulated access. There are some platforms that offer DMA for forex brokers. But if you really want to work forex orders through DMA you can trade CME currency futures with a futures broker.
Direct market access UK stocks, futures and fixed income
There are many UK brokers offering direct market access, but not all are the same. Choosing a direct market access UK broker is really dependent on your relationship with the broker and the commission rates you'll receive. If you are a start up hedge fund looking for direct market access in the UK you will need a prime broker. You can compare prime brokers using our interactive prime broker finder here.
DMA providers: Three things to look out for...
When comparing DMA providers these are the things you need to look out for:
- Commission rates: If you are a big retail or institutional trader looking for a DMA provider you should be able to negotiate on DMA commission rates. DMA trading is different for every trade and whilst brokers will publish their commission rates online you should be able to get a high volume discount or rebate if you are putting enough business through. After all, there are many DMA providers in the UK so a broker will want to keep you DMA business, rather than lose it to another direct market access provider because of excessive commission rates.
- Leverage and margin: If you are trading with a DMA provider, it's assumed that you are a sophisticated trader. And as such you should get better margin rates than retail traders. However, for DMA trading on futures the underlying exchanges will have their overnight margin rates they will charge the broker. It's unlikely you will get better rates than this. However, you may have to pay more. So when comparing DMA margin and direct market access leverage rates check what your broker charges for retail trades against the exchange websites. If you are trading stock CFDs with DMA access your margin rates are at your brokers discretion and depend on a lot of things like single and multiple position exposure, derivatives hedging and trading experience.
- Market access: Not all DMA brokers provide access to every market. So when you trade with a direct market access provider make sure you double check that you can trade everything you want beforehand. Opening a DMA account with a broker is not as simple as opening a spread betting account so get it right the first time.
What’s the difference between equity DMA CFDs and spread betting?
If you are wondering if trading with direct market access is for you and what the difference is, then here is the breakdown.
Trading with direct market access (or DMA) enables you to place your orders direct with the exchange through a broker. Which means instead of having to buy at the offer (the higher price) and sell at the bid (the lower price) you can be the bid and be the offer.
So you work limits and buy at the lower price and sell at the higher price.
Of course, this is only the case if there is a seller willing to hit the bid or a buyer willing to lift the offer with market orders.
If you are trading with spread betting without DMA then you will have to buy/sell at your spread betting brokers quoted prices. As the broker will widen the market spread to incorporate commission.
With DMA trading you work a limit at a price and your order is in the market, so you are filled at your price when it trades. Brokers will add a commission on the trade when you buy and sell.
It's basically a preference thing really. Spread betting has the advantage of being neat and tidy. You see a price, you deal and that's that. No tax, commission or admin. You just work your profit and loss from your buy and sell price.
DMA CFDs (offered by CFD brokers that offer professional accounts) are for when you have a big account and work big orders or are trading on a high-frequency basis.
If that's the case then your trading strategy requires you to be inside the bid/offer spread. So the better price of your fills will be lower than the cost of your commission.
Unlike spread betting however, you will have to pay tax on gains with DMA CFDs. If your account is big enough to warrant trading with DMA CFDs then you will probably be doing it in a tax efficient manner already anyway.
Where to trade DMA on a spread bet; it's all about relationships
You can ask your dealers at brokers like IG or Spreadex to work order in the market for you. However, you may need a big account and a good relationship with your account executive to get the service.
What are STP/ECN CFD brokers and should you be using one?
There is a lot of chatter in the tradesphere about STP/ECN brokers and the advantages and disadvantages of using them and if they really make that much difference to traders.
So, let's take a look...
What does STP stand for?
STP stands for Straight Through Processing
What does ECN Stand for?
ECN stands for Electronic Communications Network
This means that when you execute a CFD trade your order goes directly into the market. If you're buying, your broker is connecting you directly with a seller through an exchange.
Does ECN/STP matter?
Well yes in some circumstances and no in others.
It matters if you need lightning fast execution and are working decent trade sizes. However, if you're working really big orders the underlying market may not be liquid enough to fill the order so in really big order cases you may be better utilising a broker's internal liquidity to get filled.
How you pay matters
It also depends upon how you want to pay your broker. If you want an all in price (i.e. no commission) then you can't have direct market access. Because then your broker wouldn't make any money. If you want clean prices and are happy for an additional commission charge to be added to the trade then you can get DMA. The advantage of STP/ECN for clean prices is that you get much better pricing because you can work orders inside the bid and offer.
However, most DMA brokers will have a minimum commission for traders so if you are a small trader, it won't be cost effective.
Can ECN/STP help you make more money?
It certainly can't help you put on more winning trades. But what it can do is help increase profits and reduce losses by minimising your execution costs. Costs can be improved by transaction speed and execution pricing.
How do ECN/STP brokers make money?
Unlike brokers who offer commissions built into the spread ECN and STP brokers make money by charging commission per lot, or per 1m or per share (depending on what you trade). You do need to factor this in when calculating your gross P&L versus your net P&L.
Where can you find an STP/ECN CFD broker?
You can compare DMA (direct market access) brokers in our table. But for the majority of private traders one of the major CFD brokers should be perfectly adequate.
Another rhing to consider is that DMA brokers often cater to professional traders so unless your account size is above £50k you won't be able to open an account.
If you're a hedge fund looking for a prime broker for DMA, you can use our prime broker finder tool here.
Does the B Book Model in, CFD trading, forex and spread betting really still exist in the current financial climate?
The B Book model is a term spread betting and fx brokers use to assign a category of clients that consistently lose money. There are generally three books, and the terms vary between geographical location and broker so think of the allocation loosely.
A while ago we asked why no decent spread betting or CFD broker should actually want churn and burn clients. So let's take a look at the three book types.
The A Book
The A book is the main body of the client base that the broker hedges or nets off positions against. They are fairly natural on the profitability of these customers and take low-risk approach to their trading.
The B Book
The B book is assigned to clients who always lose money. These are generally smaller new accounts that the broker will not hedge against or "internalise orders". However, the terminology can mean different things.
To one broker internalising orders may mean netting off positions, to another internalising may mean not hedging them
It’s a fairly standard way to make money as a broker. It’s not as bad as it sounds as the broker is providing a very low-cost way for small punters to access the world’s financial markets.
It would not be cost-effective to only generate income from these customers from spreads and finance charging.
On average it costs a spread betting broker about £1,500 in advertising spend to get a new customer, so they need to aim to earn more to be profitable.
In fact, client acquisition costs for brokers have risen significantly in the last few years. Finance Feeds highlighted this for Plus 500 (a CFD broker) back in August.
The B Book is usually assigned to the FX, Index and Bond markets, where trades are smaller but of higher frequency than the equity market.
The C Book
Doesn’t really have a place in today’s market as the rules towards firms operating their own prop books and personal account (PA) trading are now very strict.
In the past though, spread betting brokers used to be well aware of the clients that always made money.
They would sometimes follow the trades to make a bit of money trading themselves.
Now, though it’s too much of conflict of interest between the broker and the clients so doesn’t really happen now.
A book and B book in spread betting - why it doesn't matter
The A and B book in spread betting have traditionally referred to spread betting brokers either hedging or not hedging customer positions. When a spread betting company hedges a client position it means that when a customer bets long £10 per point in the FTSE the broker goes into the market and buys a FTSE contract (one FTSE futures relates to £10 per point). You can read about contract sizes on the ICE exchange here.
When a broker doesn't hedge a client position it means that when a client bets long £10 per point on the FTSE they don't offset the position in the underlying market and take on the risk that the client will either make or lose money themselves.
Spread betting firms usually refer to a set of clients they hedge or don't hedge as the A or B book.
But how does the A and B book affect you as a trader?
The truth is it doesn't in the slightest. As a trader you have two outcomes when you trade the financial markets through a spread betting broker.
You will either make money or lose money on the position.
How your broker manages their underlying risk is not your problem. In actual fact your broker not hedging your position may work in your favour.
Not hedging smaller bet sizes
Using the above example, you can see that one lot in the underlying FTSE market is equivalent to a £10 per point bet. If you are only betting £1 per point on the FTSE, the broker can't go into the market and buy 10% of one contract. They must look at their entire book and net the smaller positions off against each other when the sizes are manageable.
Keeping trading costs low.
If you trade the FTSE through a futures broker, then you are charged a commission plus exchange fees, plus clearing fees for every lot traded. If you are trading one lot (£10 per point) the commission per trade could be as much as £12. As the dealing costs are built into the spread when spread betting you don't have to pay such expensive commission. For example, most spread betting brokers offer spreads on the FTSE of 0.8 points so in and out that is £4 round trip or £2 per side.
What the bottom line? Basically, it doesn't matter if your broker is hedging your bets or not. If you are losing money it's because of your own forex trading strategy. This may also be a sign that you might want to consider some alternatives to spread betting anyway. If you're making money, your broker is probably hedging your positions as you'll no doubt have a decent enough account balance to make it cost effective.
Spread betting & CFDs versus direct market access (DMA): 3 key points
What's the difference between spread betting, CFDs and Direct Market Access (DMA)?
If you're a trader and are considering upgrading from spread betting to a DMA broker here is a quick summary of the main differences and if it really matters.
1. DMA is not tax free
One of the main advantages of using a spread betting broker for trading is that profits are tax free. As your trades are structured as an amount per point move bet they are not subject to capital gains tax. So if you are a profitable trader acting in a personal capacity you have to weigh up whether or not paying tax on profits is more important than direct market access. You can't trade DMA through spread betting, you will need a CFD broker.
2. DMA prices are much tighter
This is true, with DMA you get direct market access to the underlying exchange. So if for example you are looking at trading Anglo America on the LSE the prices are:
- DMA: 644.5/644.8
- Spread betting (IG review) 644.5/646
But with DMA it actually gets better because you can put your buy or sell orders inside that spread to make the prices even tighter. Obviously, if you want to buy at 644.6 instead of 644.8 (as is offered) and there are no sellers you won't get filled. But you do have the opportunity for better pricing.
3. No admin versus commissions
One of the great things about spread betting is that all the costs are built into the spread. But with DMA, your broker will charge you a commission as an extra line on your statements. You also have to manually factor this into your profit and loss when you open and close the trade.
Direct market access also comes with high minimum ticket commissions so if you are a small trader it's not worth it as the minimum commission for DMA will probably be around £10 in and out so if you're planning on scalping you'll have to make more than a few points to break even.
DMA Trading FAQs
DMA stands for Direct Markets Access