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 tough you will have to pay tax on gains with DMA CFDs but if your account is big enough to warrant trading with DMA CFDs then you will probably be doing it in a tax efficient manner.
Where to trade DMA on a spread bet:
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.
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Richard started the Good Broker Guide in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2001 & 2000.