Direct market access forex broker

DMA Forex brokers.

0 – Gold Zero Kiwi Trader.

1.6 – Standard (Classic)

Forex DMA (direct market access) refers to electronic facilities that match foreign exchange orders from individual traders and buy-side firms with bank market maker prices. FX DMA infrastructures enables buy-side traders, both institutions in the interbank market and individuals trading retail forex, to trade in a transparent, low latency environment.

No re-quotes. Only 5 digit pricing Only variable spreads Anonymous platforms ensure neutral prices reflecting global FX market conditions. Orders are facilitated by brokers. The broker is not a market maker or liquidity destination on the DMA platform it provides to clients. Platforms build a fixed mark up into the client’s dealing price and/or charge a commission. ECN brokers always offer DMA, but not all STP brokers offer DMA.

It offered the quickest route to market with little latency It offered lower transaction costs. It gives traders greater control over their own trading. It enables trading on highly competitive prices on a fully transparent, anonymous, low latency platform.

Have a greater number of liquidity providers; Never offers fixed spreads, only variable Always Market execution; No re-quotes. Welcomes traders of all types and styles.

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4 thoughts on “ DMA Forex brokers ”

quero saber se zoom trader é registrada.

Does dma/stp brokers allow news trading is there widening of spreads.

fixed spreads –> least transparent.

If you are swing and position traders, any type of broker is ok. If you are a scalper or daytrader you’d better use ecn or stp broker. Ecn is more expensive than stp. I always prefer dma/stp broker. When my account grow over 50000$, I will change to dukascopy, which I believe is the best ecn broker.

Forex Brokers Guide.

Your capital is at risk. Trading on margin involves high risk, and is not suitable for all investors. Before deciding to trade forex or any other financial instrument you should carefully consider your investment objectives, level of experience, and risk appetite.

Types of Retail Forex Brokers: ECN vs DMA vs STP vs Market Maker.

DD/MM(Market Maker, brokers that have dealing desks)

DD/MM Dealing Desk Brokers ( or Market Maker):

Act as a counterparty for client transactions Route orders through Dealing Desks “ Make the market” and trade against clients. (They take the opposite side of the trade. When traders want to sell, they buy from them, when traders want to buy, they sell to them) Dealing desk brokers are able to profile their clients. They divide clients into groups systematically with algorithm. (Usually called “A Book”, “B Book”) “A Book” Automation for losing clients: Broker automatically take the other side. Losing trades of clients are counter-traded and become brokers' profit. More losing traders means more profit for the broker. “B Book” Automation for winning clients: Broker automatically take the other side and then hedge the position in the real market that they have access to. (e. g. When traders buy , broker sell to them, then the broker buy the same amount in real market). This is also done automatically through algorithm. In this case, brokers will also make money (through spread or commission). Fixed spreads Makes money through spreads and when a client loses a trade. Price Manipulation is possible . Traders can't see the real market quotes. Transparency of dealing desk brokers differ depending on their own company rules.

NDD(No Dealing Desk) Forex Brokers.

Act as an intermediary No dealing desk = No market making = S traight-through processing Straight-through processing enables the trade process to be conducted electronically without manual intervention Providing access to the interbank market without dealing desk. A ll orders are passed to Liquidity Providers(LP) directly. No re-quotes and no additional pausing when confirming orders. Makes money by commission or spreads In the retail fx markets usually there are 2 type of NDD forex brokers: Regular STP Forex Brokers & ECN Forex Brokers.

Benefits of No Dealing Desk brokers.

Anonymity . Clients' orders are executed automatically, immediately and anonymously. There is no dealing desk watching you orders. Better&Faster fills . Because all Participants or liquidity providers compete for prices in a real market. Transparency.

Liquidity providers (LPs)

Liquidity providers act as ‘supplier' for forex brokers. Both LPs & forex brokers need to make money. With NDD Forex Brokers, LP(s) are the counterparty to you trades . They take the opposite side of your position, and looking to make money by closing this position later in a trade with another party. Prices are determined by LP(s) LPs compete for providing the best bid/ask rates for orders from brokers. More LPs usually means more depth in the liquidty pool, thus better spreads. Traders usually get variable spreads. Number of Liquidity providers One Liquidity Provider. Some so-called ‘STP' brokers have only one LP, so there will be no price competition, their role in fact are just IB (Introduing Broker). LP control the price(spread). Maintenance costs is lower, but the broker become completely dependent on the one LP. Most STP Brokers has a predetermined number of liquidity providers. ECN brokers have a large number of liquidity providers.

STP Forex Brokers.

STP Forex Brokers don't trade against clients Make money through spreads mark-ups . They add small mark-ups on the best bid and ask rates they get from LPs. For example, adding a pip to the best bid price or subtracting a 0.6pip to the best ask price of their LPs No dealing desk & No dealer intervention . Clients' orders are directly sent to a certain number of liquidity providers (Banks or Other Brokers) More liquidity providers means more liquidity and better fills for the clients. Provide access to the real-time market quotes Those STP Brokers that have fixed spreads won't adjust spreads based on the lowest bid/ask prices offered by LPs. The fixed spreads they charge are higher than the best quotes they get from LPs. They may use their back-office price matching system to make sure they can make profits on spread difference while hedging the trades with LP(s) at better rates at the same time.

Direct Market Access.

Forex DMA refers to electronic facilities that match orders from traders with bank market maker prices. It enables buy-side traders to trade in a transparent, low latency environment.

Direct access to the market. All orders are passed to LPs directly Trader can place orders with LPs( banks, market makers, other brokers etc). Only Market execution. STP brokers that offer Market execution provide true Direct Market Access (DMA) Market execution is more transparent. Orders go to the market, and are filled based on available quotes from LPs.(STP+DMA brokers will add a small mark-up in order to make profit) Instant execution is less transparent. Orders don't go to the market. They are instantly filled by the broker, who then may (or may not) offset own risks with LPs. Some STP Forex brokers fill clients' orders though Instant execution, after which they hedge these orders with their LPs in order to make profits. If there are no profitable hedging opportunities when traders submit their orders, they may experience re-quotes. Orders are facilitated by brokers. The broker is not a market maker or liquidity destination on the DMA platform it provides to clients. Platforms build a fixed mark up into the client's dealing price and/or charge a commission. Only variable spreads optional: Depth of the market book access (DOM access) ECN forex brokers always offer DMA, some STP brokers offer DMA.

STP Forex Brokers that offer DMA:

Anonymous platforms ensure neutral prices reflecting global FX market conditions. There are no re-quotes, rate rejections or partial fills with the DMA model because their liquidity providers are committed to their bid/ask offers Competitive prices Transparency Welcome all trading style.

STP+DMA brokers have more liquidity providers thus better prices for clients. STP+DMA brokers always offer variable spreads, some STP Forex brokers offer fixed spreads DMA order execution is always Market execution; There are no re-quotes with the DMA model DMA model allow all trading style:scalping, news trading, swing trading, position trading etc.

ECN Forex Brokers (ECN=Electronic Communications Network)

List of ECN Forex brokers: fx-c/ecn/ List of Metatrader ECN Forex brokers: fx-c/mt4-ecn/

ECN brokers pass your trades to an ECN pool, in which other liquidity providers(banks, hedge funds, brokers, individual traders) become a counterparty to your trade. All participants (banks, market makers and retail traders) trade against each other by sending competing bids and offers into the system. Allow clients' orders to interact with each other. Orders are matched between counter parties in real time. Participants get the best offers for their trades available at the time. Only variable spreads Makes money only through commission. ECN brokers do not make money on spreads(bid/ask difference). Display the Depth of the Market (DOM) in a data window. Traders can show their order size and other traders can hit those orders. Then can see where the liquidity is.

Anonymous trading environment. Straight through processing with banks liquidity. All trading styles are welcome Interbanks prices and spreads. Greater number of marketplace participants means tighter spreads. Greater price transparency, faster processing, increased liquidity.

ECN vs STP Brokers with DMA.

ECN is the most transparent model. ECN Forex broker provides a marketplace where all its participants trade against each other real time. Both offer only variable spreads; STP+DMA Brokers will also add a small mark-up to make profit. ECN Brokers charge commission. Both have fractional pricing; Both have DOM (Depth of the Market) orders book. STP+DMA Brokers usually don't show it to you.

Hybrid Model.

Many brokers offer dealing desk account, ECN account or STP Account at the same time. Traders can choose the one they like. Cents Account or Mini Account of a STP broker is usually the account that has a dealing desk. All small orders by traders (usually below 0.1 lot) can't be sent to the liquidity providers, because they don't accept small orders based on the contract they have with the forex broker. So they usually use dealing desk model for this type of account. . Usually for orders above 0.1 lot, STP brokers send orders directly to it's liquidity providers with STP Model.

Conclusion.

Dealing desk brokers or Market makers make money on spreads and when clients lose trades. More winning traders will increase the operational risk of a dealing desk broker. No dealing desks brokers are more transparent. They want their clients to win because clients' losses are not their profit, and the more clients trade, the more profit for them(through commission or small spread mark-up). Not all forex brokers will be honest with you, so whether you choose ECN , STP, or market maker, it's important to trade with the broker that has a good reputation.

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One thought on “ Types of Retail Forex Brokers: ECN vs DMA vs STP vs Market Maker ”

Thanks, appears to be an excellent summary of issues i only vaguely understood. Important to know who is doing what out there in the world of brokers.

Forex Brokers Guide.

Your capital is at risk. Trading on margin involves high risk, and is not suitable for all investors. Before deciding to trade forex or any other financial instrument you should carefully consider your investment objectives, level of experience, and risk appetite.

DMA/STP Forex Brokers.

There are so many different options for new Forex traders. It can be rather confusing if you don’t understand what it all means. So we’ll spend a while looking at DMA/STP Forex brokers, and give you enough information to decide whether this will be one option for you.

What is DMA, with regards the Forex market?

DMA , stands for Direct Market Access. And this is one type of broker you can choose to use for your trading transactions. With DMA Forex brokers, clients can trade directly with leading Forex Banks or Market Makers. Trading in this way offers the opportunity to receive the best possible price in the market at a specified time, without having to use a dealing desk.

In order to fully understand what DMA means it’s best to look at the way in which pricing is obtained in the market. And how your order will be processed and eventually show up on the platform as a trade position.

How DMA works.

The first step of the process is for the price to appear on the platform. There are a number of banks, also known as liquidity providers, that stream their prices directly into the platform of various DMA Forex brokers. Traders can see these prices as well as the available market depth. Orders are filled with one of the liquidity providers, at the best price possible. However, there is often a small mark-up on the side of the DMA Forex broker. When the order hits the liquidity provider’s servers it is fulfilled. This is called market execution. Obviously prices can change very quickly in the market, so the execution price may not necessarily be visible once the order has been filled. Variable spreads and the speed of the internet connection are also factors that can influence what price is displayed, after the trade has been executed.

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What a DMA Forex broker offers.

An anonymous trading environment, enabling traders to deal on neutral prices, with equal access to the order book, and a view of true market depth. Pricing that is based on variable spreads, which reflects demand and supply along with volatility and market volume. This also means there are no re-quotes, which can often be the case with a fixed spread platform. With a DMA Forex broker, there are no conflicts of interest, as there is no dealing desk or counterparty trading. Trading is also done independently of account size or volume of trades.

DMA, ECN, STP – Are these all the same?

After reading our description of DMA Forex brokers, you may be thinking they offer the same model as ECN or STP brokers. There are actually a few differences, although they are rather subtle. We should also point out that all ECN brokers offer DMA, but this isn’t the same for all STP brokers.

There are also differences between a DMA/STP Forex broker and a DMA/ECN Forex broker. These differences are apparent in terms of spreads, fees, executions, and deposit requirements.

DMA/ECN Forex brokers have a cheaper fee structure than DMA/STP Forex brokers, because no commission is charged. Instead the broker makes money by marking up liquidity provider prices. A DMA Forex broker may sometimes charge a monthly fee, or a sort of penalty if traders don’t meet a certain trade volume in a monthly cycle.

The pros and cons of using a DMA Forex Broker.

There are quite a few advantages of using a DMA Forex broker:

Whatever type of trader you might be, there is no discrimination. Even scalpers are welcomed with open arms. No re-quotes ever. A DMA Forex broker will always work for you. There is no conflict of interest. Spreads can vary, but only within a specific band.

Now for the disadvantages:

Penalties can sometimes be levied if you do not trade often enough or for account inactivity. Deposit requirements could be considered pretty steep. If you prefer fixed spreads then a DMA Forex broker isn’t for you.

The differences between DMA/STP Forex brokers and STP brokers.

A regular STP (Straight Through Processing) broker fills clients’ orders and then hedges the orders with their own liquidity providers. An STP broker will try and make a profit from this hedging operation, which means a trader could experience a re-quote if there is no profit to be made by the broker, at the time the request was submitted.

With a DMA/STP broker, a client’s order is passed directly to the liquidity providers, and will be filled at the best possible price, plus a small mark-up for the broker. This way of dealing with orders, is called Market execution. And ensures all orders are filled at the best possible rate clicked on.

The advantages of DMA/STP Forex brokers.

A DMA/STP Forex broker offers direct access to the best bid/ask prices. When compared with a regular STP broker, there are a number of advantages:

A greater number of liquidity providers There are never any fixed spreads, because prices are constantly changing Orders are always executed using Market execution No re-quotes A depth of market book is offered, allowing traders to see all quotes from different liquidity providers All types of trader are welcome – including scalpers, newbies, regular traders, position and swing traders Complete transparency.

One last snippet of information for those of you who may be confused about market and instant execution.

The differences between instant and market execution.

Market execution – This is a transparent way of executing orders. Orders go to the market and are then filled based on available quotes from liquidity providers. DMA and STP brokers add a small mark-up which is their profit.

Instant execution – This is a far less transparent way of executing orders. They don’t go to the market, and are instead filled by the broker. The broker then decides whether they want to offset their own risk, or not, with their liquidity providers. Regular STP Forex brokers sometimes fill clients’ orders using instant execution, and then hedge these orders with liquidity providers, in order to make a profit. If they feel the profits aren’t enough when traders submit an order, it could be that they experience a re-quote.

Forex brokers types by accounts, platforms or processing of trades.

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Direct Access Trading Systems.

Online brokers are the most accessible, and often least expensive, trading system available today; after all, they are available to virtually anyone with a credit card and an internet connection. The problem with average, run-of-the-mill online brokers, however, is that they suffer from atrociously slow order execution. In fact, novice traders who are serious about their profession will soon recognize that speed can be a key factor in turning a profit. The system in which orders are placed and trades are executed is an essential tool for traders. This article will provide an overview of direct access trading systems (DATs).

By the nature of the business, the individual trader must compete against all of his or her fellow traders, whether they are individuals or professional traders employed by North America's largest financial institutions. Obviously, professional traders will always have access to the latest and best tools and training, including the fastest buy and sell orders. Therefore, individual traders need the absolute best system that they can afford in order to compete - anything less can put them at an immediate and perpetual disadvantage in respect to buy and sell orders.

The difference between the professional trader's order system and an online broker is that the trader's system eliminates the middleman (the human broker). Direct access trading systems allow traders to trade stock (or virtually any other financial instrument) directly with a market maker or a specialist on the floor of the exchange, or immediate order execution. The absence of a middleman can save a trader several seconds to several minutes of time. (For more on this, see Understanding Order Execution and Brokers And Online Trading Tutorial .)

Despite the inherent advantage of DATs as compared to lower level systems, not all order execution systems are created equal. Even amongst all of the existing direct access trading systems, there is considerable variety in speed and accuracy of execution, as well as in the commission price charged for each trade. As a result, traders must be careful to choose the system that most closely approximates their needs in terms of speed, performance and price.

Let's take a detailed look at how certain features of particular DATs might meet a trader's individual style and needs. Note that this discussion refers specifically to stocks - other financial instruments are traded using similar methods, but they may require slight modification in order to fall under the following general guidelines.

Electronic Communication Networks (ECNs)

Fees and Commissions.

There are many DATS and ECNs out there, but while many of these systems have now become well established (and preferred) amongst traders everywhere, the industry remains in constant flux; today's systems of choice may become "also-rans" in tomorrow's trading environment. So keep your options open when choosing your systems and never become married to a particular company or software program. Your best action as a trader is to maintain a backup plan in case your current way of doing business suddenly changes because of, say, a system failure or the bankruptcy of your system provider. The smart trader is utterly prepared for any eventuality and stands ready to turn on a dime if his or her way of doing business suddenly changes.