The DMA broker differs from other types of financial intermediaries because it offers traders direct access to the markets. Today we want to deepen and explain how a DMA broker works.
We will also analyze the differences with market maker brokers, where there is no direct access to the markets, which instead happens with the DMA brokers.
As always, if you have any doubts or questions, ask them in the box at the bottom of the article. We will be happy to answer you as soon as possible!
What is a DMA broker?
Let’s start from the definition of DMA broker and, in particular, from its abbreviation. DMA stands for Direct Market Access.
In fact, a DMA broker offers traders the possibility of being able to send buy or sell orders directly to the stock exchange book.
The DMA brokers will try to execute the order following the logic of “Best Execution“. In fact, they will try to place orders on behalf of traders at the best possible price both in the buying and selling phase.
These types of brokers that operate in the DMA do not ask for extra margins on the spread, but do charge fees for the service performed.
In this case the broker acts as a pure financial intermediary, that is, it tries to find buyers and sellers among them at the best possible price.
Unlike what happens with market maker brokers or CFD brokers, buying a stock with DMA brokers means becoming shareholders and therefore full members of the listed company.
DMA Broker vs Market Maker Broker
Let’s now see the differences between a DMA broker and a market maker broker. On Meteofinanza.com we have reviewed both brokers with direct access to markets and intermediaries that make the price (market maker).
A market maker broker does not offer direct access to the markets, but in fact has its own market, which roughly reflects the real market. When we say “they make the market price” we mean that they give a price to each financial asset, which does not necessarily correspond to the real price. However, this price is usually very close to the real market price.
A market maker broker therefore offers trading on derivatives, such as CFDs, which have a financial asset as an underlying. Unlike DMA brokers, with market makers the counterparty in the trading phase is the broker and not other investors.
On the other hand, the broker market maker always guarantees liquidity to the trader, while the DMA broker must look for a counterparty on the market, so liquidity will depend on whether or not there are buyers / sellers.
Now let’s see, thanks to a table, what are the main differences between Market Maker brokers and DMA brokers:
|DMA Broker||Market Maker Broker|
|Direct access to the markets||Non-direct trading, the counteryparty is the broker|
|Liquidity not guaranteed||Liquidity guaranteed|
|Real market prices||Market prices made by the broker|
|Presence of fees||No fees (generally)|
Which broker to choose?
There is no real answer to this question, usually the DMA broker is indicated for experienced traders, while the market maker brokers are more for beginners, but this is not a rule.
In fact, many experienced traders want to operate on a market maker because they want to trade CFDs and other derivatives; while many novice traders want to access the markets directly and become shareholders of publicly traded companies.
Which broker to choose? The choice is up to you, we will help you by providing you with an explanation of how DMA brokers work and now also by offering you a broker with direct access to the markets.
eToro DMA for stocks
eToro is often referred to as a market maker broker, but in reality, for what concerns stocks, it also offers the DMA market. In fact, on eToro it is possible to buy shares without CFDs, or by doing real trading on shares.
This way you will become a shareholder of the listed company. To do this, you don’t need to create a new account or log in on a different platform. On the same platform you can trade on real markets (shares) and with CFDs.
How to buy stocks on etoro:
- Select a stock to buy
On the eToro platform select the stock you prefer and click on “Invest”.
- Buy without leverage
At the top, click on the “Buy” box, while at the bottom select a leverage equal to X1
- Buy stocks
Select the amount to invest, enter stop loss and take profit and then click on “Open Position”. You bought shares on eToro.
Also on eToro you can buy shares without commissions! Would you like to know more? Enter the broker’s website and evaluate the available opportunities yourself!