10 things you need to know about Direct Market Access (DMA) 

 September 26, 2022

By  ForexStrategiesWork.com

Direct Market Access (DMA) is the name given to the electronic trading system used by listed shares in Australia and New Zealand. As the name suggests, Direct Market Access or DMA allows investors to trade directly with each other and with stockbrokers, as opposed to having to go through an intermediary such as ASX Limited or NZX Limited. In this way, it may be considered similar to Direct Share Trading (DST). However, as with many things in finance, it’s not quite that simple…

1. What is DMA?

Direct Market Access, or DMA, is a service offered by many mutual fund companies. The idea behind this service is that investors may want to make trades directly with the fund company and not have to go through their broker for the trade. The DMA service allows investors access to all of the funds available at the particular fund company in order for them to buy or sell securities directly from that company.

2. When should I use it?

Direct market access is best for taking advantage of opportunities as they arise. You can make a quick trade, or use it as a strategy for hedging your portfolio in the face of uncertainty. DMA also gives you more control over your trades, so if liquidity is an issue, DMA might be the solution.

3. How do I place an order using it?

The DMA system is set up so that when a trader wants to buy or sell an order, the request goes through a matching engine. The matching engine will then find another trader who wants to do the opposite of what the first person is looking for. For example, if someone wanted to sell shares of IBM, they would post their order on the exchange and it would be matched with someone else who wanted to buy IBM.

4. Do all brokers offer it?

Not all brokers offer DMA. In fact, only a handful of the top ones do. This is because DMA trades are typically more expensive and less liquid than traditional trades. That said, if you can find a broker that does offer DMA, it’s worth the search for the advanced features and trading tools it offers.

5. Which brokerages are best suited for the platform?

Choosing a brokerage is an important decision, as it will determine which firms are available for trading. It’s also important to consider how much money you want to invest and how frequently you trade. Here’s a list of the most common brokerage options:
-Charles Schwab: Charles Schwab offers commission free trading and no account minimums, making it ideal for beginners. They offer 24/7 customer service and reasonable commissions.

6. What stocks can I trade using the platform?

You can trade stocks listed on the NYSE and Nasdaq exchanges. You cannot trade stocks that are only traded in other markets, such as OTC Bulletin Board or Pink Sheets. You can also trade stocks from foreign markets, including Canada and Europe.

7. Can I buy fractional shares?

You can buy fractional shares, but the price of a share is always rounded up. For example, say a company has 100 shares priced at $1 per share. You want to buy 10 shares, which would cost $10. However, if you want to buy 5 shares, they are rounded up and instead of being priced at 50 cents each ($2), they will be rounded up and priced at $1 per share ($5).

8. What’s the transaction cost when using this method?

The transaction cost varies depending on the size of your trade.
For example, if you buy 100 shares at $50 per share, the transaction cost would be $5.
If you sell 100 shares at $100 per share, the transaction cost would be $25. If you hold those 100 shares for 10 years and then sell them for $200 each, the transaction cost is still only $5. If you are selling 1 million shares, though, it could be as high as $500.

9. Are there any additional fees involved in using this method?

There are no additional fees for using DMA. The broker will charge a commission on each transaction, but the DMA provider does not assess any additional fees. The broker may also require that clients place more capital in their account than they would with a regular stock purchase.
Some brokers may have limits as to how much of your money you can invest in this type of brokerage account.
Finally, some brokers may have different systems than others and there is typically no way to transfer stocks between accounts if they use different systems or companies.

10. Is there a minimum amount required when placing an order using this method?

Yes. Orders placed with DMA require a minimum of $25 in the account balance, so if you only have $2 in your account, you won’t be able to place an order using this method. Additionally, transactions must be at least $5 in size and there is no limit to the number of transactions that can be processed per day. Finally, orders submitted via DMA will not show up on your Trade Activity page until they are fully executed.

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