Direct Market Access or DMA allows traders and investors to input their bid and offer prices for financial instruments directly into the market, rather than having to use an intermediary broker. It allows them access to the underlying market and the ability to interact directly with the order book on the exchange. This is something normally reserved for professional broker-dealers and market markers which are members of that exchange.

DMA gives traders the ability to execute trades on the major exchanges, with market makers and brokers, as well as through the hidden liquidity of dark pools. This helps retail traders and smaller institutions to understand the depth of the market (how pricing is spread) to keep their trading costs low, boosting profitability. At the same time, it allows them to trade at a faster pace (placing and cancelling orders) and limits the probability of error.

DMA came about after the shift from traditional stock exchange pit trading (open outcry) to electronic trading, helped by technological advances such as the internet and secure networks. Investment banks were the early adopters of electronic networks and the first to develop Direct Market Access platforms. Coupled with algorithmic (e.g. automated, high frequency) trading, this helped opened up the stocks markets, making them more liquid and accessible to retail trader/investors.

DMA is ideal for those looking to set their own bid and offer prices, looking to trade within the market spread, interested in taking part in auctions (e.g. opening, closing) and trade during the pre-and post-market period in the US. It can offer more visibility and flexibility than a standard trading platform. It’s not for everyone, and there are complexities which can render it more risky. The most advanced versions of DMA sit within trading platforms which can also offer access to algorithmic trading strategies.