Nicholas Pratt
Nicholas Pratt

DMA - an increasingly attractive toolset for the FX buy-side

The concept of 'Direct Market Access' (DMA) is a simple one and is yet another example of an invention that started out in the equities market and is now being adopted in the FX market. Nicholas Pratt examines the evolution of DMA and what it means for FX traders

In equities DMA emerged over the last decade as a way of providing buy-side firms with an undiluted means of access to the exchanges and other execution venues. Up till this point the only way that an asset manager, hedge fund or corporate could access the market was via a broker. However as electronic trading began to thrive, leading to more advanced strategies such as algorithmic trading and facilitating the growth of high frequency trading hedge funds, the conventional broker-based means of execution began to feel insufficient to these new breed of buy-side traders.The advantages of DMA were threefold. Firstly it offered the quickest route to market with little latency being a sole connection between buy-side firm and execution venue. Secondly it offered lower transaction costs because of the absence of a broker. And thirdly it gives buy-side firms greater control over their own trading  - something that has become more and more important as shown by the various regulatory initiatives such as...continued

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