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    DMA vs STP Brokers- 12 Major Differences To Look Out For 2023

    Mushtaq Ahmed

    Mushtaq Ahmed


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      The financial market deals with the exchange of financial instruments which are traded such as securities, commodities, derivatives and other instruments. It includes dealing with trades and includes price information for securities. There are different types of financial markets, which include Capital Markets, Derivative Markets, Commodities Markets, Foreign Exchange Markets, and Money Markets.

      What is Direct Market Access (DMA)?

      Direct Market Access includes electronic trading facilities. It helps investment companies and private traders to use the information technology infrastructure of sell-side companies like investment banks. Direct Market Access (DMA) is provided by sell-side companies. These give access to different strategies. The investors can place their orders directly without involving market makers. It was facilitated by Instinet for the very first time.

      Benefits of Direct Market Access (DMA)

      •    It offers low transaction cost as only technology is for paid
      •    Originators handle the orders directly. This provides them with control over final execution and price opportunities. 
      •    Provides the opportunity to the user for accessing the “Trade the Spread” stock. The involvement of the broker is nullified. 
      •    Since the trading is done using Direct Market Access (DMA) provider’s identity is anonymous and therefore information leakage is minimized. 

      Disadvantages of Direct Market Access (DMA)

      •    A Penalty is imposed on the traders whose account is inactive or has not traded enough in a particular period. Traders need to be regular in trading. 
      •    DMA is known for variable spreads. It does not include fixed spreads. DMA is risky as trading in the variable spread is riskier than fixed spreads.
      •    DMA is only for serious traders who trade regularly. The amount of trading may amount to $1000 to $5000 or even more than that.
      What is Straight Through Process (STP)?

      Straight through Process is used to gear up the transaction process. The transaction occurs electronically with no human intervention. It provides automation at a higher rate as a result of high-speed internet access. It includes various features like automation for back-office functions, accounting, auditing, automatic payment processing, verification, and customer authentication.

      Scalping is a method of trading that requires the most optimal brokerage i.e. STP or DMA-based brokers.  These brokers give scalpers access to great spreads, low fees and effective analytical tools. With scalping strategies, traders are aiming for small profits from quick trades that may last mere minutes–which is why fast execution speeds and efficient tools due to diligent research is key. Therefore, it’s paramount to read through reviews of scalping brokers online to find your ideal provider. One example would be Blackbull Markets; they offer competitive spreads with low risks and an extensive range of products. Their helpful reviews provide all the necessary information you need when selecting a scalping broker.

      Benefits of Straight Through Process (STP)

      Some benefits of Straight Through Process include the:
      •    The turnaround time is shortened
      •    For process management, metrics are improved
      •    AP processing cost has been minimized
      •    Data is received instantly which reduces settlement risk and the client need not re-enter the data.
      •    Business is benefited and the process is faster, cheaper and easier
      •    Reduces complexity with time and money-saving for the business

      Difference between Direct Market Access (DMA) and Straight Through Process (STP)

      DMA offers direct electronic trading, bypassing the broker to maximize speed and cut execution costs. With Direct Market Access (DMA), traders can access an algorithmically managed multi-asset liquidity pool delivered by a Liquidity Provider that provides competitive pricing in real-time. In contrast, Straight Through Processing eliminates human intervention from your trades using an automated system – but you will have to pay the associated commission fees for engaging with the broker during each trade transaction. DMA is ideal for high-volume investors who value fast execution and low commissions over personal service; STP delivers more affordability combined with comprehensive support services provided through brokers or market makers.

      Side-by-Side Comparison


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