Direct Market Access
When you execute a trade through your broker, you may not realise that it rarely happens directly on London Stock Exchange order books.
Instead, brokers have traditionally had to request prices from specialist market makers, known as Retail Service Providers (RSPs). These intermediaries offered prices in retail-size (relatively small) volumes and you could only trade at the price they provided.
However, more and more brokers are now offering a service called Direct Market Access (DMA), which allows you to place your orders directly on our order books in the same way that institutional investors do.
Key advantages
- Level playing field: Every order is of equal status on the order book, prioritised only in terms of price and time
- Visibility: Orders are visible to the entire market, allowing all market participants a full contribution to central market liquidity
- Depth of order book: The order book shows the number of buyers versus the number of sellers and at what price they are willing to trade
- Set your own price: Limit orders can be entered at whatever price you choose and are available to the entire market
- Tighter spreads: As limit orders are displayed publicly rather than held privately, market spreads become tighter. This benefits the order placer, giving them a better chance of getting executed at the right price; the market as a whole also benefits from a tighter public reference price to work from
- Auction participation: You can participate in the pre-market and post-market auctions where the highest or lowest price often occurs
- Peace of mind: Regulation and market supervision by the Exchange
- Certainty: The order book is always available during trading hours.
Direct Market Access providers
Interactive Brokers
Interactive Brokers (U.K.) Limited (regulated by the Financial Conduct Authority) is a member firm of the Interactive Brokers Group, Inc. (IBG). IBG together with its subsidiaries, is an automated global electronic market maker and broker specialising in routing orders and executing and processing trades in securities, futures, CFDs, options, and foreign exchange instruments as a member of more than 100 marketplaces around the world.
Find more on Interactive Brokers member page.
IG Markets
Get inside the market spread with L2 Dealer. Use IG Market’s free platform to trade UK shares with free market depth data* supplied by the London Stock Exchange.Trading like a market professional, you can examine Level 2 price information for any stock, and even place your own orders into the order book. Any trade you make is automatically replicated as a CFD position, so you benefit from the convenience and value of CFD trading.
Find more on IG Markets member page.
FinecoBank
FinecoBank is UniCredit Group's direct multichannel bank (finecobank.com). An integrated business model with a one-stop-solution which combines direct banking and financial services: free-of-charge multicurrency account (GBP, EUR, USD, CHF), debit cards, trading and investment services. Fineco is the Europe’s most used trading platform thanks to the robust technology and constant innovation, providing access to 26 global markets including stocks, bonds, ETFs, futures, options, CFDs and structured products.
Find more on FinecoBank member page.
iDealing
iDealing has provided Direct Market Access to the London Stock Exchange Order books for Cash Equities since 2006. Clients may participate in all eligible auctions and may also send "Good Till" orders up to the maximum eligible time.CFDs and Spreadbets on London Stock Exchange securities are also provided.
Find more on iDealing member page.
Direct Market Access FAQs
General benefits of direct access and order book trading include the speed of execution and the potential for better pricing than investors may otherwise receive by using a third-party broker/dealer. This suggests that investment performance can be improved regardless of the number of trades per day, or per year.
The ability to join the buyers and sellers order book columns can create opportunities to buy or sell well within the perceived spread, a potential cost saving on a transaction.
Limit orders left with brokers are not displayed publicly but merely poll RSPs when the price moves past the limit order - i.e. you are still paying the spread, it is just the spread that has moved. With DMA you get the opportunity to post your limit publicly for the entire market to interact with and you can buy at the bid or sell at the offer, thus making the spread for yourself. There is therefore an increased opportunity to trade at a better price through DMA.