DMA For Future Market - Part 1

What is Direct Market Access (DMA)

As the name suggests, using DMA, and entity can trade directly in an exchange - just likes brokers do. There is no need to place an order through a broker.

Advantages of Direct Market Access (DMA)

Speed

The main advantage of DMA in that it results in faster order placement and execution.

Till now, the institutions had to convey their orders to a broker, and the broker would place the orders. This means that the same information had to be conveyed twice, which resulted in delays, and, at times, errors.

Now, with Direct Market Access, the institutions would be able to place the orders directly in the market.

Cost Saving

Cutting down an intermediary would result in significant cost savings for the institutions.

Enable Algorithmic Trading

Since the institutions would be allowed to access the market directly, they can now develop and deploy computers running complex mathematical algorithms, which would place buy and sell orders automatically.

This would be a totally new avenue, and in the future, even mutual funds specializing in algorithmic trading can be introduced.