Direct market access vs contracts for difference on A comparison

CFD offer both Direct Market Access (DMA) assets, and Contracts for Difference (CFD) assets.

This article aims to compare both types of trading and provide some insight as to the benefits what both assets hold for you the investor.

 What is DMA?

Direct Market Access (DMA) is more or less a description of the processes that are involved in providing a trader access to various assets in various markets. It is a way to connect traders directly to the interbank exchange, ie. the global exchanges. DMA assets tend to be traded using proprietary platforms. This is because each brokerage firm creates these platforms for the special needs of their clients. Some of the individuality of requirements of clients in DMA setups cannot be accommodated by generically-inclined CFD platforms such as the MetaTrader4.

The world is now fully globalized and gone are the days when traders only had access to one particular platform or to a particular market. Brokers are finding out that their clients want in on every market that they can trade all over the world.

In the words of Alpha Investor Nicholas Vardy, the philosophy of the “alphas” in the world of investing is that there is a bull market somewhere on the planet. How would you know about the presence of such markets if you do not have any information about them or have access to them? This is the void that brokers like aim to fill, by providing their clients access to markets all over the world.

What do you get when you trade DMA assets?

  1. a) You can be sure you will trade assets on regulated exchanges.
  2. b) You will have access to premarket and after-hours trading, where a lot of activity happens (especially during the earnings seasons).
  3. c) You get to purchase and own the underlying assets themselves, directly from the exchange.
  4. d) The chief benefit is being able to trade with very low latency and virtually no slippage. If slippage exists, it is quite minimal.

Being able to buy and own the underlying assets conveys some advantages. One of these is being able to “buy and hold”, which is a good strategy to employ if you have stocks which may have dropped in value, but which have a potential to rebound in the future.

What are CFDs?

CFDs stand for Contracts for Difference. These are replica assets that mirror the price movements of the real assets in underlying markets, and which are traded on the basis of the volume and direction of the price movements without the trader taking physical ownership of the asset.

For instance, a trader can decide to buy Tesla CFD, and profit from the price movements of the Tesla stock as listed on the Nasdaq 100 composite index, without actually owning Tesla stocks. offers thousands of such assets listed across several asset classes: stocks, indices, commodities and exchange-traded funds (ETFs).

What Does CFD Trading Offer You? offers more than 2,100 CFD assets, which can enable you trade CFDs on stocks, indices and ETFs with spreads that are as low as 0.4pips. CFD trading on complies with ESMA’s leverage caps so as to prevent traders from overexposing their accounts to the market. Cryptocurrencies and bonds form part of the asset classes that are traded as CFDs with

  1. a) The assets traded are generated in-house with the brokerage, even though the pricing is that of the underlying asset or market.
  2. b) There is no access to premarket and after-hours trading.
  3. c) You do not get to purchase and own the underlying assets themselves.
  4. d) You are trading with the brokerage acting as the counterparty to your trades.
  5. e) Latency exists as speeds of CFD platforms are typically between 100ms and 700ms. This latency can lead to slippage and requotes.
  6. f) Contracts for Difference assets are usually traded on turnkey platforms such as the MT4 or MT5, allowing traders a new style of trading the financial markets.
  7. g) With CFDs you can trade on both rising or falling markets.

What is the Difference Between CFDs and DMA?

Here are the key differences between the CFD trading and that of DMA.

Ownership Structure

One of the glaring similarities is the ownership status of the assets being traded. DMA offers direct trading and ownership of the asset being traded.

Counterparty Risk

Usually the two parties to the trade are the buyer and seller. One of these will be the counterparty, or the entity on the other side of the trade. In the DMA setup, the counterparty to trades is usually another trading entity on the platform (individual or corporate) or the order book of the exchange. The broker cannot be the counterparty in the DMA arrangement and therefore there is no intermediary in the order execution process. However, the CFD setup is such that there is no interbank market. Therefore, the counterparty is usually the broker, operating on the dealing desk. Some have argued that the CFD setup presents a counterparty risk, as the trader is squaring off against the broker, a sort of setup where the other player is also the umpire.


In the DMA setup, it usually costs more to open an account, as the volumes traded can be quite large. Furthermore, commissions are charged on trades. The CFD setup usually presents lower entrance costs, allowing for generous use of leverage and no-commission trading.

Trading Platforms

DMA trading requires more customized tools to suit the varied tastes of the firm’s clients. CFD trading usually involves a one-size-fits-all approach where a turnkey trading platform such as the MT4 or MT5 is used. These turnkey platforms do not have customized features; what you get with one broker is what you get with another.

Number of Assets

The asset base for DMA trading is usually larger than is obtainable with CFD assets. CFD trading on comes with just over 2,100 assets, but DMA trading comes with access to more than 100,000 assets scattered across various global exchanges.

Suitability: Who Is the DMA Meant For?

The Direct Market Access product suite may be more suitable for traders with the following characteristics:

  1. You love to trade during the premarket and after-hours of the US markets.
  2. You like to set your own ask and bid prices, or choose from a host of bid-ask price quotes offered by several liquidity providers.
  3. You want greater flexibility and additional features instead of just the regulars from standard trading platforms.
  4. You have access to a large capital base and can take on very low leverage (usually not exceeding 1:5).
  5. You have some professional training or experience.
  6. You want to use algorithmic trading strategies.

In a pool of traders, you will find that those who use DMA trading are the minority.

Suitability: Who is the Ideal CFD Trader?

The Direct Market Access product suite may be more suitable for traders with the following characteristics:

  1. You are primarily looking for a low-entry brokerage.
  2. You do not care about setting your own ask and bid prices and you are prepared to accept whatever price quote the dealing desk offers you.
  3. You are a simple trader who can use the turnkey platforms very well and are not interested in trading with special features.
  4. You would like to have access to leverage that is typically higher than in a DMA setup.
  5. You do not have professional training or experience and are strictly in the retail end of the traders’ spectrum.
  6. You prefer commission-free trading with fixed spreads.


Between the DMA and CFD trading suite, it is not possible to declare one trading style as being superior to the other. Traders will like some features and dislike others. That is why it is better to make your choice based on your preferences as outlined above.

Risk Warning

The value of your investments can fall as well as rise, which could mean getting back less than you originally put in. Past performance may not be indicative of future results. All trading involves risk. Options and Warrants are complex financial instruments and are not suitable for all investors. Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment.