The Forex market is a decentralized market which has been historically fragmented. This has resulted in inconsistent trade execution on the part of most brokers since they operate in various capacities. Direct Market Access (DMA) now enables traders to transact their orders directly with sources of liquidity or primarily Interbank participants.
A Forex DMA broker acts in an agency capacity as opposed to being a market maker. The complete transparency of a Forex DMA offers many benefits:
Forex DMA orders are only based on two variables – (1) Price and (2) the time that the order is placed. The result is efficient execution where requotes are rare regardless of the market conditions.
Forex DMA pricing is based on institutional standards of 1/10th of a pip pricing as opposed to ½ or 1 pip pricing. Retail brokers typically quote using ½ to 1 pip to capture the difference in their favor. Continue reading ‘Forex and the evolution of Direct Market Access’ »