Forex Direct

What is direct market access and how does it work?

Direct market access (DMA) is a type of FX execution that offers traders access to the order books of liquidity providers without intermediaries. Traditionally, FX trading is conducted through a forex broker, who will request quotes from exchanges and market makers, and then present the best price to their client. But DMA is an electronic trading mechanism that enables you to see the different orders and prices yourself, and then place your trade accordingly.

It is important to note that while you are trading based on underlying market prices and depth, what you actually receive when placing a trade is a CFD from us. Forex DMA works like this:

• DMA displays the best bid and offer price available for a particular market, plus further prices on either side of the order book
• You place an order, and we instantly conduct a margin check to ensure you have sufficient funds to cover the margin on your proposed trade
• If the margin check is successful we place an order in the market and, at the same time, create a parallel CFD between you and us

Benefits of direct market access in forex

There are a variety of advantages of direct market access, such as setting your own price and dealing directly with other market participants. Other benefits of DMA include:

• Faster execution
• Full forex market transparency
• Extended data on currency pairs
• Prices from a wide selection of global banks and liquidity providers

Drawbacks of direct market access in forex

Because of the complex trading environment of forex DMA, there can be increased risk and a few potential downsides that you should be aware of before you start trading:

• Prices are not necessarily better than OTC, but our pricing technology is engineered to find the best available prices on both OTC (over-the-counter) and DMA
• As we take a parallel position in the underlying market, once an order has been executed we are unable to change or reverse the position
• While you are trading at market prices, you do not gain any ownership rights over the currencies which form the subject of your CFD

Forex DMA costs

Commission

Unlike OTC trading, there is no IG spread to pay. Instead we charge a variable commission – as low as USD10 per USD million worth of the currency traded. This charge is based on the volume you traded in the preceding month.

If your account is not denominated in USD, the commission will be converted into your base currency (at current exchange rates) before being deducted.

Average spreads

There are no IG spreads with Forex Direct – instead you are trading on buy and sell prices provided by major banks and currency providers.

*Average spread (Monday 00:00 - Friday 22:00 GMT) for the 12 weeks ending 19th March 2019. There is also a commission charge for Forex Direct.

Forex DMA trading example

Trading a EUR/USD via Forex DMA

EUR/USD is trading at 1.17598, with a buy price of 1.17599 and a sell price of 1.17597. Because this is forex DMA, you’ll see a list of available buy and sell prices on your deal ticket, with the best prices listed at the top and other available prices below.

You want to buy EUR/USD, so you place a limit-day order to buy five CFDs (equal to five lots) at 1.17599. This is the equivalent of buying €500,000 for $587,995. We’ll instantly check whether you have sufficient margin to cover the trade – EUR/USD has a margin factor of 3.33%, so you’ll need to deposit $19,580.23 as margin.

If you have the funds to cover the trade, then we’ll place the order on your behalf. If the order is accepted, we’ll create a parallel CFD between you and us.

Forex DMA is charged via commission instead of the spread, which means you’ll have to pay a fee to open and close your position. Our commission rates are variable, depending on how much FX you’ve traded in the previous month.

So if you’ve traded $300 million in forex CFDs in the previous month, your commission would be $30 for every million USD you’re trading. (30/1,000,000)*$587,995 = $17.64, which would be the commission you pay on the trade.

If your prediction is correct

EUR/USD rises to 1.18048, and based on the orders you can see you decide to put in an order to sell your five CFDs at 1.18045. It’s accepted, and your $587,995 is now worth $590,225, earning you a profit of $2,230 – or $2212.36 once you’ve factored in the $17.64 commission.

You’ll also have to pay funding charges.

If your prediction is wrong

EUR/USD falls to 1.17148, and you put in an order to sell your five CFDs at 1.17145. Your $587,995 is now worth $585,725, meaning you’ve lost $2,270. Including commission, you’ve lost $2287.64, plus any funding charges.

Buying GBP/USD: FX CFD trading example

How do I get Forex Direct?

1. To trade DMA with IG you need to open an account and activate DMA within our web-based dealer.
2. Choose which platform you'd like to trade on: download our mobile trading app, or our specialised L2 dealer.
3. If you choose to trade via our app, you will need to give us a call to request DMA access.