Direct market access: Summary highlights

Direct Market Access (DMA) enables traders to submit buy or sell orders directly to the order book of an exchange.

In the traditional method of placing a trade, your securities dealer requests quotes from market makers and then presents the best quote, at any one time.

Equities are one of the most common instruments traded via DMA. It eliminates all intermediaries and connects traders, both retail and institutional, to other liquidity providers at the registered exchange.

The ZSE has resuscitated the Odd Lot Board with effect from June 1, 2019, for effective implementation of the DMA.

DMA is an absolute connection between the trader and order book of a registered exchange.

Under DMA, the order routing process is streamlined significantly:

1. The trader enters an order remotely via the ATS.

2. The order travels to the registered exchange servers via internet connectivity.

3. The order is received, placed and potentially filled at the registered exchange.

The introduction of DMA can also be an opportunity for local registered exchanges to link with regional exchanges.

This can in turn establish a harmonised regulatory environment for the issuance and trading of securities across the region.

The main advantages of DMA are non-financial and include:

◆ Control over execution — A trader decides when to execute a trade.

◆ Minimal information leakage — There are no third parties involved in the transaction, so there are higher levels of confidentiality.

◆ Speed — The time between placing orders and trades happening is greatly reduced.

◆ Auction Participation — A DMA arrangement allows you to participate in pre-market and post-market auctions where the highest or lowest price often occurs.

◆ Accuracy — All of the processes are electronic, online and verifiable by the participant, so errors can be reduced.

◆ Equal playing field — Every order is of equal status on the order book, prioritised only in terms of price and time.