PureDMA is provided by IG Markets, and comes as an extension of their PureDeal trading platform. DMA stands for Direct Market Access, which some people call Level II, and allows the trader to see what is happening in the market, rather than just what the broker chooses to show. DMA is in contrast to the alternative way of setting prices, where the broker stands as a market maker, and may choose what price he quotes you.
IG Markets says that anyone can upgrade to PureDMA as long as they have at least a minimum balance of $5000 in their account, or £1000 in the UK. You simply have to change your preferences within the settings menu to activate it. The facility can only be provided where you have an exchange that will take CFD trades, such as the ASX (Australian Stock Exchange) or the LSE (London Stock Exchange), but this does not preclude you trading contracts on financial securities around the world, provided they are exchange traded.
With Level II information, you can see the pending trades. These are shown in two columns, one listing the amount of shares and the price that someone wants to sell at, and the other showing different numbers of shares wanted, and the price the buyer is prepared to pay. Whenever the orders are matched on price, then the trade occurs and the buyer and seller go away. So the normal view is of the top buyer offering just a little less than the top seller wants for the shares. Here’s a view of that -:
This example shows that the potential buyer who will pay the most at the moment, 27.430, wants 657 shares, and the next potential seller, who has 69,777 shares for sale, wants a price of 27.470.
When adding PureDMA to their trading platform, traders lose none of their previous access to many other financial securities and instruments, such as Forex and commodities trading, so DMA can only be seen as an advantage. The specific advantages claimed for direct market access include full transparency in pricing and the ability to see the market depth and, with this superior knowledge, minimize the amount paid on the spread. For instance, in the example above you could offer to buy or sell at 27.450, and you may find a counterparty willing to trade, whereas a CFD market maker would give you a set price. In addition DMA gives the opportunity for pre-and post market auctions.
When the broker is acting as market maker, they may choose to offset clients positions in-house, matching buyers and sellers. If the trades are placed through DMA, then the broker would immediately offset the trade by buying the shares.
The PureDeal platform, through which you access PureDMA, is browser based and comprehensive in its facilities. The addition of direct market access for the exchange traded securities is very welcome, and shows a trend that is growing in the contracts for difference trading world.