Direct Market Access vs. Retail Trading – What’s the Difference?

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Direct Market Access vs. Retail Trading – What’s the Difference?

direct market access vs retail trading access

Day trading has become an exciting career for millions of people in America. Furthermore, stocks have been relatively volatile recently because of the effects of the coronavirus pandemic. Most of these traders are using the popular trading platforms like Robinhood and Schwab.

In this article, we will look at the concept of Direct Market Access (DMA) and its key differences with retail traders.

What is Direct Market Access?

Direct Market Access is a trading approach where traders have direct access to the market. As such, their orders are implemented directly through their preferred gateway. Retail trades, on the other hand, are filled through intermediaries.

In early 2021, during the Wall Street Bets craze, the contrast between DMA and retail trading became clear. As stocks like AMC Entertainment and GameStop skyrocketed, retail brokerage companies were accused of colluding with their market makers like Citadel Securities.

For starters, while Robinhood is a good broker that offers free unlimited trades, there are concerns about how it makes money. It does this through what is known as payment for order flow (POF). This simply means that it routes all its trades through high frequency traders (HFT) like Citadel Securities.

In the past, these HFT companies have been accused of betting against retail traders.

In the United States, most of the popular retail trading companies like Robinhood and Schwab don’t offer direct market access. That’s because of two main reasons.

First, the companies make a substantial amount of revenue from order flow payments. Second, Schwab and other large brokerages tend to focus on long-term investors, who don’t have any issue with differences in small movements in prices.

Retail trading definition

Retail trading is defined as the practice of buying and selling financial assets from an individual capacity. It is the opposite of institutional trading, which includes an organization like a hedge fund, private equity company, or an investment bank.

Retail trading is what most people do when they open a brokerage account from companies like Robinhood, Schwab, TD Ameritrade, and Interactive Brokers.

In these accounts, they do their research on different assets like stocks and cryptocurrencies, open trades, and hope to close them with a profit.


As explained, direct market access is a technology that gives traders and investors a more complete access to the financial market. In the equities market, DMA gives traders access to market makers, who execute these orders. The most popular market makers in the US are Citadel Securities and Virtu Finance.

Algorithmic trading, also known as Algo, on the other hand, is the use of algorithms to execute trades. The most basic algorithms are designed to focus on technical indicators like moving averages, ADX, and the Relative Strength Index (RSI). 

In this case, you can set an algorithm that executes a buy an asset when the 50-day and 25-day moving averages make a bullish crossover, with the RSI value above 50 and the ADX value above 25. The algorithm will automatically open the position when this happens.

There are more complex algorithms that incorporate more information, including artificial intelligence (AI) and other fundamental analysis issues. 

Therefore, there is a big difference between DMA and ALGO in that the latter is a trading strategy while the former refers to how the market is accessed.

DMA vs Direct Strategy Access (DSA)

Another common question is on the difference between DMA and Direct Strategy Access. DMA is a technology that gives traders and investors access to market makers directly. 

On the other hand, direct strategy access, is a service that allows traders to access and execute orders directly through a specific trading strategy. This is a different approach than DMA and other brokers who use market makers. DSA has lower transaction fees and improved order flow.

How Direct Market Access works

The US has two main exchanges where companies are listed. These are the New York Stock Exchange (NYSE) and the Nasdaq. The exchanges make money directly from the companies they have listed. Another substantial source of revenue is from broker-dealers and liquidity providers.

These are companies that match buyers and sellers of shares in the market. The best-known of these companies are Bat Exchange, EDGX, AMEX, and ARB among others. As such, when using the popular retail trading brokers, you don’t have a say on where your orders are filled. At times, you might not get the best price.

In direct market access, you have access to these market makers and you can select the one with the best price. Because of how competitive it is, some of the market makers could also pay you some money for adding liquidity into their platforms.

Examples of brokers with direct market access

Fortunately, there are many brokers in the United States and around the world that offer DMA to their customers. Among the most popular ones are:

  • Real TradingOur company is not a broker. Instead, we are a prop firm that provides traders around the world an opportunity to make money. Our trading platform has a direct market access capabilities.
  • Lightspeed – This is a company owned by Wedbush Securities, a well-known company in the United States.
  • Interactive Brokers – This is a publicly traded broker that is valued at more than $31 billion. It has millions of customers from around the world.
  • Speedtrader pro – The pro version of Speedtrader offers you more features like DMA and advanced level 2.

Key differences between retail trading vs DMA

There are a few differences between DMA and retail trading. In the real world, however, these differences are quite subtle and won’t matter for you as a day trader.


The first main difference to know is the fees that you pay or get paid. In a retail account, you will likely not pay any fees since most brokers have removed commissions. In this case, the broker will select the market maker automatically.

On the other hand, in a DMA account, you can select your own market maker based on their pricing. In some cases, the market maker can even pay you a small fee for selecting them.

Order execution

In a retail trading account, the broker has the discretion to select the market maker. By law, the broker should go for the broker who offers the cheapest price.

On the other hand, in a DMA, the trader sees the action in the market and selects the market maker he wants. In this case, the DMA is a better option but the overall impact is quite small.


The other important difference between DMA and retail trading is transparency. With DMA, you have direct access to different gateways in the market and you can select the one with a better price. 

On the other hand, with a retail account, there is no transparency since the broker has the discretion to select the gateway. A common con for this is that many traders feel that the market maker has the advantage and can short your long positions.

Instant execution

Further, in some cases, especially for small cap companies, there is a likelihood that an order in a retail account will not be executed right away. This challenge is handled easily in a DMA since you can easily see this data. 

Benefits of using a direct market access broker

Better pricing

If you are a long-term investor, you can use any type of broker because your trade will be executed near the range where you want. For example, if Apple shares are trading at $130, you can be sure that it will be executed near that range. Therefore, it won’t make a significant difference since your plan is to hold it for a long time.

However, if you are a day trader, every penny counts and you want the best execution price. Using a broker that provides direct access to the market will help you determine the best route to execute your orders.

Advanced level 2

Level 2 is a dashboard that shows you the state of order flow in the market. It shows you the best bid and ask prices for most assets. In recent years, Robinhood has introduced Robinhood Gold, which provides the Level 2 data.

However, a closer look at Robinhood’s explanation shows you why it has its limitations. It says:

“Only orders from market participants directly on the Nasdaq stock market will appear on the Level II chart, so Level II Market Data may not include data on orders from other stock markets, trading venues, brokers, or Robinhood.”

Related »: Retail Trading vs Proprietary Trading Accounts

Further, Robinhood does not offer Level 2 quotes for free. It charges a fee through what is known as Robinhood Gold. The same is true with Schwab, which charges a fee for this data.

Therefore, at Real Trading, you get these advanced level 2 dashboards for free. Also, you get quotes from many market makers.

Speed and efficiency

Finally, direct market access helps to ensure that your orders are executed at the fastest pace and with great efficiency. Also, they are often cheap and offer anonymity.

Pros of retail trading over DMA

Direct Market Access has more benefits than retail trading. However, there are two benefits of retail trading. First, retail trading companies like Robinhood and Schwab make it easier for most people to trade.

Second, securities laws make it mandatory for brokers to select the best price offered by the market maker.

Final thoughts

In the past, trades were mostly executed physically at the New York Stock Exchange and in other venues. Today, most trades are being executed online.

Therefore, for day traders, getting a broker that offers direct market access features can help you get the best prices and have orders executed fast. It can also give you payments for creating liquidity in the market.

External Useful Resources

  • What are the advantages of direct market access? – Forex Owl
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