CFD DMA Broker

[stephaneb]

Hi everyone,

If I understand correctly when I enter a long CFD position for 100 XYZ shares a DMA
broker will hedge this by buying 100 XYZ shares on physical exghanges.
My question is why trading CFDs with a DMA broker is so much les expensise than
trading stocks on margin since for the broker the result is the same (considering I have understood DMA routing properly...), buying or selling securities on the regular markets.
Thanks for your answers

 

[Als]

Here's some info on The Best CFD Brokers but to answer your question, if your broker is DMA then the clients are trading against each other. If the broker is a Market Maker then the broker can either bet against their client or simply just hedge the position in the market.

However, DMA only works for the broker on liquid markets as the liquidity had to be there. So a true DMA broker won't be able to offer tens of thousands of CFDs like a Market Maker can. If you wanted to trade some penny stock using CFDs for example then the broker would have to create the market to make it happen.

Personally, I'd go with DMA every time though, would you really want a broker who could bet against you?

is ICmarkets DMA?