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Broker ECN vs DMA
| ECN | DMA |
|---|---|
| NDD + STP + DMA + DMT + ECN pricing | NDD + STP + DMA + ECN-style pricing |
| ECN (Electronic Communication Network) NDD - No Dealing Desk STP - Straight Through Processing DMA - Direct Market Access to the Top-tier liquidity DMT - Direct Market Trading within ECN liquidity pools ECN pricing - ECN bid/ask quotes | DMA (Direct Market Access) NDD - No Dealing Desk STP - Straight Through Processing DMA - Direct Market Access to the Top-tier liquidity ECN-style pricing - competitive bid/ask quotes resembling ECN pricing |
| ECN is a Network with the Top-tier liquidity | DMA is an Access to the Top-tier liquidity |
| Trading is done inside the Network | Direct Market Access to some of the Top-tier liquidity (via contracted LPs), but no direct trading inside the Network |
| Unlimited number of Network participants | Limited and known number of participants |
| Unlimited number of liquidity providers of all Tiers 1-3, including top banks, hedge funds, investment companies and individual investors | Fixed number of liquidity providers under a direct contract with the DMA Forex broker (mostly Top-tier 1 & 2) |
| Anonymous & wild trading environment | Well-defined & balanced trading environment |
| Everyone is for themselves, prone to market manipulation, price rejection etc. | It's a cooperation between companies under the contract (Forex Brokers and their LPs), based on mutual interest |
| Raw ECN pricing from ECN pools | Aggregated ECN-style pricing from multiple LPs |
| Access to Raw prices from various ECN pools | Raw prices from known limited number of Top-tier LPs are aggregated to identify the best Bid/Ask offer, which is then given to clients |
| ECN broker is an Agent | DMA broker is a matched Principal |
| ECN broker doesn't fill client orders, all orders are forwarded to the ECN liquidity pool | DMA broker acts as a matched Principal, where it fills Clients' orders itself, and at the very same time places a matched back-to-back order with its Liquidity Provider(s) |
| Traders trade for themselves | DMA brokers aggregate Clients' orders |
| Each order is sent directly to the ECN liquidity pool, and is filled at the current market conditions. An order appears under ECN broker's name (to preserve anonymity), but is nonetheless an individual order. | DMA brokers combine orders from several clients into a one large order before sending them (in its own name) to own LPs. Orders are filled by the LPs with the best Bid/Ask offer. |
| Strictly professional clients | Available to retail & professional clients |
| High requirements towards investment amount & level of experience | No requirements for Retail clients towards level of experience & lower capital requirements |
| Higher deposit requirement | Lower deposit requirement |
| Average minimum deposit is $50,000 (but no less than $10,000 USD) | DMA accounts can start under $1000 USD |
| Leverage less than 1 : 100 | Higher leverage possible |
| Due to the nature of ECN trading, leverage above 1 : 100 is unsustainable | No leverage limits, though most DMA brokers won't go above 1 : 500 |
| Minimum trade size from 0.1 standard lot | Minimum trade size from 0.1 standard lot |
| ECN brokers don't offer micro lots. The 0.1 minimum lot size cap is the requirement set by liquidity providers | DMA brokers which allow micro lots (0.01 lots) need to aggregate clients' orders into a larger size orders before sending them to the LPs |
| Maximum trade size unlimited | Maximum trade size can be capped |
| No limits on trade size and volume | If the limit is set, it will still be very high & comfortable. Orders up to $50 million USD per trade can be accepted without any issues. |
| Low commission | Commission |
| Low commission, goes even lower with higher trading volume | Commission is higher, volume discounts possible |
| Raw spreads | Raw spreads + mark-up |
| No spread mark-up ever, ECN brokers profit from commission only | DMA brokers add own small mark-ups on top of Raw prices, which becomes their profit. DMA brokers who offer Raw spread accounts (without any mark-ups), compensate this with higher commission |
| Trade inside the spread | No |
| Traders can place orders between the highest Bid and the lowest Ask price, e.g. become "price makers" | Trading on given spreads only, e.g. "price taking" |
| Trade against other traders | No |
| Traders can trade against other traders, market makers or anyone else in the ECN network | Although DMA broker can choose to match clients' trades against other clients, it will be inside their own ECN-like trade matching system |
| Unlimited access to Market Depth (DOM) | Limited access to Market Depth (DOM) |
| Traders can see true ECN liquidity | Traders can see liquidity from DMA broker LPs only. Other times DOM might be unavailable |
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