Direct brokerage services
A brokerage firmor simply brokerageis a financial institution that facilitates the buying and selling of financial securities between a buyer and a seller. Brokerage firms serve a clientele of investors who trade public stocks and other securities, usually through the firm's agent stockbrokers. The staff of this type of brokerage direct brokerage services is entrusted with the responsibility of researching the markets to provide appropriate recommendations, and in doing so they direct the actions of pension fund managers and portfolio managers alike.
These firms also offer margin loans for certain approved clients to purchase investments on creditsubject to agreed terms and conditions. Traditional brokerage firms have also become a source of up-to-date direct brokerage services stock prices and quotes. A discount broker or an online broker is a firm that charges a relatively small commission by having its clients perform trades via automated, computerized trading platforms rather than by having an actual stockbroker assist with the trade.
Most traditional brokerage firms offer discount options and compete heavily for client volume due to a shift towards this method of trading. Other ways to direct brokerage services costs for these brokers is by executing orders only a few times a day by aggregating orders from a large direct brokerage services of small investors into one or more block trades which are made at certain specific times during the day.
They help lower costs in two ways:. Since investor money is pooled before stocks are bought or sold, it enables investors to contribute small amounts of cash with which fractional shares of specific stocks can be purchased.
This is usually not possible with a regular stockbroker. Many broker-dealers also serve primarily as distributors for direct brokerage services fund shares. These broker-dealers may be compensated in numerous ways and, like all broker-dealers in the United States, are subject to compliance with requirements of the US Securities and Exchange Commission and one or more self-regulatory organizationssuch as the Financial Industry Regulatory Authority FINRA.
Direct market access DMA is a term used in financial direct brokerage services to describe electronic trading facilities that give investors wishing to trade in financial instruments a way to interact direct brokerage services the order book of an exchange. Normally, trading on the order book is restricted to broker-dealers and direct brokerage services making firms that are members of the exchange.
Using DMA, investment companies also known as buy side firms and other private traders use the information technology infrastructure of sell side firms such direct brokerage services investment banks and the market access that those firms possess, but control the way a trading transaction is managed themselves rather than passing the order over to the broker's own in-house traders for execution.
Today, DMA is often combined with algorithmic trading giving access to many different trading strategies. Certain forms of DMA, most notably "sponsored access," have raised substantial regulatory concerns because of the possibility of a malfunction by an investor to cause widespread market disruption. As financial markets moved on from traditional open outcry trading on exchange trading floors towards decentralised electronic, screen-based trading and information technology improved, the opportunity for investors and other direct brokerage services side traders to trade for themselves rather than handing orders over to brokers for execution began to emerge.
The implementation of the FIX protocol gave market participants the ability to route orders electronically to execution desks. Advances in the technology enabled more detailed instructions to be submitted electronically with the underlying order. The logical conclusion to this, enabling investors to work their own orders directly on the order book without recourse to market makerswas first facilitated by electronic communication networks such as Instinet.
Recognising the threat to their own businesses, investment banks began acquiring these companies e. Most major sell-side brokers now provide DMA services to their clients alongside their traditional 'worked' orders and algorithmic trading solutions giving direct brokerage services to many different trading strategies.
There are several motivations for why a trader may choose to use DMA rather than alternative forms of order placement:. Advanced trading platforms and market gateways are essential to the practice of high-frequency trading. Order flow can be routed directly to the line handler where it undergoes a strict set of Risk Filters before hitting the execution venue s.
The race for ultra-low latency direct market access is a hot topic amongst high frequency traders, Brokers and technology vendors such as Artha Financial TechnologyFusion Systems Raptor, Ullink or Fidessa. One area in which low-latency systems can contribute to best execution is with functionality such as direct strategy access DSA  and Smart Order Router.
Foreign exchange direct market access FX DMA refers to electronic facilities that match direct brokerage services exchange orders from individual investors and buy-side firms with bank market maker prices. FX DMA infrastructures, provided by independent FX agency desks such as DMALINKconsist of a front-end, API or FIX trading interfaces that disseminate price and available quantity data from multiple bank contributors and enables buy-side traders, both institutions direct brokerage services the interbank market and individuals trading retail forex in a low latency environment.
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