Direct Market Access (DMA) allows traders or institutional clients to place orders directly into the market without intermediaries like brokers actively managing the execution. Through DMA, users can access the exchange's order books, enabling greater control, faster execution, and lower latency. Buy side firms will still use the trading infrastructure of sell side firms.
Direct market access allows buy side firms to often execute trades with lower costs. Since it is all electronic, there is less chance of trading errors. Order execution is extremely fast, so traders are better able to take advantage of very short-lived trading opportunities
DMA is also facilitated via an Electronic Communication Network (ECN) or a FIX protocol connection to the market, bypassing traditional manual intervention by brokers.
An algorithm is a specific set of clearly defined instructions aimed to carry out a task or process.
Algorithmic trading (automated trading, black-box trading, or simply algo-trading) is the process of using
computers programmed to follow a defined set of instructions for placing a trade in order to generate
profits at a speed and frequency that is impossible for a human trader. The defined sets of rules are
based on timing, price, quantity or any mathematical model. Apart from profit opportunities for the
trader, algo-trading makes markets more liquid and makes trading more systematic by ruling out
emotional human impacts on trading activities.
A desk where transactions for buying and selling securities occur. Trading desks can be found in
most organizations (banks, finance companies, etc.) involved in trading investment instruments
such as equities, fixed-income securities, futures, commodities and foreign exchange. A trading
desk provides traders with access to instantaneous trade executions. Also known as "dealing
desk".
Trading desks can be either large or small depending on the organization and are occupied by
licensed traders, usually specializing in trading one particular type of investment product (e.g.
forex traders, commodities traders, stock traders, etc.). The instantaneous trade executions can
be particularly important for day traders looking for arbitrage opportunities that usually last
only minutes or even seconds.
Computerized trading used primarily by institutional investors typically for large-volume trades.Orders from the trader's computer are entered directly into the market's computer system and
executed automatically
In finance, a contract for difference (CFD) is a contract between two parties, typically described as
"buyer" and "seller", stipulating that the seller will pay to the buyer the difference between the current
value of an asset and its value at contract time (If the difference is negative, then the buyer pays instead
to the seller). In effect CFDs are financial derivatives that allow traders to take advantage of prices
moving up (long positions) or prices moving down (short positions) on underlying financial instruments
and are often used to speculate on those markets.
For example, when applied to equities, such a contract is an equity derivative that allows traders to
speculate on share price movements, without the need for ownership of the underlying shares.
CFDs are currently available in Australia, Austria, Canada, Cyprus, France, Germany, Hong Kong, Ireland,
Israel, Italy, Japan, The Netherlands, Luxembourg, Norway, Poland, Portugal, Romania, Russia,
Singapore, South Africa, Spain, Sweden, Switzerland, Turkey, United Kingdom and New Zealand. They
are not permitted in a number of other countries. In the United States, under the Dodd-Frank Act, CFDs
are considered to be “swaps” or “security-based swaps,” depending on the nature of the underlier on
which they are based, and are subject to the regulatory framework for those products established by
Title VII of the Dodd-Frank Act.
or
DEFINITION OF 'CONTRACT FOR DIFFERENCES - CFD'
An arrangement made in a futures contract whereby differences in settlement are made through cash
payments, rather than the delivery of physical goods or securities
This is generally an easier method of settlement because losses and gains are paid in cash. CFDs provide
investors with all the benefits and risks of owning a security without actually owning it.
8) Basis Points(BPS).
A basis point, or bp, is a common unit of measure for interest rates and other percentages in finance.
One basis point is equal to 1/100th of 1%, or 0.01% (0.0001), and is used to denote the percentage
change in a financial instrument. The relationship between percentage changes and basis points can be
summarized as follows: 1% change = 100 basis points, and 0.01% = 1 basis point.The basis point is commonly used for calculating changes in interest rates, equity indexes and the yield
of a fixed-income security. It is common for bonds and loans to be quoted in basis point terms. For
example, it could be said that the interest rate offered by your bank is 50 basis points higher than LIBOR.
A bond whose yield increases from 5% to 5.5% is said to increase by 50 basis points; or interest rates
that have risen 1% are said to have increased by 100 basis points. Or, if the Federal Reserve Board raises
the target interest rate by 25 basis points, it means that rates have risen by 0.25% percentage points. If
rates were at 2.50%, and the Fed raised them by 0.25%, or 25 basis points, the new interest rate would
be 2.75%.
By using basis points in conversation, traders and analysts remove some of the ambiguity that can arise
when talking about things in percentage moves. For example, if a financial instrument is priced at a 10%
rate of interest and the rate experiences an increase of 10%, it could conceivably mean that it is now
10% x (1 + 0.10) = 11% OR it could also mean 10% + 10% = 20%. The intent of the statement is unclear.
Use of basis points in this case makes the meaning obvious: if the instrument is priced at a 10% rate of
interest and experiences a 100 bp move up, it is now 11%. The 20% result would occur if there were
instead a 1,000 bp move.
The Price Value of a Basis Point (PVBP) is a measure of the absolute value of the change in price of a
bond for a one basis point change in yield. It is another way to measure interest-rate risk, similar to
duration which measures the percent change in a bond price given a 1% change in rates.
Smart order routing (SOR) is a process used in trading application to execute incoming liquidity into
liquidity providers following routing rules. The routing rules usually follow business needs like best
execution or internalization.
Smart order routing implementation has become a key technology for banks and brokers in the last ten
years[when?] for all asset classes. Some banks developed their own smart order routers or bought
existing products from technology vendors such as Millennium SOR from MillenniumIT [1] and the
LiquidityOrchestrator from SmartTrade Technologies.
An order is an instruction to buy or sell on a trading venue such as a stock market, bond market,
commodity market, or financial derivative market. These instructions can be simple or
complicated, and can be sent to either a broker or directly to a trading venue via direct market
access.
A pegged order is a limit order with a price that will track the best bid or offer. Pegged orders
may also make use of offsets from the same side bid (offer) or offsets from the contra side (peg
buy offset from offer). The order is displayed in the order book.
To behave like a market maker, it is possible to use what are called peg orders.
A system that allows a client to trade directly with another client, a market maker on Nasdaq, or a specialist on the floor of an exchange without broker interference.DAT is the preferred trading system for day traders, where success is dependent upon speed of execution. For the average investor, DAT is not necessary.