B book brokers list

Forex trading is different from investing in shares or futures, because a broker can choose to trade against his clients.

No deposit forex bonuses

What is the A Book and B Book that forex brokers use, b book brokers list.

This system used by "dealing desk" market maker brokers is known as "B booking". To efficiently identify profitable traders, as well as unprofitable ones, forex brokers have software that analyses their clients' orders. They can filter traders according to the size of their deposit (the percentage of winning traders increases significantly for deposits over $10,000), the leverage used, the risk taken on each trade, the use or non-use of protective stops, etc.

What is the A book and B book that forex brokers use?

Forex trading is different from investing in shares or futures, because a broker can choose to trade against his clients. This system used by "dealing desk" market maker brokers is known as "B booking".

"no dealing desk" ECN/STP brokers send all of their clients' trades to the real market or to liquidity providers. They therefore use the "A booking" system.

However, many forex brokers use a hybrid model which uses a B book for clients who lose money and an A book for the profitable clients.

In the regulated futures contract and stock markets, all transactions are sent to an exchange that confronts buyers' and sellers' orders by sorting them according to price and time of arrival.

The A book - used by ECN / STP forex brokers

ECN/STP brokers all use an A book, they are intermediaries that send their clients' trading orders directly to liquidity providers or multilateral trading facilities (mtfs). These forex brokers make money by increasing the spread or by charging commissions on the volume of orders. Therefore, there are no conflicts of interest, these brokers earn the same amount of money with both winning and losing traders.

This type of forex broker is becoming increasingly popular because forex traders are reassured by the absence of this conflict of interest, as well as the fact that these brokers have an incentive to have profitable traders since they will increase their trading volumes and therefore the brokers' profits.

The B book - used by market maker brokers

Forex brokers that use a B book keep their clients' orders internally. They take the other side of their clients' trades, which means that the brokers' profits are often equal to their clients' losses. Brokerage firms are able to manage the risks associated with the holding of a B book by using certain risk management strategies: internal hedging through the matching of opposite orders submitted by other clients, spread variations, etc. As the majority of retail traders lose money, the use of a B book is very profitable for brokers.

It is obvious that this model generates conflicts of interest between brokers and their clients. Profitable traders can cause these brokers to lose money. Traders are often worried about being subject to the underhanded tactics of some brokers who seek to always be profitable. That's why the larger market maker forex brokers use a hybrid model that involves placing trades in an A book or in a B book based on traders' profiles.

The hybrid model

The popularity of the hybrid model is understandable, as it allows forex brokers to increase their profitability as well as their credibility. It also enables brokers to earn money off of profitable traders by dispatching their trading orders to liquidity providers.

To efficiently identify profitable traders, as well as unprofitable ones, forex brokers have software that analyses their clients' orders. They can filter traders according to the size of their deposit (the percentage of winning traders increases significantly for deposits over $10,000), the leverage used, the risk taken on each trade, the use or non-use of protective stops, etc.

The hybrid model is not necessarily a bad thing for traders because the profits made off of traders that are placed in the B book enable hybrid brokers to provide all of their clients with very competitive spreads, whether they are profitable or not. The main disadvantage of this system is that if a hybrid broker mismanages the risk of the B book, he can lose money and therefore endanger the company.

The difference between A-book and B-book brokers

What’s all this talk of A-book and B-book brokers I hear you say?

Let me explain in simple english. At the end of this post, you’ll be able to explain to all your rookie trader buddies the secret workings of the brokerage industry. I guarantee you’ll be able to impress them and totally sound like you know what you’re talking about.

Firstly, let’s clear the air. Almost every broker in the world is a mixture of A-book and B-book. It’s not like there’s a secret fraternity of A-book brokers that walk around in white suits releasing doves into the wild and saving homeless traders from the street. All brokers (with very few exceptions) are a combination of A & B-book.

“sure, whatever. What the heck is A & B-book?”

A-book means your trade is passed through to the market and filled by a “liquidity provider”, basically a fancy term for “bank”. Imagine you want to buy some USDJPY, your broker places the order with the bank, the bank then digs into their vault and fills your order.

This A-book transaction is what most people understand as the role of a traditional broker. A transaction facilitator. Not a supplier. Think of a real estate broker or a stock broker. They source the deal, and in return, earn a commission.

Forget the bank. You’re now buying directly from the supplier. When placing a trade on the brokers B-book, they fill your trade internally. Instead of passing your trade along to the banks, they’ll fill you from their balance sheet. They take the risk with their own company capital. So when you win, they lose. And vice versa.

I hear you… but it’s not as unconscionable as you think. It’s completely legal. I’ve even been told the regulators actually encourage the practice because it results in clients trades executing at a better price (due to the order being filled instantly).

“how can this possibly be legal?!”

I know I know… I was as shocked as you when I first learned how the inner workings of the brokerage industry operate. Here’s how they get away with it. ALL regulated forex brokers possess what’s known as a “market maker license”. Whether the broker is regulated by ASIC, FCA or the NFA, it’s the same. They have the OPTION to fill the trades internally (B-book) or pass them through to the market (A-book).

As a client, you’ll likely never know which book you’re on.

In my experience, big accounts are placed on A-book due to the risk to the broker. Imagine having a $200k account, going short 1,000 lots at on USDJPY and picking up 100 pips? You just made $1mil. That’s not a risk most brokers are willing to take!

On the other hand, if you’re trading a small account the odds are that your trades are executed on B-book.

How can you test?

If your trades are being filled quickly during a news release, then it’s a safe bet you’re on B-book. Traditionally liquidity dries up during times of high volatility, so it’s harder to find a counterparty (bank) to fill your trade. However, on B-book, that’s not an issue because they fill your order instantly. If you’re trading an EA that makes money during news releases, then I can say with 99.99% certainty that you’re on B-book.

Does it matter?

I don’t think it does. If you put the morality aside of brokers pretending to be white knights who hunt down the best liquidity in the world to deliver you spreads of 0.0, and instead accept the fact that price is the only thing that matters, B-book is superior.

However, I don’t personally like the idea of the broker betting against me. I want my, and my broker’s motivations to be aligned

The only way to ensure that happens is to trade profitably.

Take their money initially, then they’ll move you to A-book and you’ll all trade happily ever after.

Do you have any experience managing risk within a broker? Please share your inside tips and experiences for the benefit of our community.

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Brokers

Regulated forex brokers

When viewing the forex broker or a trading platform, it is the paramount priority to choose from the hundreds the most reliable one and the best forex provider, as it will determine the whole trading experience. Indeed, doing research and compare the vast number of forex brokers with many aspects to consider, maybe not an easy choice, as well time-consuming. So here we are ready to assist your selection and answer the most common questions.

Can I trade forex without a broker?

This may be the first question you would ask, as indeed forex market, FX or currency market is the largest global non-centralized exchange where trading process performed electronically via networks. While main forex participants are international banks and financial institutions operating huge volumes through a need to exchange currencies, presented as currency pairs, and assist international business with the conversion which is known as the interbank market.

Therefore, in order to trade fx you should be authorized dealer to do so, as well as operate a quite sufficient amount so before forex brokers were introduced to retail traders and global community it was not possible for trade markets. For this reason, forex trading brokers are the companies or agent if you like that gives retail forex traders access through its platform to operate forex market and trade various markets including commodity futures, indices, bonds, etc.

Do I need license to trade forex?

So this is another pleasant and great opportunity which is given by forex brokers, as you may access trading without financial or dealer license. Moreover, there are hundreds of opportunities with a relatively small investment which allows you to trade forex, do technical analysis and analyze markets almost instantly.

Are forex brokers regulated?

And now we will check the most crucial question if forex broker can be regulated, since the market is decentralized, and is it safe to trade forex? Obviously, this is the biggest trump you may fall as a retail trader if you choose a non-reliable, mainly non-regulated or offshore firm without a proper license you may easily fall into a scam and lose money.

So due to increasing demand and mainly that traders got no easy access to trading or financial education, the world countries established particular organizations or authorities in order to oversee the market proposals and regulate forex broker firms. So yes, forex brokers are regulated while holding a license from a local authority alike world known FCA in the UK, ASIC in australia, commodity futures trading commission CFTC in the USA, MAS in singapore and more.

What does a regulated broker mean?

The whole concept of regulation is to oversee forex business in a particular country or region, protect clients and ensure safe conditions while trading forex. So in simple words, regulated broker means a safe and legit broker that is compliant to various rules and criteria set by the international authority with the purpose to provide secure trading and good customer service. So its trading environment and provided services like technical analysis, education and tools are also aligned to the best practices.

In addition to its constant check on the service providing, authorities protecting clients throughout compensation schemes and other security checks, however, these conditions may vary from the regulator to another.

How do I know if my forex broker is regulated?

In order to check if broker is regulated or not, you should verify this information through the official brokers’ website first, as regulated companies always provide its licenses. And the next step is to verify a license through the official regulatory website. However, in our forex broker review you will find all the necessary information and license check as well.

It is a fact, unscrupulous brokers may easily fake information and assure you of its license while its not true, so always verify information through the official source. As well, adhere to trade with brokers regulated in serious jurisdictions, not the offshore once, as they luck of strong regulation, requirements and necessary safety measures. Read more by the link why avoid brokers from st vincent & the grenadines.

How to choose best forex broker?

Security of funds is always first in forex trading, for that reason, we recall your attention to open an account with regulated brokers only. Making it simple, regulated broker means that you will trade forex with proper security of funds and investment itself, so first of all good broker is a sharply regulated broker.

Further on, you should also check the necessary conditions and select offer suitable for you and trading strategy you deploy.

For this reason, we assist your selection and provide an assortment of efficient regulated brokers with updated on a weekly basis in-depth forex broker list. A professional detailed analysis with trading fees account overview, platform breakdowns while sorted by regulation, country or trading conditions, along with traders comments so smarter decision is easier now.

A-book and B-book types of forex brokers - what's the difference?

To understand the difference between the so-called A-book and B-book forex brokers, we have to understand what the concepts of the A-book and B-book are.

The general concept of the A-book and B-book refers to the manner in which brokers distinguish and separate their clients, based on the degree of risk that each clients’ order presents to the broker’s dealing desk. Retail forex brokerages typically have links with several liquidity providers in the interbank forex market. They get their liquidity and pricing from the big banks and prime brokers operating in the interbank market, and chop these into smaller positions that enable them fulfil their clients’ trade orders in a matter of milliseconds. These orders are all fulfilled automatically at the trading stations in the dealing desks operated by the retail forex brokers.

However, there are some orders which by virtue of trade size or due to the fact that these orders will pose in-house risk to the counterparty function of the dealing desks, cannot be fulfilled in-house. These orders will have to be routed to external venues for fulfilment. This is the basic operation that enables forex brokers to separate their clients’ orders into two liquidity buckets: the A-book and the B-book.

Before moving on to the discussion, it must be stated clearly here that there are no exclusive A-book or B-book forex brokerages. Nearly all, if not all forex brokers operate both models. Which liquidity bucket the forex broker decides to use at any time depends on what their clients are doing in the market.

It is also pertinent to define the dealing desk. A dealing desk is a department within a retail forex brokerage that is responsible for matching and executing trade orders of their clients. These clients are usually those in the B-book liquidity bucket.

A-book forex brokers

So who are the A-book forex brokers? These are the forex brokers that routinely pass on their clients’ orders for fulfilment in the interbank market or other external execution venues. They could sum up the traditional definition of a brokerage: they source the liquidity for their clients’ orders and pass these orders on for other entities to fulfil. They act like facilitators to these transactions. The closest brokerage model to the A-book forex brokerage model are the STP brokers. However, this is not to say that market makers do not routinely carry out A-book order fulfilments.

There are some reasons why some brokers decide to use the A-book fulfilment model. If a brokerage is an STP brokerage, this is pretty straightforward. By their very nature, these brokers never fulfil orders in-house. Orders are always sent to the interbank market. The broker makes money from spreads as well as from the commissions charged on the buy-sell sides of the trades. There is therefore no motivation to fulfil orders in-house.

For the market makers who routinely fulfil orders in-house using a dealing desk, the only motivation to perform A-book fulfilment transactions is simply to prevent risk to their positions. Market makers routinely take the opposite sides of their clients’ positions. Statistics have shown that 95% of retail traders lose money in forex, so this makes the counterparty operations of the market makers very profitable. However, there are the 5% of retail traders who consistently make money. Obviously, no brokerage will like to see their positions fall into losses on account of these traders. So the logical thing that the market makers do with such clients is to put them into a different liquidity bucket known as the A-book. The positions in the A-book are those which constitute inherent risks to the market maker and therefore the only way to avoid such counterparty risk is to ship the orders somewhere else for execution. The banks at the interbank forex market do not take counterparty positions, so they will be happy to fulfil such positions as they come in.

This is what the A-book operations are all about.

B-book forex brokers

Now what about the B-book forex brokers? As you may have guessed, the market makers always have the B-book system in operation. Remember the 95% of traders who are not usually profitable as forex traders? Well, these are the traders lumped into the B-book liquidity bucket for in-house order fulfilment by the broker’s dealing desk. The B-book forex brokers routinely use their in-house dealing desks to fulfil such orders, usually by taking a counterparty position to the trades of these clients.

In some instances, such brokers typically use what is known as a dark pool to mask the true identities of where the orders are being fulfilled. As two different traders send orders to the brokerage, the broker may decide to send the order to the dark pool, where another market maker picks up the trade and also drops off an order for execution in the dark pool. So both traders get their orders filled, and even though it may not show up as being executed at the dealing desk, the reality is that the order may have been filled in a dark pool without ever hitting the interbank market.

Differences between the A-book and B-book forex brokerage process

The difference between the A-book and B-book forex brokerage model is pretty simple. The A-book utilizes interbank market executions for clients’ orders, while the B-book process leads to internal order fulfilment without the usage of the interbank market.

A-book: you are trading with the banks and you have various options at transparent pricing. The broker provides the software and access to the interbank market.

B-book: you are trading with the supposed facilitator.

Closing note

The irony of the entire thing is that as a trader, you do not know what book your trade is on. If you are a consistently profitable trader, chances are that the forex broker would not take chances trying to trade against you. So your orders will more often than not, be shipped off to the interbank market. Imagine being in a situation where you consistently trade 5 lots on a commodity CFD and on each trade, you are banking thousands of dollars consistently.

The same situation occurs if you trade large volumes of say, 100 lots. A trade size of 100 lots is worth $10m trade value on the EURUSD, with a monetary value per pip of $1000. If you make 200 pips a month as total profit, you walk away with $200,000! No broker will take chances at opposing your trades.

But if you trade a small account and are not very consistent in profits, then you are more likely to be placed in the B-book liquidity bucket.

The dark underworld of forex trading. Brokers "A book" and "B book" explained.

I nvestors around the world haven't lost their appetite to trade in the post-financial-crisis era. But instead of playing the sharemarket, they fancy themselves as global currency traders. That has been propelling the growth of retail foreign exchange broking into a $380 billion industry, doubling since 2007.

Australia has become a hot-bed of the industry by virtue of its trading culture, and as a safe jurisdiction for locally based players to market themselves to traders around the world. Such is its popularity that daily turnover at some of australia's largest brokers can exceed the entire cash equities volume of the australian securities exchange on a given day.

Forex trading is not new, but the electronic platforms and extreme leverage – sometimes as high as 500 to one – can make the euro/US dollar pair as riveting as punting on a penny stock.

Yet despite its rising popularity, some insiders are adamant the world of forex broking has been, and remains, a shifty business. Technology may have lowered trading costs but it has allowed many unsavoury practices to take place on a larger scale.

The industry's dirtiest little secret is the extent of trading profits that brokers earn by directly taking on their muggiest punters. While some platforms act like true brokers others are more akin to bookmakers. They're understood to split their trades into what is known in the industry as "A-books" and "B-books". The "A-book" describe the trades the broker receives that are passed on to the inter-bank market with the broker clipping a ticket. The alternative "B-book" consists of trades that the broker has not passed on to the market but taken on themselves.

Why would brokers take on their clients? Because an estimated 95 per cent of retail traders are pre-programmed to fail, which means the brokers will ultimately win by taking them on rather than passing them off to the market. The existence of leverage amps up the movements in clients' positions, making it more likely that a stop-loss (mandatory sell order) will be triggered, speeding up the inevitable loss. And with brokers trading against their clients, they may possess the ability to tilt the game in their favour.

This includes inserting charges such as "cost of carry" that retail punters have little chance of reconciling. It has also been suggested the brokers can and do widen their bid-to-offer spreads momentarily to hit the stop-losses, forcing a loss on the client. The B-book does carry risks that a large savvy trader will bet big and win, which means the larger accounts are shifted to the A-book where the broker pays an inter-bank dealer a fee.

"B-booking" is a taboo subject and brokers are loath to admit they engage in betting against their clients. But insiders are convinced it is an integral part of several of the brokers' business models that required them to constantly market for new clients.

Cottage industry of trading analytic firms

As evidence of B-booking's prevalence, a cottage industry of trading analytics firms has sprouted up to help brokers identify which clients have even the faintest idea what they're doing. They're then shifted to the A-book.

There are reasons why foreign exchange markets are particularly well suited to the retail brokerage model. And much of the logic played out in reverse last thursday evening. The FX markets never sleep, which means the sudden "gapping" in pricing that can blow up brokers and their clients in other markets is rare.

That's why former axi trader executive and currency trading expert quinn perrot believes high leverage of up to 400 times in certain currency pairs is not as dangerous as it sounds. "the FX markets have high leverage because they trade 24 hours a day, which usually prevents the type of gaps seen between market close and market open on the stock market," he said.

But on thursday the swiss franc gapped like no currency in history. Perrott says this was because larger dealers had a view where the franc should trade without the peg. They instantaneously moved their market pricing to that point, blowing through stop-losses of broker clients. For a trader with 400 times leverage, a 30 per cent move resulted in a 1200 per cent loss.

Such enormous losses, which exceeded client balances by many multiples, meant the big problems lay with brokers. Some either had a blowout in bad debts or closed out their client's trades at different levels to where they could hedge the exposures. The losses effectively blew up the largest and third-largest retail forex broker and inflicted multimillion-dollar losses for other players.

Perrott says poor risk management "too often confined to lawyers and operations staff stuck away in a corner office" caused brokers to collapse. He stress-tested scenarios where the peg was lifted and rejects the assertion that the swiss move was a shock "black swan" event. "what was missing is they probably never sat down with their risk managers and brain-stormed the potential knock-on effects."

The melt-down of some offshore brokers has also raised the controversial issue of client segregation. Australia imposes tough restrictions on derivative brokers, but unlike other countries allows brokers to use client funds as collateral. On this issue, local and international brokers are at loggerheads.

The australia CFD forum, which consists of big global players like IG markets and CMC – lobbied governments to introduce segregation of client funds. Other brokers such as pepperstone say they support client segregation but take exception to foreign firms lobbying for rule changes on their home turf.

The risks of frozen client funds was apparent to local clients when global broker MF global collapsed in 2011. It ran into trouble taking highly leveraged "off-piste" bets on european interest rates. That and the swiss events are reminders of a lesson even the largest players often forget: the dangers of trading are beyond what meets the eye .

Original article by jonathan shapiro:

A-book and B-book types of forex brokers - what's the difference?

To understand the difference between the so-called A-book and B-book forex brokers, we have to understand what the concepts of the A-book and B-book are.

A-book forex brokers

This is what the A-book operations are all about.

B-book forex brokers

Differences between the A-book and B-book forex brokerage process

A-book: you are trading with the banks and you have various options at transparent pricing. The broker provides the software and access to the interbank market.

B-book: you are trading with the supposed facilitator.

Closing note

But if you trade a small account and are not very consistent in profits, then you are more likely to be placed in the B-book liquidity bucket.

Brokers

Regulated forex brokers

Can I trade forex without a broker?

Do I need license to trade forex?

Are forex brokers regulated?

What does a regulated broker mean?

How do I know if my forex broker is regulated?

How to choose best forex broker?

Further on, you should also check the necessary conditions and select offer suitable for you and trading strategy you deploy.

A-book B-book and hybrid models

Forex OTC market differs from investing in many other financial instruments like for example equities or futures trading because it is possible for the brokerage houses to take the other side of customers’ trades (so trade against them).

This is where the distinction between the A and B-book brokers comes in together with many hybrid-combinations in between.

The A-book model

Brokers operating in this model are regarded as ECN/STP (electronic-communication-network/ straight-through-processing) brokers also known as “no dealing desk” brokerages. Such brokers are intermediaries that send all of their clients’ trades directly to liquidity providers or multilateral trading facilities.

These forex brokers make the profit by increasing the spread or by charging their customers commissions. In this situation, no conflict of interest does exist because brokerages earn the same amount of money regardless of whether the trader is profitable or not.

The B-book model

B-book brokers, on the other hand, keep their clients’ orders internally. A brokerage house, in this case, takes the other side of a trade therefore its profits very often equal to clients’ losses and the other way around. Due to the fact that the great majority of clients lose money in a long-distance run, keeping trades on their own books can be very profitable (if the trading flow stays within client- retail broker scope only with no trades send to lps it is considered as B-book (see image below).Since there is an obvious conflict of interest many clients are afraid that brokers may use unfair practices to ensure they remain profitable.

Nevertheless, this model is considered as a very risky and challenging in terms of risk management.

This is the reason why many market maker forex brokers use a hybrid model that involves hedging with liquidity providers as well as placing trades in a B-book based on traders’ profiles.

The hybrid model

The popularity of the hybrid model is justified as it allows brokerages to take advantage of the two above-mentioned models. The entire tactic rests upon identifying chosen group of traders who are profitable and send their trades to the real market, while keeping the remaining part in-house.

Clients who are likely to be kept on the book have usually few common characteristics.

First of all they are keen on significant leverage, use their free margin to the very extent as well as deposit lower amounts of money of their trading accounts (statistics clearly show that lower deposit accounts are overall less successful).

Many brokerages operate in a hybrid model, and there is nothing inherently bad in such a model. This model runs very responsibly and with appropriate attitude toward risk-management can be very successful.

While benefiting from both types of models such brokerage houses can offer their clients competitive markups and commissions whereas the hybrid model is also better perceived by clients.

Compare direct market access brokers in the UK

Compare brokers that offer direct market access (DMA) trading platforms authorised and regulated in the UK by the FCA. Find the best DMA provider and you could get direct market access for CFD trading, spread betting and forex. Choose a cheaper DMA broker to save money and you could reduce your trading costs to help you profit.

How to compare DMA brokers

The best CFD brokers that offer DMA (direct market access) tend to be well-established players with a mainly professional or institutional client base.

Trading cfds via DMA gives a trader an edge over the more retail-focused CFD broker because they can buy at the bid and sell at the offer. Trader buy and sell orders go straight onto the order book and can be worked in a professional manner using order types such as iceberg, limit and market or limit stops.

It is particularly important to use a CFD broker that offers DMA if you are a large trader dealing in over the normal NMS (normal market size) on the main markets or in illiquid markets where you don’t want to show your entire order in one go. In smaller assets, big orders can move the market before you get a chance to get in.

If you are looking for an institutional account you can find a prime broker here.

All these brokers are well capitalised and have experienced brokers to assist with account set ups and look after their customers well.

How to open a DMA account

To open a DMA account you will need to contact a broker which offers this service. Like opening any normal trading account you will also need to provide proof of identity like a passport or driving licence, your bank details, an email address and contact details. However, keep in mind that DMA trading is usually for more experienced investors, professionals and institutions. It may not be suitable for traders with little experience.

All of the brokers in our comparison are authorised and regulated by the FCA

DMA providers will normally ask questions about your experience levels to ensure you understand the risks of this type of trading.

You will also need to consider your strategy for trading on the markets through DMA, due to the speed of trading, human error or failings in computer software may increase the risk of losses.

A sensible risk management strategy is essential before you begin.

What is direct market access?

Direct market access, also commonly referred to as DMA, is a service offered on some platforms by brokers that enables trading brokers with sufficient experience to place buy and sell orders directly on the electronic facilities and order books of stock exchanges around the world.

Rather than placing trades through a retail service provider, DMA brokers enable you to place trades directly the central market.

Direct market access is commonly used by investment firms and sophisticated traders as it allows for the implementation of strategies based on algorithmic trading and can help make the trading process more efficient due to the overall speed of execution and the lower costs associated with trades.

With a DMA trading, you may be better able to make the most of opportunities within the market, even if they are only short-term opportunities.

Direct market (DMA) spread betting brokers

If you want to get inside the bid-offer you need to be trading with direct market access (DMA). However, this is a tricky thing to do if you want a spread betting broker to provide direct market access.

The reason is quite simple. The mechanics just don’t work. Spread betting is over the counter (OTC), in that it is conducted off-exchange and structured as a bet. There is no exchange to access and the quotes provided by the spread betting brokers are based on the prices in the underlying exchanges.

However, prospreads will offer a form of direct market access. They will give you a trading platform and access to the markets, when you trade they hedge everything and convert it in to a spread bet post-trade.

There are a few other spread betting brokers that provide level-2 and direct market access through cfds, but then you lose the tax advantages.

You need a big account to trade with prospreads as your trade size needs to be the minimum one exchange lots size. In the FTSE it’s £10 per point for example.

In reality, though, spreads nowadays are so tight. Especially with new brokers offering no-frills trading like core spreads with FX spreads of 0.7 and FTSE spreads of 0.8. The real market is only 0.5.

Where to find DMA brokers UK?

If you are looking for UK DMA brokers we've highlighted some of the major ones above. The only DMA UK brokers we feature on this site offer direct market access and are good standing and properly regulated by the FCA.

Direct market access trading platforms advantages and disadvantages

The main advantages of direct market access trading platform is that you get clean pricing directly from the exchange order book. You can place your DMA orders directly on the exchange and get in between the bid and offer price.

Some of the main disadvantages of direct market access trading platforms is that if you are familiar with spread betting or using a CFD broker that widens the spread rather than charging a commission there is an added layer of administration because you have to include commission in your profit and loss calculations.

Pros of DMA

Speed of execution of trades

Better prices due to fewer middle man cuts

Lower potential for human error by a broker acting on your behalf

Anonymity can be higher for

Cons of DMA

Where to find a list of direct market access providers?

Compare DMA brokers here to choose a broker which best suits your needs. All of the brokers here offer direct market access and cater for larger private and institutional accounts.

Our comparison table only includes brokers which offer DMA trading and are regulated by the FCA.

Generally it's only worth using a direct market access provider if you are trading with over £50,000 and are a regular and experienced trader.

Where can you find DMA forex brokers?

Most forex brokers don't offer DMA because you have to be trading in significant size. However, if you want a DMA forex broker you need a futures broker because the forex market does not operate like the stock market with order books and centralised regulated access. There are some platforms that offer DMA for forex brokers. But if you really want to work forex orders through DMA you can trade CME currency futures with a futures broker.

Direct market access UK stocks, futures and fixed income

There are many UK brokers offering direct market access, but not all are the same. Choosing a direct market access UK broker is really dependent on your relationship with the broker and the commission rates you'll receive. If you are a start up hedge fund looking for direct market access in the UK you will need a prime broker. You can compare prime brokers using our interactive prime broker finder here.

DMA providers: three things to look out for.

When comparing DMA providers these are the things you need to look out for:

Commission rates: if you are a big retail or institutional trader looking for a DMA provider you should be able to negotiate on DMA commission rates. DMA trading is different for every trade and whilst brokers will publish their commission rates online you should be able to get a high volume discount or rebate if you are putting enough business through. After all, there are many DMA providers in the UK so a broker will want to keep you DMA business, rather than lose it to another direct market access provider because of excessive commission rates.

Leverage and margin: if you are trading with a DMA provider, it's assumed that you are a sophisticated trader. And as such you should get better margin rates than retail traders. However, for DMA trading on futures the underlying exchanges will have their overnight margin rates they will charge the broker. It's unlikely you will get better rates than this. However, you may have to pay more. So when comparing DMA margin and direct market access leverage rates check what your broker charges for retail trades against the exchange websites. If you are trading stock cfds with DMA access your margin rates are at your brokers discretion and depend on a lot of things like single and multiple position exposure, derivatives hedging and trading experience.

Market access: not all DMA brokers provide access to every market. So when you trade with a direct market access provider make sure you double check that you can trade everything you want beforehand. Opening a DMA account with a broker is not as simple as opening a spread betting account so get it right the first time.

What’s the difference between equity DMA cfds and spread betting?

If you are wondering if trading with direct market access is for you and what the difference is, then here is the breakdown.

Trading with direct market access (or DMA) enables you to place your orders direct with the exchange through a broker. Which means instead of having to buy at the offer (the higher price) and sell at the bid (the lower price) you can be the bid and be the offer.

So you work limits and buy at the lower price and sell at the higher price.

Of course, this is only the case if there is a seller willing to hit the bid or a buyer willing to lift the offer with market orders.

If you are trading with spread betting without DMA then you will have to buy/sell at your spread betting brokers quoted prices. As the broker will widen the market spread to incorporate commission.

With DMA trading you work a limit at a price and your order is in the market, so you are filled at your price when it trades. Brokers will add a commission on the trade when you buy and sell.

It's basically a preference thing really. Spread betting has the advantage of being neat and tidy. You see a price, you deal and that's that. No tax, commission or admin. You just work your profit and loss from your buy and sell price.

DMA cfds (offered by CFD brokers that offer professional accounts) are for when you have a big account and work big orders or are trading on a high-frequency basis.

If that's the case then your trading strategy requires you to be inside the bid/offer spread. So the better price of your fills will be lower than the cost of your commission.

Unlike spread betting however, you will have to pay tax on gains with DMA cfds. If your account is big enough to warrant trading with DMA cfds then you will probably be doing it in a tax efficient manner already anyway.

Where to trade DMA on a spread bet; it's all about relationships

You can ask your dealers at brokers like IG or spreadex to work order in the market for you. However, you may need a big account and a good relationship with your account executive to get the service.

What are STP/ECN CFD brokers and should you be using one?

There is a lot of chatter in the tradesphere about STP/ECN brokers and the advantages and disadvantages of using them and if they really make that much difference to traders.

What does STP stand for?

STP stands for straight through processing

What does ECN stand for?

ECN stands for electronic communications network

This means that when you execute a CFD trade your order goes directly into the market. If you're buying, your broker is connecting you directly with a seller through an exchange.

Does ECN/STP matter?

Well yes in some circumstances and no in others.

It matters if you need lightning fast execution and are working decent trade sizes. However, if you're working really big orders the underlying market may not be liquid enough to fill the order so in really big order cases you may be better utilising a broker's internal liquidity to get filled.

How you pay matters

It also depends upon how you want to pay your broker. If you want an all in price (i.E. No commission) then you can't have direct market access. Because then your broker wouldn't make any money. If you want clean prices and are happy for an additional commission charge to be added to the trade then you can get DMA. The advantage of STP/ECN for clean prices is that you get much better pricing because you can work orders inside the bid and offer.

However, most DMA brokers will have a minimum commission for traders so if you are a small trader, it won't be cost effective.

Can ECN/STP help you make more money?

It certainly can't help you put on more winning trades. But what it can do is help increase profits and reduce losses by minimising your execution costs. Costs can be improved by transaction speed and execution pricing.

How do ECN/STP brokers make money?

Unlike brokers who offer commissions built into the spread ECN and STP brokers make money by charging commission per lot, or per 1m or per share (depending on what you trade). You do need to factor this in when calculating your gross P&L versus your net P&L.

Where can you find an STP/ECN CFD broker?

You can compare DMA (direct market access) brokers in our table. But for the majority of private traders one of the major CFD brokers should be perfectly adequate.

Another rhing to consider is that DMA brokers often cater to professional traders so unless your account size is above £50k you won't be able to open an account.

If you're a hedge fund looking for a prime broker for DMA, you can use our prime broker finder tool here.

DMA B-booking

Does the B book model in, CFD trading, forex and spread betting really still exist in the current financial climate?

The B book model is a term spread betting and fx brokers use to assign a category of clients that consistently lose money. There are generally three books, and the terms vary between geographical location and broker so think of the allocation loosely.

A while ago we asked why no decent spread betting or CFD broker should actually want churn and burn clients. So let's take a look at the three book types.

The A book

The A book is the main body of the client base that the broker hedges or nets off positions against. They are fairly natural on the profitability of these customers and take low-risk approach to their trading.

The B book

The B book is assigned to clients who always lose money. These are generally smaller new accounts that the broker will not hedge against or "internalise orders". However, the terminology can mean different things.

To one broker internalising orders may mean netting off positions, to another internalising may mean not hedging them

It’s a fairly standard way to make money as a broker. It’s not as bad as it sounds as the broker is providing a very low-cost way for small punters to access the world’s financial markets.

It would not be cost-effective to only generate income from these customers from spreads and finance charging.

On average it costs a spread betting broker about £1,500 in advertising spend to get a new customer, so they need to aim to earn more to be profitable.

In fact, client acquisition costs for brokers have risen significantly in the last few years. Finance feeds highlighted this for plus 500 (a CFD broker) back in august.

The B book is usually assigned to the FX, index and bond markets, where trades are smaller but of higher frequency than the equity market.

The C book

Doesn’t really have a place in today’s market as the rules towards firms operating their own prop books and personal account (PA) trading are now very strict.

In the past though, spread betting brokers used to be well aware of the clients that always made money.

They would sometimes follow the trades to make a bit of money trading themselves.

Now, though it’s too much of conflict of interest between the broker and the clients so doesn’t really happen now.

A book and B book in spread betting - why it doesn't matter

The A and B book in spread betting have traditionally referred to spread betting brokers either hedging or not hedging customer positions. When a spread betting company hedges a client position it means that when a customer bets long £10 per point in the FTSE the broker goes into the market and buys a FTSE contract (one FTSE futures relates to £10 per point). You can read about contract sizes on the ICE exchange here.

When a broker doesn't hedge a client position it means that when a client bets long £10 per point on the FTSE they don't offset the position in the underlying market and take on the risk that the client will either make or lose money themselves.

Spread betting firms usually refer to a set of clients they hedge or don't hedge as the A or B book.

But how does the A and B book affect you as a trader?

The truth is it doesn't in the slightest. As a trader you have two outcomes when you trade the financial markets through a spread betting broker.

You will either make money or lose money on the position.

How your broker manages their underlying risk is not your problem. In actual fact your broker not hedging your position may work in your favour.

Not hedging smaller bet sizes

Using the above example, you can see that one lot in the underlying FTSE market is equivalent to a £10 per point bet. If you are only betting £1 per point on the FTSE, the broker can't go into the market and buy 10% of one contract. They must look at their entire book and net the smaller positions off against each other when the sizes are manageable.

Keeping trading costs low.

If you trade the FTSE through a futures broker, then you are charged a commission plus exchange fees, plus clearing fees for every lot traded. If you are trading one lot (£10 per point) the commission per trade could be as much as £12. As the dealing costs are built into the spread when spread betting you don't have to pay such expensive commission. For example, most spread betting brokers offer spreads on the FTSE of 0.8 points so in and out that is £4 round trip or £2 per side.

What the bottom line? Basically, it doesn't matter if your broker is hedging your bets or not. If you are losing money it's because of your own forex trading strategy. This may also be a sign that you might want to consider some alternatives to spread betting anyway. If you're making money, your broker is probably hedging your positions as you'll no doubt have a decent enough account balance to make it cost effective.

Spread betting & cfds versus direct market access (DMA): 3 key points

What's the difference between spread betting, cfds and direct market access (DMA)?

If you're a trader and are considering upgrading from spread betting to a DMA broker here is a quick summary of the main differences and if it really matters.

1. DMA is not tax free

One of the main advantages of using a spread betting broker for trading is that profits are tax free. As your trades are structured as an amount per point move bet they are not subject to capital gains tax. So if you are a profitable trader acting in a personal capacity you have to weigh up whether or not paying tax on profits is more important than direct market access. You can't trade DMA through spread betting, you will need a CFD broker.

2. DMA prices are much tighter

This is true, with DMA you get direct market access to the underlying exchange. So if for example you are looking at trading anglo america on the LSE the prices are:

DMA: 644.5/644.8

Spread betting (IG review) 644.5/646

But with DMA it actually gets better because you can put your buy or sell orders inside that spread to make the prices even tighter. Obviously, if you want to buy at 644.6 instead of 644.8 (as is offered) and there are no sellers you won't get filled. But you do have the opportunity for better pricing.

3. No admin versus commissions

One of the great things about spread betting is that all the costs are built into the spread. But with DMA, your broker will charge you a commission as an extra line on your statements. You also have to manually factor this into your profit and loss when you open and close the trade.

Direct market access also comes with high minimum ticket commissions so if you are a small trader it's not worth it as the minimum commission for DMA will probably be around £10 in and out so if you're planning on scalping you'll have to make more than a few points to break even.

DMA trading faqs

Do IG offer DMA trading?

Yes, IG offer direct market access trading. You can find out more about their account offering here. Other brokers like saxo capital markets & interactive brokers also offer it.

Which is the best DMA broker for day trading?

The best DMA brokers for day trading are the ones which offer fast access to the markets, low commission and a wide range of markets and assets to trade based on your needs, as well as FCA regulation. Compare DMA brokers in our table to get the best one for you.

How is DMA regulated?

All of the brokers we include in our comparison are authorised and regulated by the FCA.

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	cyprus, UK, mauritius	cysec, FCA, FSC, FSCA	MT4, MT5, web	$10	review website
	australia, cyprus	ASIC, cysec	MT4, MT5, iress	$100	review website
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	UK, australia, south africa	FCA, ASIC, FSCA, cysec	MT4, trading station, ninjatrader	$50	review website
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	UK	N/A	MT4, web, LMAX mobile	$1000	review
	USA	FINRA/SEC	web, thinkorswim	$2000	review
	UK	FCA	MT4	£100	review
	cyprus	cysec	MT4, colmex pro trader/expert	$400	review
	UK, autralia, belarus	FCA, ASIC, NBRB	MT4, web, fortrader	$100	review
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	UK, australia	FCA, ASIC	MT4, MT5, web, mirror trader	$1	review
	denmark, UK	FSA, FCA, ASIC	web, saxotrader	$10 000	review
	australia	ASIC	MT4	$500	review
	cyprus	cysec	sirix	$200	review
	cyprus, UK	cysec, FCA	etoro webtrader, etoro openbook	$200	review

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