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

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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.

You can compare DMA CFD brokers on the Good Broker Guide here

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 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 tough you will have to pay tax on gains with DMA CFDs but if your account is big enough to warrant trading with DMA CFDs then you will probably be doing it in a tax efficient manner.

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