When it comes to contracts for difference (CFD) offerings there are few retail brokers who provide real liquidity for trading them. Most forex brokerages act as market makers and provide their customers with a solution which does not affect the market price directly.
Direct market access CFDs have been created to prevent clients from being concerned about trading against their own broker and delivering the exact same price to the client as the one on the stock exchange. Brokerages providing DMA CFDs guarantee their customers that the deals which they conduct through trading CFDs will be transferred to the open market in a physical trade.
The Australian arm of Japanese listed brokerage, Invast Securities, has announced that it will start offering DMA CFDs to Australian investors. The firm has chosen IRESSTrader as a platform solution, delivering a list of relatively sophisticated tools to retail traders.
The platform includes in-depth market monitoring with the ability to see market depth, various analysis tools and a Microsoft Excel interface which will allow the more ‘sophisticated’ bunch to create live price links between Excel and IRESSTrader.
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This is the first attempt by a Japanese broker to enter the DMA CFD market. The offering does not not use the traditional liquidity provider model as is the case with OTC forex. The liquidity that the clients view and execute on the platform comes directly from the exchanges.
Invast Australia’s CEO, Brendan Gunn, explained to Forex Magnates reporters, “If Level 2 data is available from the exchange, then the client will be able to view price depth. Being DMA it also means that when a client places an order that the trade will appear in the market depth.”
Asked how the trading process is being conducted behind the scenes, Mr Gunn explained, “For the product construction Invast uses a prime broker to execute an equity swap. Invast then turns the equity swap into a DMA CFD for the client.”
By definition, DMA CFD providers guarantee that there will be a physical trade executed on the corresponding market place, matching the CFD trades. The DMA delivery and execution model is much more similar to that of a traditional broker which is normally used by professional and institutional investors, since the potential for conflicts of interest is eliminated from the trade.