| Direct access is typically excludes inactive and long | | | | higher chances of better prices. Slippage in this model |
| day traders. Investors prefer this method for | | | | of trading is controlled at a minimal price as well. |
| reasons such as low involvement of transaction and | | | | 4. Control over order routing: There is higher control |
| low exchange fees and also because there are no | | | | over the ordering routine. This is because most direct |
| brokers involved. | | | | access firms choose to send their orders through a |
| Direct access trading is primarily for self-helped active | | | | specialist, a market trader or Electronic |
| traders. Traders value the speed of execution that is | | | | communication network to any exchange. |
| available in this model. They try hard to minimize | | | | 5. Liquidity rebates: Direct access brokerage does not |
| slippage and costs of execution. Direct traders are | | | | get rebates. They also do not sell order flows. |
| dependent on their own decision. They have little or | | | | Traditional online brokerages on the other hand |
| no chances of being involved in any trading advices | | | | usually have very simple and also very flat |
| from a third party. Direct access brokerage has the | | | | commission fee per trade. Any active trader would |
| following advantages: | | | | gain what an online brokerage would gain. They |
| Advantages | | | | usually earn money from serving the customers. |
| 1. Speedy execution: Direct access trading involves | | | | Disadvantages |
| technique and instrument that allows very speedy | | | | 1. Volume Requirement: Some brokerage firms charge |
| and authentic execution of every transaction. It | | | | inactivity fees. This inactivity fees are charged when, |
| happens in less than a minute, in a few milliseconds. | | | | the trader has not invested or made any transaction |
| 2. Cost reduction: Transaction costs per share of | | | | for about a month. This is also when the trading |
| trading are less than even a dollar. In retail brokerage | | | | volume has not been met. As inactivity fees many |
| on the other hand it is over and above five dollar. It | | | | firms deduct a certain amount of money as well. |
| is one of the main advantages of direct access | | | | However not all direct access brokerages have |
| trading. The low cost of trading making this a perfect | | | | minimum monthly trading volume requirements. |
| choice when trading. | | | | 2. Knowledge: Knowledge is of foremost importance. |
| 3. Slippage: In direct access trading there is a higher | | | | Advices are very hard to come by. New and |
| chance that the investor might fetch profit. This is | | | | inexperienced traders are difficult bargainer will find it |
| because if the market suddenly shoots up it has | | | | very to get information needed to trade. |