Direct market access (DMA) is a highly effective tool for institutional investors because it removes areas of friction caused by using needless middlemen and brokers. Instead, embracing DMA means exchanges can be directly accessed and orders placed in a fraction of the time. 

The beauty of DMA is that the approach can facilitate trading for any stock exchange or security that’s tradeable on exchanges. This means that institutions can find efficiency across a number of equities, fixed-income securities, derivatives, or just about any other financial asset. 

Time is of the essence when it comes to frictionless trading, and it’s only through DMA that institutions can execute the right trades at the right time to capture opportunities ahead of their rivals.

So, how can institutional investors create an efficient and sustainable DMA strategy? Let’s take a deeper look at five essential steps to take in order to achieve direct market access success:

Uniting DMA with algorithmic trading

Because direct market access excels in removing the barriers to trading for institutional investors, it offers the best level of efficiency when coupled with high-quality, fast-paced algorithmic trading tools. 

This means that ambitious institutions should seek out a functional DMA portal provider that offers quick instrument requests, corporate action management, and downloadable configuration files to help optimise efficiency throughout trading strategies. 

In choosing prime services that feature globally positioned trading servers and locally connected pricing structures with data vendors for real-time quotes, it’s possible for institutions to unite their DMA with high-frequency trading (HFT) and functional algorithmic trading platforms to capitalise on opportunities faster without the threat of losing valuable time against competitors. 

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Lower latency pricing can be a great asset when connecting DMA and Expert Advisors (EA) without having to worry about slippage or other factors that could hinder the effectiveness of results.

Utilise the transparency of order books to shape decisions

Order books are invaluable tools when it comes to gaining insights into market dynamics. However, the analysis of data can often make it difficult for institutional investors to extract clear insights in a landscape where time is literally money. 

When using order books, institutional investors can learn an asset’s liquidity by exploring its bid-ask spread. It’s also possible to explore the depth of the order book to understand the level of buying and selling interest regarding a specific asset. 

Traders are capable of using the data within order books to identify trends and explore possible trading signals. For instance, if an asset is receiving a higher volume of bids at a specific price level, it’s reasonable to expect it to climb higher. Likewise, if the ask side is heavily populated at a price level, investors can interpret it as a sell signal. 

Order books are becoming more accessible through integrated trading platforms and even smartphone apps today, making it easier than ever for institutions to access essential market insights. 

Conforming to compliance

Direct market access poses its own set of compliance requirements for institutional investors, and their adherence will be essential in building a functional and efficient trading strategy. 

When using DMA, it’s important that supervisory controls and procedures are continually tested in order to obtain the necessary CEO certification from FINRA. This certification is audited annually and pertains directly to risk management and compliance with the safety of the markets. 

It’s the responsibility of broker-dealers to ensure that their DMA services are well-tested and possess the required certification. 

With this in mind, it’s essential that any DMA used is fully compliant at all times to keep on top of regulatory scrutiny from the likes of FINRA and the Securities and Exchange Commission (SEC). It’s with this in mind that choosing the right DMA requires necessary due diligence, and low-cost options can come with both regulatory risks and possible security threats.

Following the direct market access rule

Any institutions engaging in DMA should also be aware of the direct market access rule set out by the SEC. This rule requires broker-dealers to implement the necessary risk controls for market access. 

The Direct Market Access rule means that any broker or dealer that has market access or any entity that offers a customer or other party access to an exchange through the use of its MPID is required to comply with the rule. 

This rule applies to trading in all securities, exchanges, or ATS, including equities, options, exchange-traded funds (ETFs), debt securities, and security-based swaps. 

While much of the rule focuses on provisions made by broker-dealers to offer compliant market access, it also makes stipulations that can be vital for institutional investors and securing efficient market practices. 

For instance, the rule states that it’s entirely possible to incorporate risk management tools or technology provided by a third party that’s independent of the customer, provided that it has direct and exclusive control over those tools or technology and is fully compliant. 

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This means that it’s entirely possible for DMAs to vary from different broker-dealers, and their proposition can have different ramifications for efficiency and compliance. With this in mind, it’s worth researching the available DMA options to see whether one tool offers a greater range of compliant integrations to improve access and latency.

Learn the intricacies of DMA and OTC trades

No, direct market access isn’t like over-the-counter (OTC) trading. The intricacies of the two approaches are important for institutional investors to take on board. 

Crucially, DMA places trades directly on an exchange, while OTC trading occurs outside of exchanges and directly between the appropriate parties. 

Because it focuses on trading via exchanges, DMA offers considerably more transparency, liquidity, compliance, and more competitive pricing than OTC trading, but it’s worth taking the time to research the relevant perks of each approach. 

For instance, some institutions prefer OTC trades because commission is instantly factored in and it can be easier to track profit and loss due to operating through a single party. 

However, a major issue with OTC trading stems from counterparty risk and reliance on chosen parties to fulfil their commitments when trades are placed. 

Building a sustainable DMA strategy

As institutional trading becomes ever-competitive, more traders are looking to DMA as an option to secure frictionless market access in a low-latency environment that’s fully compliant with necessary regulatory requirements to leverage a sustainable strategy. 

With the technology entering the industry becoming increasingly effective, incorporating these innovations into DMA strategies without slowing execution times down will be essential. 

As the market continues to grow, the range of powerful options at the disposal of institutions will only grow, so it’s worth conducting the appropriate research and utilising prime services that can offer meaningful direct market access that meets the ambitions of the institutions looking to achieve their potential.

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Malaysia’s economy has witnessed steady growth in recent years, yet the challenge of stagnant unemployment rates persists, posing a critical concern for policymakers and businesses alike. As the country strives for economic prosperity and workforce stability, Malaysian companies play a pivotal role in addressing this issue.

Despite Malaysia’s unemployment rate remaining at 3.3 per cent, Malaysian companies and the government have taken the first steps to reduce the number of unemployed by introducing initiatives in the business and gig economy. Initiatives such as JaminKerja, are created to increase job opportunities for the unemployed, targeted towards local workers.

The gig economy has emerged as a prominent force and solution, offering both opportunities and challenges for companies and workers alike. Based on a study by the Employees Provident Fund (EPF), it is estimated that gig workers will account for 40 per cent of employed workers in Malaysia within five years, twice the global average.

Additionally, the widespread use of smartphones and the availability of high-speed internet has made it easier for individuals to access gig platforms leading to a boom in the gig economy, with the local gig economy being valued at RM1.33 billion (approximately US$281.54 million).

The gig economy also offers flexibility during work, not normalising the usual business hours but providing workers with the ability to choose when, where, and how much they work, allowing them to balance work with personal commitments or to pursue multiple gigs simultaneously.

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Despite the gig economy thriving, there are still several challenges that the gig economy poses that need to be addressed. In this article, we will delve into the current limitations of the gig economy and how Malaysian companies aim to solve these challenges.

The downsides of working in the gig economy

There are around 2.2 million documented migrant workers in Malaysia, with the majority of them being in the gig economy as it is difficult for unskilled workers of foreign nationality to obtain a full-time working job. Most migrant workers are satisfied with the minimum working conditions in Malaysia. In contrast to their country of origin, Malaysia is considered to be hospitable with a decent standard of living. 

Malaysia also relies heavily on foreign workers, with the labour industry having the highest demand for them. The reliance on foreign workers causes a lack of job opportunities for Malaysian workers as foreign workers are viewed as a cheaper option compared to their domestic counterparts. Therefore, companies in Malaysia prioritise hiring foreign workers for gig economy work.

The gig economy also has its limitations, affecting both foreign and domestic workers which include:

Lack of job security

Gig workers often face uncertainty and instability in terms of job security. They may experience periods of inconsistent income, limited access to benefits such as health insurance and retirement plans, and vulnerability to changes in demand or market conditions.

Gig workers are vulnerable to market changes, shifts in demand and economic downturns. Changes in consumer behaviour, technological advancements, or industry disruptions can directly impact gig workers’ ability to secure work opportunities and maintain a steady income.

Limited access to benefits

Gig workers often do not have access to the same benefits as traditional employees, such as health insurance, paid leave, retirement plans, and worker’s compensation. This lack of benefits can significantly impact gig workers’ financial security, well-being, and quality of life.

The absence of benefits and protections can contribute to income instability for gig workers. Without benefits such as unemployment insurance or worker’s compensation, gig workers may face financial challenges during periods of unemployment, injury, or unforeseen circumstances.

Skill underutilisation

Gig workers may not always have the opportunity to fully utilise their skills and expertise in gig assignments. They may be assigned to repetitive or low-skilled tasks, limiting their potential for career advancement and skill development.

Furthermore, the lack of proper certification for gig jobs in the plantation sector prevents workers from earning a higher pay rate. Without recognised certifications, gig workers in plantations struggle to demonstrate their skills and value, leading to lower compensation and fewer opportunities for professional growth.

Local workers who work in the gig economy will then miss out on the opportunity to learn the necessary skills to adapt to other gigs that may require different skills, limiting the workers to only work in gigs that require common skills.

The future of the gig economy leverages employment opportunities 

A crucial aspect of the gig economy’s growth is the correlation of supply and demand dynamics, streamlined by the advent of online platforms and digital recruitment agencies. These platforms diminish the barriers typically encountered in traditional job markets, facilitating efficient connections between gig workers and employers. 

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The gig economy is reshaping the traditional business hiring model. Employers are increasingly drawn to gig workers for their ability to offer specialised skills not readily available in-house. In a job market increasingly shaped by technological advancements and global connectivity, soft skills have emerged as a critical differentiator for both job seekers and employers. The emphasis on soft skills has never been greater as it is an essential skill that sets candidates apart and contributes significantly to workplace goals. 

The Malaysian government themselves are also taking a proactive approach to nurturing the gig economy, exemplified through various initiatives, ranging from building digital skills and improving the regulatory framework to expanding social protection. For example, Malaysia Digital Economy Corporation’s (MDEC) Global Online Workforce is to equip Malaysians with the necessary skills to excel in the digital freelance marketplace.

The gig economy can prove to be the solution to reduce the stagnant unemployment rate that the country has been plagued by. Through various channels such as job portals, digital recruitment agencies, and government initiatives, it is imperative that candidates are provided with upskilling aid by corporate bodies to boost the development of the country’s employment sector.

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Editor’s note: e27 aims to foster thought leadership by publishing views from the community. Share your opinion by submitting an article, video, podcast, or infographic.

Join our e27 Telegram group, FB community, or like the e27 Facebook page.

Image credit: Canva Pro

The post Skills for the gig age: Empowering workers in Malaysia for the future of work appeared first on e27.