- Speedy execution: It allows very fast execution, measured in terms of milliseconds
- Cost reduction: Transaction costs are lower for trade executed with a direct access brokerage. Transaction costs are generally per share (ex. 0.004$ per share) where as retail brokerage forms charge on a per transaction basis (ex. 5$ per trade).
- Slippage: Slippage is controlled at a minimal. Also it has a higher chance to execute at a better price when the market suddenly moves rapidly
- Control over order routing: With most direct access firms, a trader may choose to send his orders to any specific market maker, specialist, or Electronic Communications Network
- Liquidity rebates: Traditional online brokerages usually have a simple and flat commission fee per trade because they sell order flows. Direct-access brokerages do not sell order flows and get rebates They earn money from serving their customers. An active trader can gain what traditional online brokerages gain
Disadvantages
- Volume Requirement: Some firms charge inactivity fees if a minimum monthly trading volume has not been met. For example Interactive Brokers charges a 10 USD per month inactivity fee on accounts generating less than 10 USD a month in commissions. Many firms will deduct transaction fees and commission paid each month from that month's inactivity fee. Hence an activity fee often serves as a minimum monthly commission which is paid to the brokerage.
However not all direct access brokerages have minimum monthly trading volume requirements.
- Knowledge: New and inexperienced traders may find it difficult to be familiar with direct access trading.
Knowledge is required when dealing with something like making trade decisions & order routing