DMA models directly hedge with the underline. So when you place a buy order with a DMA broker they physically enter your order into the real market( eg you put in a limit order to buy BHP @ $26.01, then an order will be entered into BHP's order book @$26.01( You can see it for yourself in the market depth ), and if the price of BHP trades down to ≥26.01, then the order would get executed in the real market( depending on liquidity*), just like any regular order. So with a DMA model there are real "shares" behind it. Trading DMA is similar to trading a margin account.
* If price trades down to $26.01 and there's 1000 units ahead of you in the queue @ 26.01, then your order will not get filled if only 1000 units get executed before price trades back to 26.02.
