Pre-trade alert for Darwins with high negative divergence

5 October 2017
The Market Owl

Alert for high investor divergence

Due to rapid investor growth, some Darwins with a lot of investment are starting to experience high divergence. For those unfamiliar with Darwin divergence, we recommend you consult this article explaining how Darwinex measures divergence.

To avoid existing Darwin investors (and the Darwin provider themselves) being negatively impacted by new investment, we are taking the following measures:

Already launched: New investors will be alerted before buying a Darwin whose monthly expected divergence is worse than -0.5%. The aim is for new investors, or those not yet familiar with divergence, to be cognisant of the negative impact to their profitability before trading.

Near future: Darwin providers will be able to determine the maximum level of divergence they are prepared to accept before the Darwin will be closed to additional investors. At this point, the Darwin will only be able to be sold by existing investors.

We are conscious of the fact that the Darwin replication model has a structural defect, in that investors enter the market after the trader. Our long term plan envisions eliminating this structural defect such that investor and traders orders will be sent to the market together, resulting in a significant increase in Darwin capacity.