Product Update: Applying divergence to DARWINs quote

In this article, we provide information about a new improvement in the Darwinex platform, crucial to provide greater transparency and build more confidence in our investment asset, the DARWIN.

Starting today, with some exceptions that we will mention later in this post, DARWIN quotes will be calculated based on investors’ execution prices instead of the trader’s signal account execution prices, as they have been previously. It is important to note that the profitability of the investors does not change.

Given the significance and implications of this change on both investor’s and the DARWIN provider’s (trader’s) experience, we provide you with all the details below.

If you want to learn more about the concept of divergence, its main causes, and the discrepancies that will exist between the DARWIN price and investor profitability from now on, we have prepared another article that we invite you to read here.

Implementation of the new quoting method for DARWINs

We have dedicated over a year to develop this product improvement due to its technical complexity (important implications on the platform, challenges in testing it in a simulated environment, etc.).

Since September of this year, all DARWINs that did not have investment have already been quoting using the new calculation method and we have verified that the changes have worked correctly in a real environment.

From now on, all DARWINs with less than $100,000 of investment also transition to quoting with the new format. In other words, 95% of DARWINs are now quoting using the new calculation method.

Once we have thoroughly tested the functionality on these DARWINs with lower investment, we plan to implement the change for the remaining DARWINs on the platform, most likely between January and February 2024.

How does the new quoting system affect you and what changes will you find in the platform?

1. If you are a DARWIN provider (trader):

• In the DARWIN section, you will be able to access the same information you had until now.
• Once all DARWINs are being quoted including slippages, the divergence restriction currently imposed in DarwinIA will no longer be used. All DARWINs, except those closed to investment, will then participate in DarwinIA (however, note that the current restrictions based on correlation and minimum equity in the signal account will be maintained).
• The returns used for the rating calculation in DarwinIA SILVER and the monthly return in DarwinIA GOLD will be calculated using the new DARWIN quoting method. Therefore, if a DARWIN is experiencing slippage issues, they will be reflected in its returns but it will still participate in DarwinIA.

• The DARWIN index now depends on the execution quality of the investors, adding another source of differentiation to the signal account’s return curve. It is a “minor negative consequence” for the DARWIN provider, offset by providing greater transparency to the investor.

  
  In the event that we decide to compensate investors for an execution problem, we will proceed to recalculate the DARWIN quote the following weekend to show the compensation made to investors.
  
  

2. If you are an investor:

The concept of divergence disappears from the DARWIN page, and we replace it with the concept of “used capacity.” Used capacity is a value between 0% and 100%, indicating an estimate of the amount of investment a DARWIN can have before closing due to excessive slippage.

It is calculated based on its existing slippage divergence, calculated to date, and the divergence at which we close the DARWIN to new investment due to slippage making it very difficult for investors to continue generating positive returns in the future.

A DARWIN will be open to new investment as long as the used capacity value is not 100%. Once it reaches 100%, it will be closed to further investment until the used capacity value drops back to 95%.

Used capacity will be displayed using a bar with the following colors depending on the value:

• Green (0 to 69.99%) – DARWIN Open
• Orange (69.99% to 99.99%) – DARWIN nearing closure
• Red (100%) → DARWIN Closed

In the header, the three states of the DARWIN will be added:

• Open
• Nearing Closure
• Closed
  
  

• The DARWIN’s quote curve will start quoting with investors’ execution prices, making it much easier to assess the impact of slippage on the DARWIN’s performance.

For each DARWIN, we will display the date from which its quoting began to be calculated with the new system.

We will not recalculate the DARWIN curve for technical reasons. However, investors will still be able to simulate the profitability of their investment using our backtesting tool.

• In the “Investors” tab, the filters “D-Score,” “Return,” and “Divergence” will be removed from the “Investor Capital Progress” chart. Instead, the concept of “Used Capacity” will be added.

• The “Divergence per order” chart will be renamed to “Slippages by investor order relative to the trader”. Here, you can access the slippages of the last 100 investor orders.
  
  

• In the investor terminal, we replace the concept of “divergence” with “currency impact.” For investments opened prior to the implementation date of this change, an alert will be displayed indicating that the “currency impact” value also includes differences resulting from slippages during the execution of the investment.
  
  

Now, all that’s left is for you to log in and see all these improvements for yourself. We are confident that this change adds greater transparency to the platform and will generate more confidence in investors when selecting DARWINs for their portfolios.

As always, if you have any questions about this update, feel free to contact our Support Team at info@darwinex.com.

Thank you for reading,

Your Darwinex Team.