BOARD

When do DARWINs close for new investment?

16 June 2016

With several DARWINs gaining Assets under Management at speed, the time has come to announce the DARWIN lock-out methodology.

This blog post explains how the process is monitored, with two new areas in the investor interface providing the relevant information.

Reminder – Divergence

DARWINs track their underlying strategy. DARWIN provider and investors are bound NOT to trade at the exact same prize because:

  1. Investors’ replica block trade lags the lead DARWIN provider’s
  2. For popular DARWINs, the investor block trade volume exceeds provider’s

The market typically moves during the latency period, and this introduces a performance difference. On some trades investors lose out, on some they win. Over a long enough sample of trades the latency effect averages out – but it introduces a bit of noise in the replication process.

Unlike the latency effect, the volume effect makes investors systematically worse off. They lose out gradually as growing trade sizes (driven by growing assets under management) wipe available market depth. For successful enough DARWINs, there comes a point when a marginal EUR / USD / GBP invested yields no marginal profit. This point marks a strategy’s AuM ceiling.

Monthly Divergence

The single metric driving when and how a DARWIN is closed for new investment is monthly investor divergence.

Monthly investor divergence is public for all DARWINs on the public dashboard, with a high-level summary (A in the screen capture below) and a detailed overview (B in the capture):

Screen Shot 2016-06-16 at 17.47.48

Negative monthly divergence (red) indicates how much DARWIN investor performance lags DARWIN notional performance, per month. Note that to protect investors from this effect, investor trades clear at the raw spread provided by our LPs. This is the reason why most DARWINs sport positive (green) divergence by default. The monthly divergence  figure is calculated for the most representative trades by the strategy (note – there are numerous hedging micro-trades triggered by the risk management algos to “shave” investor exposure, but these do not count towards the divergence computation).

The public submenu in the DARWIN profile (B in the screenshot) includes two tabs.

The first tracks divergence in cumulative % – as a difference between DARWIN and investor performance:

Screen Shot 2016-06-16 at 20.27.00

The second tracks pip divergence: tracking positive (green) and negative (red) divergence accounting for replication latency (average and median) in milliseconds (ms) and individual trade size (bubble size): Screen Shot 2016-06-16 at 20.29.38

Note that divergence can fluctuate substantially across strategies and market times. It can be particularly slow during market roll-over and news releases, as trades take longer to fill and the execution bridge takes longer to report to our investor infrastructure.

 

What’s next?

As AuM for the more popular DARWINs scale, we’ll continue to monitor all the parameters driving investor divergence, with a view towards:

  1. Refining the calibration of the scalability score to AuM
  2. Developing algorithms that fraction investor execution – it is certainly possible to reduce slippage this way
  3. Offering providers toolkit to optimize their investors’ liquidity trade-offs
  4. Refining the threshold after which DARWINs are closed for new investment (currently set at -1% negative divergence)

Thoughts? Suggestions? Go ahead!

Last News
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Last night’s incident on MT4 micro indices

14 November 2019

Our MT4 feed on some “micro” indices went down in the night from November 13th to November 14th, 2019. NB: the downtime did NOT affect FX pairs, commodities, stocks and cryptos on MT4, and MT5 operated as normal. This blog post explains what happened and what we did about it. What happened One of our Prime Brokers […]

Our MT4 feed on some “micro” indices went down in the night from November 13th to November 14th, 2019.

NB: the downtime did NOT affect FX pairs, commodities, stocks and cryptos on MT4, and MT5 operated as normal.

This blog post explains what happened and what we did about it.

What happened

One of our Prime Brokers had issues with their “micro” Liquidity Provider on STOXX50E, UK100, GER30 and WS30 in the very early European morning.

We worked with them to isolate, then fix the root cause  and resumed streaming later in the European morning.

Our decision

Whilst our PB has refused to indemnify us for their downtime, our Operations Department has proactively reviewed all affected orders. We will affected customers wherever a compensation is due. Luckily enough, some of our customers benefited from this incident and made larger profits than they planned!

If you feel any of your orders ought to be reviewed, kindly reach out to info@darwinex.com. As ever, don’t forget to mention your MT4 account number and (where possible), Order ID.

We keep working hard to improve our liquidity, the better our LPs, the lower the chances that this sort of incidents take place.

Please accept our sincerest apologies for the inconvenience and do let us know if doubts remain. We’ll do our utmost to clarify!

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Upcoming Holiday in Japan on November 4th

31 October 2019

There is a public holiday in Japan on Monday, 4th of November. Kindly note that during this time spreads may be wider and liquidity may be thinner. Bank holidays may also give rise to changes on the applicable swap rates.

There is a public holiday in Japan on Monday, 4th of November. Kindly note that during this time spreads may be wider and liquidity may be thinner. Bank holidays may also give rise to changes on the applicable swap rates. For any questions, don’t hesitate to reach out to info@darwinex.com.

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Upcoming Holiday In New Zealand Resulting In The Possibility Of Wider Spread

25 October 2019

Please be aware that there is a public holiday in New Zealand on Monday, October 28th during which spreads may be wider and liquidity may be thinner. For any questions, reach out to info@darwinex.com.

Please be aware that there is a public holiday in New Zealand on Monday, October 28th during which spreads may be wider and liquidity may be thinner. For any questions, reach out to info@darwinex.com.

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MetaTrader and Wine / PlayOnMac incompatibility on MacOS Catalina

18 October 2019

We’d like to inform you that MetaTrader terminals are currently not working correctly when using Wine or PlayOnMac on MacOS Catalina. CodeWeavers (developers of Wine) are already working on fixing this. We recommend that if you use Wine or PlayOnMac on MacOS, you postpone updating the operating system to MacOS Catalina until a solution is […]

We’d like to inform you that MetaTrader terminals are currently not working correctly when using Wine or PlayOnMac on MacOS Catalina. CodeWeavers (developers of Wine) are already working on fixing this.

We recommend that if you use Wine or PlayOnMac on MacOS, you postpone updating the operating system to MacOS Catalina until a solution is ready.

In the meantime, users who are already affected can continue using MetaTrader on MacOS by installing Windows as an alternative OS or by using Parallels.

For any questions, don’t hesitate to contact us at info@darwinex.com.

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Margin increase on 18 October 2019 (Professional Clients only)

17 October 2019

Please be informed that our margin requirements for Professional Clients are changing on Friday (18 October 2019) around 17:00 UK time due to the uncertainty around the Brexit negotiations. Retail Clients are not affected by this change. The new margin requirements described below will remain in force until further notice. In this connection, please note that the new margin requirements […]

Please be informed that our margin requirements for Professional Clients are changing on Friday (18 October 2019) around 17:00 UK time due to the uncertainty around the Brexit negotiations. Retail Clients are not affected by this change.

The new margin requirements described below will remain in force until further notice.

In this connection, please note that the new margin requirements will affect both EXISTING and NEW positions. Kindly make sure you have enough available margin / equity in your account for the days leading up to and during the voting/announcement of results.

 

 

Instrument Current Margin New Margin (Brexit)
FOREX
EURAUD 1.00% 2.00%
EURCAD 1.00% 2.00%
EURCHF 1.00% 2.00%
EURGBP 0.50% 2.00%
EURJPY 0.50% 2.00%
EURNOK 1.00% 2.00%
EURNZD 1.00% 2.00%
EURUSD 0.50% 2.00%
GBPAUD 1.00% 2.00%
GBPCAD 1.00% 2.00%
GBPCHF 1.00% 2.00%
GBPJPY 0.50% 2.00%
GBPNOK 1.00% 2.00%
GBPNZD 1.00% 2.00%
GBPSEK 1.00% 2.00%
GBPUSD 0.50% 2.00%
COMMODITIES
XAUUSD 0.50% 2.00%
INDICES
STOXX50E 2.00% 3.00%
UK100 2.00% 3.00%

 

For the ease of reference, Margin in % =  (1/max. leverage)* 100. In other words:

0.50 % = 1:200 leverage

1.00 % = 1:100 leverage

2.00 % = 1:50 leverage, etc.

Need help? At info@darwinex.com we’ll be happy to assist you!

 

Brexit

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Potential High Volatility upon Market Open on Sunday Oct 20th

15 October 2019

We’d like to inform our traders of the possible extraordinary UK parliamentary sitting on Saturday October 19th, 2019 where a vote may be held on any Brexit deal achieved at the EU Council meeting this week.

We’d like to inform our traders of the possible extraordinary UK parliamentary sitting on Saturday October 19th, 2019 where a vote may be held on any Brexit deal achieved at the EU Council meeting this week.

Due to the uncertainty created by this event, we urge our traders to proceed cautiously as market moves may be large. Particular attention should be paid to the market open on Sunday October 20th, where there is potential for high volatility which may cause market gaps.

To manage their account effectively, traders should review margin rates and that there is sufficient collateral to cover their exposure.

For any questions, reach out to info@darwinex.com and we’ll be happy to help.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 66 % of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.