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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
apalancamiento esma

NextEra Energy Stock Split 4:1

19 October 2020

The NextEra Energy stock split is approaching. At Darwinex we will apply the stock split on October 27th.

The NextEra Energy stock split is approaching. $NEE shares will be split 4-for-1. The number of shares will be multiplied by 4 and share prices divided by this same value.

At Darwinex we will apply the stock split on Tuesday October 27th at market open.

In live accounts we will adjust open position to the split without the need to close and reopen trades. Pending orders will be cancelled. In MT5, the hedged positions will be closed and the split will be applied to the resulting net position.

In demo accounts we will close all open positions in $NEE on Monday afternoon. Pending orders will be cancelled.

$NEE stocks will be available for trading from Tuesday, October 27th, at the post-split price.

As always, at info@darwinex.com we’ll be happy to assist you!

End of Daylight Saving Time in Europe (October 25th 2020)

Please note that Daylight Saving Time (DST) ends in Europe on Sunday October 25th 2020 but our MT4 nd MT5 servers’ time is not changing until Sunday November 1st 2020 when DST ends in the US.

Please note that Daylight Saving Time (DST) ends in Europe on Sunday October 25th 2020 but our MT4 nd MT5 servers’ time is not changing until Sunday November 1st 2020 when DST ends in the US.

This means that there will be 1 week (October 25th through November 1st) where, for European users, most markets will open 1 hour earlier than during European DST, e.g. FX market will open at 21:04:01 GMT.

Instrument Trading Hours (GMT)
FX 21:05 Sun – 20:55 Fri (except 20:59:50 – 21:04:01 daily) 
DARWINS 21:05 Sun – 20:55 Fri (except 20:59 – 21:05 daily)
COMM.  
XAUUSD 22:01 Sun – 20:55 Fri (except 20:59 – 22:01 daily)
XAGUSD 22:00:01 Sun – 20:55 Fri (except 20:59:50 – 22:00:01 daily)
XTIUSD 22:00 Sun – 20:55 Fri (except 21:00:01 – 22:00 daily)
XNGUSD 22:00 Sun – 20:55 Fri (except 21:00:01 – 22:00 daily)
INDICES  
AUS200 22:00 Sun – 20:55 Fri (except 21:00 – 22:00 daily)
STOXX50 22:00 Sun – 20:55 Fri (except 21:00 – 22:00 daily)
FCHI40 22:00 Sun – 20:55 Fri (except 21:00 – 22:00 daily)
GDAXI 01:30 – 21:00 (Mon – Fri)
SPA35 07:00 – 19:00 (Mon – Fri)
J225 22:00 Sun – 20:55 Fri (except 21:00 – 22:00 daily)
UK100 22:00 Sun – 20:55 Fri (except 21:00 – 22:00 daily)
SPX500 22:00 Sun – 20:55 Fri (except 21:00 – 22:00 daily)
NDX 22:00 Sun – 20:55 Fri (except 21:00 – 22:00 daily)
WS30 22:00 Sun – 20:55 Fri (except 21:00 – 22:00 daily)
US STOCKS 13:31 -19:59 (Mon – Fri)

As always, at info@darwinex.com we’ll be glad to assist you with any question you may have!

apalancamiento esma

Margin increase for EURGBP and EURJPY this Friday (Professional Clients)

14 October 2020

Our margin requirement for the EURGBP and EURJPY pairs for Professional Clients is changing this Friday, October 16th 2020, around 17:00 BST.

Our margin requirement for the EURGBP and EURJPY pairs for Professional Clients is changing this Friday, October 16th 2020, around 17:00 BST.

The measure is due to the recent increase in market volatility.

The new margin requirement will be 1% for both EURGBP and EURJPY, replacing the previous 0.5%.

It will remain in place until further notice and will affect both existing and new positions.

Kindly make sure you have enough available margin and equity in your account for the new margin level.

Need help? Please don’t hesitate to contact us at info@darwinex.com.

apalancamiento esma

Discontinuation of cryptocurrencies from 2021

15 September 2020

From 2021 Darwinex will no longer offer cryptocurrencies. As a first step, on Monday 21 September we will deactivate the creation of new accounts.

From 2021 Darwinex will no longer offer cryptocurrencies. Their low demand from our customer base does not justify the regulatory risk involved.

As a first step towards the discontinuation of cryptocurrencies, on Monday 21 September we will deactivate the creation of new accounts.

The cryptocurrency accounts already opened will be able to continue operating until the end of the year.

Amended Trading Hours U.S. Labor Day 2020

27 August 2020

Please note the amended Darwinex trading hours for the upcoming U.S. Labor Day on September 7th, 2020. All times are UTC.

Please note the amended Darwinex trading hours for the upcoming U.S. Labor Day on September 7th, 2020. All times are UTC.

Labor Day 2020

For your convenience:

– Normal DARWIN trading hours

– Normal FX/CFD trading hours

– Annual Calendar of Amended Darwinex Trading Hours

Apple And Tesla Stock Splits

25 August 2020

Tesla’s and Apple’s stock splits are approaching. As of August 31st, Tesla shares will be split 5-for-1, and Apple’s 4-for-1. Existing shares of each company will be multiplied by 5 and 4, respectively, and their share prices divided by those same values. At Darwinex we will apply the stock split on the weekend of August […]

Tesla’s and Apple’s stock splits are approaching. As of August 31st, Tesla shares will be split 5-for-1, and Apple’s 4-for-1. Existing shares of each company will be multiplied by 5 and 4, respectively, and their share prices divided by those same values.

At Darwinex we will apply the stock split on the weekend of August 29th.

In live accounts we will adjust open positions in $AAPL and $TSLA to the split without the need to close and reopen trades. Pending orders will be cancelled.

In demo accounts, however, we will close all open positions in $AAPL and $TSLA on Friday afternoon. Pending orders will be cancelled.

Both $AAPL and $TSLA will be available for trading from Monday, August 31st, at post-split prices.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. -- % 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.