PAMM accounts
PAMM (Percent Allocation Management Module) accounts give the opportunity for traders to run their own investment funds.
Main features
Consolidation: All investment accounts are unified into one master trading account, also known as a PAMM account.
Access Control: Only the money manager has trading access to the PAMM account. Investors cannot execute trades.
Profit Sharing: Profits and losses (PnL) made on the PAMM account are distributed among investors according to their account sizes.
Execution Flexibility: The system provides various execution options, including the ability to auto-correct master’s positions during withdrawals.
Automated Rollovers: The platform automates rollovers for deposits and withdrawals according to a predetermined schedule.
Uninterrupted Trading: There's no need to close master positions during subscriptions, unsubscriptions, deposits, or withdrawals.
Customizable Fees: Fees for all investors can be separately configured.
Automated Subscriptions: The system supports automatic subscription and unsubscription of investors.
Privacy of Positions: Investors cannot view open positions in their MT5 terminal.
Transparency of Performance: Investors can track their performance, current equity, and the floating PnL of their investment accounts through web interfaces.
Precise PnL Distribution: Profits and losses are distributed to investment accounts with a minimum precision of 0.01 USD/EUR/GBP, which is the smallest unit of the base currency of the investment account.
Allocation of positions in PAMM accounts
A master account, also known as a PAMM account, is composed of multiple individual investment accounts. The total equity of the master account is equal to the sum of the equities from these individual investment accounts.
Only a designated money manager has the authority to execute trades on the master account.
Any trades initiated by the money manager on the master account are not visible or reflected in the individual investment accounts.
When a trading position is closed by the money manager, the respective profits or losses (PnL) are distributed amongst the investors. Each investor receives a balance operation reflecting their proportionate share of the PnL from the closed position.
Formula for calculation of PnL for investment account
Example
Step 1: Master opens BUY 1 lot EURUSD @1.2110. Nothing is opened on investment accounts.
Step 2: Master closes 1 lot EURUSD @1.2120. Closed profit = 100USD.
Step 3: Investor #1 gets balance operation with 10USD. Investor #2 gets balance operation with 20 USD profit. Investor #3 gets balance operation with 70USD profit.
Behavior of PAMM accounts during deposits/withdrawals
When an individual performs a deposit or withdrawal (DW), the shares in their investment accounts are adjusted according to the updated share balance following the transaction. Once the DW operation is completed, this adjustment is reflected across all active positions within the master account. Additionally, any floating Profit and Loss (PnL) from the master account positions are proportionally redistributed to the investment accounts through balance operations.
Example
Step 1: Master opened BUY 1 lot EURUSD @1.2110.
Step 2: Investor #2 subscribed and deposited 2900 USD when EURUSD was @1.2120.
Step 3: Investor #1 got balance operation with floating PnL at the moment of DW: +100USD
Step 4: Master closed position @1.2110.
Step 5: Investor #1 got a balance operation with his share of PnL between DW and closing of position: -27,5 USD (-100USD x (1100/4000). Investor #2 got his share of PnL: -72,5USD
Additional options of execution
Autocorrection of master positions on Withdrawals.
Deposits without rebalancing of positions.
1. How autocorrection works
Autocorrection helps a money manager automatically save the same leverage (or margin level) that was on the account before a withdrawal by partially closing opened positions.
Autocorrection assists a financial manager in maintaining the original leverage or margin level in an account, even after a withdrawal. It achieves this by initiating partial closures of open positions. This automatic feature allows the account to preserve its previous leverage state despite any account withdrawals.
Autocorrection always results in closing each open position on a master account by at least the minimum trading volume that is defined for an instrument.
Example
Let's take a concrete example of a PAMM account with an initial investment of $4000, divided between two investors: Investor #1 with $1000 (25%) and Investor #2 with $3000 (75%). Consequently, they have a respective virtual stake in a 1 lot position of EURUSD: Investor #1 at 0.25 lot and Investor #2 at 0.75 lot.
Now, let's say Investor #2 decides to withdraw $2000.
If we apply an autocorrection mechanism, the master position is adjusted in accordance to the withdrawn amount. The calculation follows this pattern: withdrawal amount/total initial investment x total position, which in our case is $2000/$4000 x 1 lot, resulting in a closure of 0.5 lots.
Post-withdrawal, both investors will retain the same size of virtual positions: Investor #1 with 0.25 lot and Investor #2 with 0.25 lot, as they now have equal equity.
On the other hand, if we do not apply autocorrection, the positions of the money manager remain unaffected, but the investors' shares in the PAMM account are recalibrated after the withdrawal.
Investor #1 now holds 50% and Investor #2 also holds 50%. This means that each investor has a 0.5 lot position in EURUSD after the withdrawal.
in this situation it means that leverage for investor #1 increased by 2 because of actions of investor #2.
We've integrated a 'rollover' feature to improve the predictability and management of deposits and withdrawals, ensuring there are no unexpected fluctuations, even in master accounts where autocorrection isn't enabled.
The 'master account manager' has the ability to establish a comprehensive schedule for both deposits and withdrawals. This means they'll have complete clarity on the timing of deposit and withdrawal (DW) requests, as well as the specific amounts that investors intend to deposit or withdraw.
Furthermore, the scheduling of rollovers can be easily customized by the master account manager. This can be done by accessing the settings of their master account via the Web User Interface (UI). This way, they can adjust the schedule to their preferences, enhancing their control over account operations.
2. Deposits without re-allocation of positions
For illustration, let's consider a PAMM account with a total deposit of $4000, divided between two investors: Investor #1 with a $1000 deposit (representing 25% of total), and Investor #2 with a $3000 deposit (75% of the total). At this point, there's an open position of 1 lot in EURUSD.
Subsequently, Investor #2 makes an additional deposit of $4000.
Prior to this deposit, Investor #1 had a virtual position of 0.25 lot in EURUSD, and Investor #2 held 0.75 lots. Despite the additional deposit from Investor #2, their virtual positions in EURUSD remain unchanged: Investor #1 continues to hold 0.25 lots and Investor #2 still has 0.75 lots.
While this approach may seem logical, it's important to bear in mind potential downsides:
The performance of the master account could differ from the individual investment accounts because the positions aren't rebalanced to reflect the new deposit.
The master account will maintain a larger margin level than Investor #1. This could result in Investor #1 hitting a stop-out point sooner than the master account, due to the smaller investment balance.
Consequently, utilizing this feature might not be advisable due to these potential complications.
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