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Personal account dealing / Insider trading

Some (quite random) thoughts on this:

@bianka this could be really a new ‘Compliance’ thread. (So move on your discretion)

There are a couple of ‘crowds’ at Darwinex, (Traders/Investors/Darwinex Employees/Darwinex Labs/Dawinex Stakeholders + Investors/…). So I am not only talking about the ‘Community Forum’, but I think there is some value to point out some alignment, but some disparities too.

Now, as I get it, this started as an issue about how a ‘Darwin Asset’ could/should be linked to the information that it is run by a Darwinex Employee. Gives this a ‘unfair’ advantage’ for attracting funds for this Darwin? And do we face probably a case of ‘Insider Trading’.

Now the whole, quite different concept of the ‘Darwinex Exchange’ vs a normal broker, gets us probably into some real new, and interesting, territory.

But it is, by some part, the same old issues again. Starting from: Do I want my analyst to trade? And the more sophisticated question, where to solve - the quite blurry line - between 'Market Making, Hedging, and at last ‘Trading against your Customer’. (Or to keep in Forex/CFD: B-Book)

With Darwinex, still on a ‘Agency’ mode of operation , this could boil down to some published ‘Code of Conduct’ and ‘Compliancy’ Statements.

BUT: I strongly (- just my opinion - but still capital I -) want REAL TRADERS at Darwinex. I want more expertise than only collecting commissions! And I want them even more to communicate. This whole thread is just a variation the old ‘Chinese Walls’ between the ‘Prop Desk’ vs ‘Customer Flow’. But this is done. It is settled. Many times. Before. (Ok. Probably not here and now. But…)

So probably new concepts needed.

The real question is: Where WE want to go? And, as I go to read between the lines of the last podcasts, there is the idea to make successful traders to ‘stakeholders’ in Darwinex.

So in my opinion don’t get taken away that some new ‘Vampire Squid’ is ‘fleecing’ you, think more of some new kind ‘Renaissance Technology’ emerging. With us on board :wink:

Just my 2¢ :wink:

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https://www.acacompliancegroup.com/blog/fca-has-concerns-about-investment-firms’-personal-account-dealing-controls

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Welcome to the :darwinex: community forum @quant , it’s good to have you here!

You’re right that this theme deserves its own topic on this forum given the interest of @Forexintradiadarwin and other members.

As an FCA-regulated broker and asset manager, Darwinex has indeed to prevent that a personal transaction by a staff member gives rise to either a conflict of interest, insider dealing or a breach of confidentiality. There are internal prodecures for this.

We’ll make an effort to elaborate more on this and related topics in different formats. Stay tuned!

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@quant
You can find more on this subject in this discussion

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@quant Thanks a lot for engaging on this.

I agree this is a line where we need to thread very carefully, and one where we have to be 100% transparent, but also practical.

  1. One risk as you say is that we don’t enforce enough IP protection so that our employees breach our customers trust in sharing their trading with us. This would indeed be the end of Darwinex, and as you can imagine, we’re paranoid about avoiding it.
  2. The other risk, which is quite real, is that compliance kills our “by traders, for traders” ethos. At the time of writing this, about 80% of our core operations / marketing / customer success team is made up of traders - traders who were customers before they became employees.

On that note, imposing a trading ban would mean the end of Darwinex as:

  • It would drain our talent pool - one thing is to employ people to support the product, quite another is employ people who USE the product and contribute to improving it every day, because they LOVE it
  • It would keep our employees’ eyes “off” the market ball, and this is VERY important for e.g. operations and risk management functions

Given Darwinex only ever offered and only ever will offer trading in the most liquid references in the markets - we don’t think a risk of market manipulation is warranted.

On that note, we’d be very happy to heed any suggestions that help us clarify our stance right now, which is basically -

  • trading is fine,
  • listing DARWINs is also fine - on the exact same terms as every customer, as long as they publicly disclose the person is currently employed at Darwinex.

Happy to clarify any questions!

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Thanks for reading this from you!

Do you have restrictions for trading employees or do you have a procedure to install and control restrictions in specific situations?

At this time, we severely restrict employee access to individual customer positions to protect the IP, and have an internal policy that any employee listing a DARWIN has to disclose his condition as an employee on his DARWIN profile.

Would you like to suggest additional requirements?

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As you mentioned that you are a buyer of HFD, you should disclose your complete real portfolio so that there is no smell of protectionism for a single Darwin.

It is enough if the Darwins are copied to a public demo portfolio with minimum position sizes instead of your real position sizes on an own thread here.

Changes (new Darwins or selling a complete position) should be published.

Edit: same is to do by other employees if they come out that they own a Darwin but their own.

I don’t think they should disclose their portfolio.
A darwin is a public product, a portfolio isn’t.

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Dear @IlIlIlIlI , I agree with @CavaliereVerde on this one.

My buying or not buying a certain DARWIN shouldn’t concern anyone, and what I should probably stop doing is disclosing parts of it - either the whole thing, or nothing, in which case best to disclose nothing.

Thanks for helping me realise this!

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I think you are correct here, although I did not perceive your mentioning that you held a particular Darwin as any kind of endorsement, some others seem to have done. And of course if they go on to invest in it, and then take a big loss you may become the scapegoat.

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@SATFX I guess the important thing to stress is that my methodology when building my DARWIN portfolio is as good as anyone’s (and possibly worse - I spend at most 20 minutes a month thinking about my portfolio!!!)

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The point is that

  1. your buying takes massive influence on investors, since you published it today the number of investors on HFD increased significantly

  2. if you publish one, publish all. That’s very simple.

  1. They are buying a dip
  2. Now it is open while before was closed for divergence

There are already too many topics about HFD there is no need for another …:wink:

I am very courious about other investors but… come on it doesn’t make any sense! :smiley:

No! Stop apologizing, there is a DD you call dip since several days and number of investors are increasing since today.
Welcomed to reality!

Even if I am wrong, I don’t know the investors and their reasons, there will be a coincidence in review what happened today.

Transparency means to publish all! At least now, and if no Darwin is mentioned again by any employee in the future, you can leave it with one publication.

A complete list here by @juancolonbo could be enough for clearing this point.

@juancolonbo '“by traders, for traders”
Exactly this was my main point!
With this in mind everything else will work out, and just ‘fall’ in place.

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@IlIlIlIlI Thanks for your contribution.

As I’ve stated elsewhere, I don’t have to publish my holdings in DARWINs because I have no control over either the trader behaviour, or the behaviour by any of the liquid assets traded by the managers.

We’re called the DARWIN Exchange because we’re about the survival of the fittest traders and investors - and that includes EVERYONE. When it comes to my personal investor behaviour - I am utterly open whenever I speak about my a) not being a trader and b) devoting a lot less time to my DARWIN portfolio than most members in this community - which means my guess is as good as anyone’s. Whatever AuM I choose to invest in my private capacity are disclosed in the AuM figure / investor count, alongside everyone else’s.

On that basis, I see no moral obligation to disclose my holdings. Personally, I don’t give a s…t disclosing them because of how little work I’ve put into it, but this thread clearly highlights how counterproductive my disclosure can be construed to be, so therefore I’ll refrain from doing it going forward.

Thanks for helping me clarify my stance - I’ve now finally thought this one through properly!

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@juancolonbo
To publish all would be more fair to traders and investors instead of promoting one, that were my thoughts.
We are not in a compliance audit so I don’t write about obligations.

You’re not the first employee I ask this question, even if I didn’t get an answer: what would you do if HFD burns another million of AuM? I currently see a very small green candle which stopped DD, but not a recovery. It wouldn’t be a tragedy for HFD to have a DD of 30 %, but for new investors just jumped in close to the former ATH.

To be responsible, to feel responsible and to be made responsible are three completely different things.

I wrote this to you just to think about side effects.