Allow Strategy Managers to define limits on Subscriber Scaling

Chatting with some others about C2, when we began wondering about scaling. It is my understanding that C2 has run into a few instances of large volume affecting the market, and has had to impose size limits (Strategy Managers: Get ready for position size limits).

I suggest a feature for Strategy Managers to be able to set their own limits on how large a subscriber can scale their use of an individual strategy when autotrading. This new limit-choosing option would, of course, be capped at whatever max size C2/the market can accommodate.

This could be accompanied by allowing an investor to subscribe to multiple instances (units) of that strategy, for the corresponding fee.

This would:

  • Allow Strategy Managers to derive proportionate and fair income from autotrading whales.

  • Reduce likelihood (or delay the event) of only a few subscribers, generating limited sub revenue, bringing the strategy to the point of slippage in a low-volume instrument and rendering the strategy unable to accommodate more subscribers.

  • Possibly allow strategy managers to cut down the number of systems they operate, if they have made extras in order to reach more subscribers.

  • Let investors with smaller accounts be as profitable (proportionate to sub fee) as autotraders with larger accounts, and not have to fight against slippage from lower footing.

  • Give strategy managers another tool to manage their position sizes, possibly?

  • Enable strategy managers to more accurately price their strategies, allowing investors to make more informed choices/comparisons.

I hope to hear other input. I may not have the greatest understanding of every factor involved, regulatory requirements, etc. such as mentioned in Subscriber control for system managers: charge according to scaling of subscribers?, but I think this idea is different from what is mentioned in that thread and may encompass another type of solution to the problem posed therein.

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I want to write the same for a long time.
Thank you, CollectiveEfforts for collecitng together all arguement.
I am totally agree and ask to add my vote.

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Thank you for raising this suggestion. As a strategy manager, it would be a huge issue as I have dedicated enormous amounts of resources to creating and maintaining my trading systems, and if it were to get bloated by merely 20-30 paying customers who run it at 10x or manually follow with larger amounts, for a sub fee that I can’t raise higher than C2’s cap. I realize now that I would have no choice but to leave C2 if this happened and was starting to affect my own accounts running the same systems.

In fact, on top of these measures, I’d love to be able to make auto-trading a condition of subscribing to my strategies, to prevent people from [easily] manually following. Perhaps by delaying the trade signals that are sent out, or not sending them out at all. I realize it would still be possible for someone to manually follow if they replicate the trades from their own account, but it would help discourage/ mitigate the issue of someone contributing significantly to slippage without paying their fair share.

Maybe it’s just me, but I imagine many other managers would like to be the ones putting a clear and fair price tag on their product.

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Super! Great idea on the scaling percentage. If only it were implemented here. Now it’s not fair - one has a scaling percentage of 100%, the other has 1000%, and both pay for a subscription the same.

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There was a discussion on this no so long ago:

The strategy manager doesn’t have too much control, you even can’t remove subscribers if they Auto-Trade your strategy.

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I agree that when you pay for a subscription it doesn’t matter if you 1X or 10X the trades because you pay for a service… but when it affects the strategy manager performance something should be done, especially when Collective2 does charge more for scaling… seems a bit “unfair”

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Thank you for bringing this thread to my attention, I had missed it before when searching for similar topics.

It looks like there were several concerns that Matthew raised, from wanting to avoid investor confusion, to whether or not it is even possible under regulations.
I can’t speak to the regulations, but I do hope there is a viable way to implement these suggestions on the website, such as displaying a category “Scale Limits: 1-3x" or "1-5x” visible before someone subscribes.
This would be a great tool to help keep strategies viable longer-term, so that the manager doesn’t have to add delay or position-size-limiting measures that may artificially worsen the performance of the strategy + bloat whatever process is running it.

To your second message,
If you enter into a paid subscription for a service that is meant to let you freely scale, then of course you should not be stopped from getting the full value. What strategy managers may need is a way to offer limited subscriptions. The price, then, should take into account the limited value that it offers. Many people like @TheStig won’t be willing to make their best strategies available to the little guy if the same price has to encompass the fat cats weighing the ship down. And conversely, if someone feels that their strategy is worth the max $595 for only 1x, then they won’t even list it and make it available for fear of someone 10x’ing at 90% discount!

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Is it legal though ? What’s the regulations for this ?

This is some of the regulation-related commentary I have seen from the threads I have reviewed:

TL;DR: I have yet to see any regulatory issues with this version of solution to the problem that others have found roadblocks in.

Matthew in 2020: “The CME has taken the position that prices are not allowed to change too much on their futures exchanges.” Important reference
This is the reason behind C2 imposing position size limits on strategy managers. The suggestion I outline would be cooperative towards this goal.

@KarlA in 2016 vaguely mentions regulation, but differentiates between a vendor trying to limit scaling and an individual strategy having limits. Perhaps this is the key, if C2 is the vendor?
Other replies in this thread imply or refer to regulatory hurdles for transaction/volume-based compensation, which is the inverse of what is being suggested here. Rather, C2 already imposes its own scaling limit via paid Investor plan, but I think it would be valuable to open this control feature up to strategy managers as well. I also believe that this feature would enrich the ecosystem of strategy managers willing to contribute their systems, thus benefiting C2 as a platform innately, on top of the additional subscription fees.

I see one or two threads from @Daniel_goldshtein who is presented with the same problem, however Daniel’s approach to solving it is slightly different - wanting strategy managers to profit whenever a subscriber chooses to scale. To which, Matthew very bluntly states, “it’s a regulatory problem.”

I wish I could point to specific regulations, but I am still early in my learning and don’t even know what regulatory bodies C2 is subject to other than CME. Hopefully someone else can chime in with greater insight?

I realize it would still be possible for someone to manually follow if they replicate the trades from their own account,

I initially thought along these lines, but did some more snooping on the site and read somewhere that C2 is able to detect external trades being placed in AutoTrade-synched accounts, and disable the AutoTrading to…do something, I can’t remember. Possibly related to margin requirements. Maybe this same infrastructure can be used to further discourage autotrade replication!

And, hey, if someone still manages to workaround by having a second a/c follow the first (autotrade) a/c, more power to them. They’ve just developed their own tool.

Let me gently nudge this conversation into a slightly different direction. @CollectiveEfforts, your information about position size limits may have come from some older forum threads about the subject. In fact, in the last few months, we were able to increase our position size limits somewhat, with the assent of the CME. While the problem is far from resolved, I think that some of the more egregious size limits were expanded.

I always appreciate suggestions from users, and strategy managers. The best way I know to make Collective2 better is to understand what users want, and try to give it to them.

But, that said, I think it unlikely that in the near future I’ll be adding any kind of Strategy Manager controlled scaling limits, scaling-based subscription pricing, etc. There are several reasons for this – some regulatory, some related to the UI complications and wonkiness that would be needed, the lack of consistency across instrument class, etc – all of which would put still more barriers in front of new users wanting to explore C2. I never say “never,” so it may be something I consider in the future. But right now, it is unlikely.

I think the strategy I will pursue instead will be to continue working within the regulatory system: nudging, pleading, and begging the CME to relax their more unproductive size restrictions, so that position size limits become less important in the future.

@CollectiveEfforts I would also encourage you to build your subscriber base, and start to see where (and if!) position size limits even affect your trading. I do not see that you are close to reaching these limits currently. When and if they become an issue, hopefully by then I will be able to encourage the CME to loosen the restrictions yet more. Perhaps you will not ever be affected or size-constrained.

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