I had a question regarding the scaling.
From what I read on the website and here in the forum, strategy leaders don’t get more subscription fees from the investor if he does scaling.
Some had arguments that it is not fair because if the investor makes more money, they should pay more for the strategic leader.
Even though this claim can be valid because when an investor wants to scale more than 200%, he needs to increase his subscription price as a Collective2 user to be able to scale higher. I can understand that C2 may have technical requirements or any other thing that will require paying more for the scaling, and that’s fine, and I personally don’t care what others make.
BUT, my question is; if I trade any product that can have Position-size-limit such as GOLD Futures, scaling can hurt my cashflow.
From what C2 wrote about the Position-size-limit I understand but just for illustration;
Let’s say I manage 1 Million AUM, and I can trade only five Gold contracts at the moment, and then a subscriber comes and scaling his strategy by 500%, then there is a chance that I’ll not be able to trade.
So, instead of this investor that scaled, I could have 4-5 subscribers who would have joined my strategy, and I would earn a subscription fee.
So basically, the investor with 500% scaling “blocks” me from getting new subscribers.
I just wanted to clarify it and see if I’m missing something because the scaling affects the Position-size-limit, and it can hurt the strategy leader by not getting a potential investor. Then they will not understand we he does not trade.
Just trying to understand as there is a big difference when you trade in private strategy for yourself and when you get subscribers, as they’re becoming some limitations.
Hello, any update about this from C2 team?
I don’t understand what you are asking.
The question is that when you scale, the cost of the subscription should change.
Especially in tools where there is a volume limit (in other words “subscribers”).
If a subscriber want to scale more than 200% he need to increase his subscription fee at C2.
If the investor scale a strategy let’s us 800% this affects on the strategy leader position limits what can affect on receiving a new subscribers. If a new subscriber joins and the strategy leader can’t trade because he is max-up in the position limits products.So, instead of this 1 subscriber that scale 800% he could take another 3-4 subscriber and earn subscription fee from them.
We had something like this a few years ago, and truthfully it wasn’t worth the overhead in complexity – both from a customer-experience and support-cost perspective. It makes the process harder for subscribers – introducing one more thing to worry about/optimize around/consider… and it introduces regulatory complexity as well (it’s not 100% clear this is even allowed for stocks and options strategies; so we would need to have two different pricing regimes; and what about strategies that trade multiple instrument classes? – etc.)
In short, it is not something that I will implement. But I appreciate that Daniel took the time to make a suggestion that he feels will improve the experience for C2 strategy managers.
I agree with you. This is not something that needs to be optimised.
Personally, it would be much more important for me to be able to set the subscription price according to profit.
A strategy that earns $100 a month and a strategy that earns $5K a month cost the same or very close.
It’s not fair to traders and it’s not fair to subscribers.
Thanks for the update Matthew.
At the end the goal is keep improving C2 for both Managers and Costumers.
For both sides I think sometimes it may sound easy or necessary to implement something, but then the regulations or complexity arrive and it changes the picture.
I Totally agree with, sometimes it’s not beneficial for the strategy leader even though the investor take risks subscribing to your strategy.
@MatthewKlein once mention that this is a regulatory thing and more importantly this is not the way that C2 operates, and this is fine, this is their business model that’s all.
@Alex-Y the only thing the manager can do I assume is to increase the strategy price.
Or maybe they make a “donation” feature
@Alex-Y This is not allowed in the U.S.
@MatthewKlein Matthew, as someone mentioned earlier in the thread, what if a trade lader watches his position limits (futures in this case) and when subscribers/autotraders are close to reaching the number-limit for position-sizes used by the strategy and the leader dont accept any more subscribers for that particular strategy and thats fine. But then several existing subscribers decide to scale their positions and the strategy goes over the allowed limits. In this case lets say we already trade the minimum of 1 contract and we can not lower the sizes, then the strategy can not trade anymore at all or forced to unsubscribe followers. Trade leaders can not even unsubscribe followers if they are auto trading. This is a HUGE problem. I think its important that you plan how trade leaders, especially for futures trading should deal with this going forward.
You’ll need to complain to the CME. This is their regulation. I have no choice but to follow their requirements.
I agree, I think the strategy leader should limit the scaling of the investors, because in that case as you said if someone increase his scaling it can affect on our position limits + new subscribers and there is nothing you can do…
Also, not to mention that the subscriber don’t know that the strategy leader in a position limit situation, and they can assume that the strategy leader don’t trade, and the most sad part that he can’t do anything.
@MatthewKlein Can you please refer for this regulation/limit by CME?
I tried to look for some information and I saw that there is a position limit subject
but this is more for a commodities future and not on Index Futures + they said the position limit apply on costumers that have above 30 Million AUM, I don’t think there is a strategy here with this amount of money that trades Futures with this amount of money.
@Daniel_goldshtein @MatthewKlein , we understand the regulation part, not to do anything or complain, and also the trade leader is responsible to watch the limit sizes, but if the leader did his part and limited subscribers it should not be possible “afterwards” that subscriber scale or do something that leaders can not control and because of that the strategy can not trade anymore. so the leader is responsible for the first i mentionen but after that i hope that everybody agrees that it is C2:s responibility that a trade leader does not end up in a situation like that without any possibility to do something about it.
I saw this but from what I understand C2 doesn’t put limit orders for the investors but instead execute a market for the investors when the price limit for the strategy leader hits, am I coreect? If so, their claim is not relevant. Also, in this case, if we execute market order isn’t this “solve” this issue?
Sorry for the many questions but seems there are some differences when you trade for your own account in private and when a subscriber joins your strategy.
Also, I totally agree with what you wrote “Wait a second. When lots of people want to sell something, isn’t the price supposed to change? Isn’t that what an exchange is supposed to do?” did they have any response one that? ( as you were fined unfairly I think…)
Agree, this is very common when the Futures contracts changes and it can affect very much on the trading as the volume switching from one contract to another.
Is there an option to create like a buffer or something, that the strategy leader need to approve if he in a position limit situation? or if a subscriber joined to the strategy he can’t change for X period of time. ( only upscaling )
to offset this issue C2 could implement an algo for execution being processed in a random way for subscribers rather than offload position via mkt orders. (with better slippages on the long run too) I agree though that It’s something odd the CME Rule posted above. On top of that let managers decide the scale for subscribers tied to a price per contract or lot. (which will help manage in a more efficient the issue above). As far as I know this is legal and indeed used by other services out there… (note it’s not % based on profit) If It’s legal for C2 decide the scale then should be legal for trade leaders too decide the lot traded per unit…
Okay, thanks for all the feedback. I’m going to close this thread.