Main Features
Consolidation of Accounts
All investor money is combined into a single master trading account, which is called a PAMM account. This approach makes managing the funds much easier for everyone.
Access Control
Only the Money Manager has permission to execute trades in the PAMM account. Investors cannot trade directly.
Profit Sharing
Profits and losses (PnL) from the PAMM account are automatically distributed to investors based on their initial contribution.
Execution Flexibility
The PAMM system offers flexible trading features, including an auto-correction mechanism that adjusts the master's trades during withdrawals.
Automated Rollovers
Deposits and withdrawals are processed automatically according to a pre-set schedule.
Uninterrupted Trading
The system is designed to run seamlessly, meaning the manager does not have to close any open trades when investors join, leave, or make deposits and withdrawals.
Customizable Fees
The manager can set separate, customized fee structures for each individual investor.
Automated Subscriptions
The platform automatically handles the process of investors joining and leaving the PAMM account.
Privacy of Positions
Investors cannot view the manager's open trading positions in their MetaTrader 5 (MT5) terminal. This protects the money manager’s strategy.
Transparency of Performance
Investors can track their performance, current account value (equity), and profits or losses from open trades (floating PnL) through dedicated web interfaces, offering full visibility into their investments.
Precise PnL Distribution
Profits and losses are distributed to investment accounts with extreme precision (down to 0.01 USD/EUR/GBP), ensuring a fair and accurate allocation.
PAMM Account: Position Allocation and Execution Features
Allocation of Positions in PAMM Accounts
The master account (or PAMM account) pools together the funds from all investment accounts. Only the designated money manager can execute trades on the master account, and investors cannot see these individual trades.
How PnL is Distributed: When the money manager closes a trading position, profits and losses (PnL) are allocated to the investment accounts based on their share of the total master account equity. Each investor's account is credited with a balance operation reflecting their proportional share.
PnL Calculation Formula:
$$ \text{PnL of investor} = \text{Closed PnL for master position} \times \left(\frac{\text{Investor's Equity}}{\text{Master’s Equity}}\right) $$
Example:
Master account total equity: 10,000 USD
Investment account #1 equity: 1,000 USD
Investment account #2 equity: 2,000 USD
Investment account #3 equity: 7,000 USD
Steps:
Master opens a BUY 1 lot EUR/USD at 1.2110.
Master closes the position at 1.2120, making a closed profit of 100 USD.
Profit Distribution:
Investor #1 receives 10 USD (1,000/10,000 x 100).
Investor #2 receives 20 USD (2,000/10,000 x 100).
Investor #3 receives 70 USD (7,000/10,000 x 100).
Behavior of PAMM Accounts During Deposits and Withdrawals
When an investor adds or removes funds, their shares in the investment account are adjusted. These changes are immediately reflected in the master account, including any floating profits or losses (PnL).
Example:
Initial State: Master account = 1,000 USD, Investor #1 = 1,000 USD
Step 1: Master opens a BUY 1 lot EUR/USD at 1.2110.
Step 2: Investor #2 deposits 2,900 USD when EUR/USD is at 1.2120.
Step 3: Investor #1 receives a balance operation reflecting a floating PnL of +100 USD.
Step 4: Master closes the position at 1.2110.
Step 5: Investor #1 sees a balance operation with -27.5 USD, and Investor #2 receives -72.5 USD.
Additional Execution Options
The PAMM system includes various features to ensure smooth execution during deposits, withdrawals, and other account changes:
3.1 Autocorrection of Master Positions on Withdrawals
Autocorrection helps keep the account’s risk level (leverage or margin level) consistent after a withdrawal. This feature works by partially closing open positions to maintain the original risk profile for all remaining investors.
How Autocorrection Works: If an investor withdraws funds, autocorrection calculates the amount to be closed by applying the formula:
$$ \frac{\text{Withdrawal amount}}{\text{Total initial investment}} \times \text{Total position} $$Example:
Initial Investment: $4,000 (Investor #1: $1,000, Investor #2: $3,000)
Master opens: 1 lot EUR/USD.
Investor #2 withdraws $2,000.
Autocorrection: A 0.5 lot closure occurs (2,000 / 4,000 x 1 lot), adjusting the positions accordingly.
Investor #1 now holds 0.25 lots, and Investor #2 holds 0.25 lots, after the withdrawal.
3.2 Deposits Without Rebalancing Positions
Deposits can be made without forcing the manager to rebalance positions, which helps preserve existing trades.
Drawbacks: This method may not always be ideal, as the positions of investors may no longer match the equity balance, leading to discrepancies in margin levels. For example, one investor may experience a stop-out due to the larger margin level in the master account that was not proportionally adjusted for their smaller position size.
Rollover Feature
To improve predictability, the system includes a rollover feature to handle deposits and withdrawals more efficiently. Money Managers can set a schedule for deposits and withdrawals, ensuring clarity and control over timing and amounts.
Benefits:
Predictable deposits/withdrawals.
No unexpected fluctuations, even when autocorrection is disabled.
Flexibility for money managers to schedule and control account operations.
Conclusion
The PAMM system provides sophisticated features for managing investments, including automatic profit distribution, risk control during withdrawals (autocorrection of master positions), and customizable deposit/withdrawal schedules. These tools ensure efficient account management while maintaining transparency and fairness for all investors.