The internet has brought FX trading to the masses in the 1990s and the industry kept growing from there. The currency wars in the post-2008 financial crisis were another push toward a move away from bank deposits and into trading and investments.
Unfortunately, not everybody has the skills, whether the know-how or the appropriate mindset, to trade the FX markets successfully.
This has paved the way for the rise of the Percentage Allocation Management Module (PAMM) accounts, a form of pooled money forex trading in which investors allocate their money in desired proportion to the qualified trader/money manager of their choice, who then manages multiple forex trading accounts with an aim to generate profits.
PAMM accounts are often intermediated by an FX broker who provides a secure and reliable platform and facilitates the trading activity within the regulatory framework, as well as account keeping, deposits, and withdrawal.
Brokers act as a matching platform for investors and money managers via a transparent PAMM marketplace, with reviews, feedback, and ratings, detailed CVs, qualifications, past performances in terms of returns, amount of money managed, numbers of associated investors, positive/negative reviews, etc.
The number of clients interested in derivatives trading continues to grow
“The FX industry looks to attract new traders; however, financial derivatives trading requires knowledge and experience. Regulated brokers make sure that the clients meet certain criteria in order to be able to accommodate their accounts”, said Natalia Zakharova, Head of Global Sales at FXOpen.
“The number of clients interested in derivatives trading continues to grow, yet until they are ready to trade on their own, there are not that many options they can explore – social trading, buying EAs (also questionable, as you need experience in order to be able to choose the right EA) and investing in a PAMM”.
FXOpen has recently launched a “Money Managers Contest” with a $10,000 prize fund in order to fuel the emergence of new talented and skilled PAMM masters.
The contest has started on August 2, 2021. Registration will be open for the next 2 months and expires on October 3, 2021. The competition ends on November 28, 2021.
The first place earns $5,000, followed by the second place being awarded $3,000 while the third place gets $2,000. The prize funds are then added to the winners’ Master’s accounts under the Master Offer Performance Fee parameter equal to 50%.
PAMM accounts have grown in popularity in recent years to become a key feature offered by brokers and even critical to keep many inexperienced and “hot-headed” retail traders from blowing their accounts.
“This is obviously subject to regulation – some jurisdictions consider it to be asset management and prohibit it, some require PAMM Masters to hold licenses. Only FXOpen Markets and FXOpen Australia offer PAMM service, the latter with several limitations”, Ms. Zakharova continued as she explained the brokers’ PAMM offering.
“While joining a PAMM offer seems like an attractive option for less experienced traders, it doesn’t exempt the clients from understanding the risks involved and how financial markets operate. Yet for the brokers it allows them to expand their customer base and offer their services to a wider audience”.