Darwinex Zero 'Belongs Outside Any Regulated Perimeter', says CEO

Last week, Darwinex launched Darwinex Zero, a subscription-based trading platform that is unique in the industry. The platform allows traders to pay a monthly fee and trade on a virtual account. If successful, Darwinex will provide seed capital to the traders and share a part of the profit.

The service is much like a prop trading firm, but Darwinex instead claims it to be the first of its kind in the crowded retail trading space.

"Darwinex Zero is not a prop trading platform, but the talent scout to our regulated asset management sisters. To the best of our knowledge, there's no competing subscription-based product that certifies, and seeds track records out there," Darwinex's Co-Founder and CEO, Juan Colón, told Finance Magnates in an interview.

A Subscription-Based Model

Traders must pay a monthly subscription of €38 and a €95 one-off payment for signing up. It will provide access to over 900 CFDs instruments of forex, stocks, commodities, and stocks. The platform has plans to expand the offering by adding futures, spot stocks, ETFs, and cryptocurrencies.

Darwinex Zero offers a virtual trading account on MetaTrader 4 and MetaTrader 5. The program starts with traders proving their skills on the virtual account and receiving seed capital on a tier-based program.

In the first stage, traders can receive €25k to €250k in 3 months, and in the second stage, it can go up to €500k in 6 months. The third stage opens access to external investments, while in the final stage, traders can promote their brands and approach their own investors.

Colón explained that the platform would evaluate traders based on "risk-adjusted, sustainable performance" and not only on returns.

"The Top managers on Darwinex post 10-20% yearly returns, and we'd like Zero users to grow towards that benchmark," he said. "We only evaluate strategies on their risk-adjusted track record – as a matter of fact, we manage investor risk at arm's length from our traders. For sure, diversification helps if it reduces risks more than it reduces returns."

Circumventing Regulations

Dawinex only holds regulatory licenses in the United Kingdom and Spain, thus limiting its market strictly to the UK and European Union. However, those laws apply only if the platform accepts deposits from traders.

As Darwiex Zero only takes a monthly subscription fee and no client deposits, it is not bound to the strict regulations of the financial services industry. The new services are available globally, including in the United States, Canada, Japan, and Europe.

"Zero users buy a technology service (certification of an auditable signal track record) and sell signals. Zero takes neither customer monies nor provides investment advice – which is why the activity belongs outside any regulated perimeter," Colón added. "That said, Darwinex Zero may become an appointed representative to our brokerage entities in those jurisdictions where we offer regulated business."

No Cap on Investment?

Darwinex originally offered retail trading service with margin forex and contracts for differences (CFDs) of other asset classes. Now, it has over 100 million in assets under management (AUM). The platform already provides copy trading services, allowing expert investors to share their trading strategies with novice traders and earn a commission.

Additionally, the broker supports the best-performing expert traders on its legacy copy trading platform with a seed capital of up to €10 million, with the allocation of six months. But, that allocation strictly depends on the return performance of strategies, which is not the case in Darwinex Zero.

Darwinex Zero instead looks to be a refined extension of that existing model. Traders under Darwinex Zero will receive access to Darwinex Pro, a hedge-fund-as-service for professionals, but that will be based on performance over time.

"Zero is an infinite monthly challenge that seeds and rewards traders for 3, 6, and infinite returns. Zero exists to groom future asset managers from zero – thus, the name," Colón added. "This is a key strategic priority to a business that has grown assets under management by almost 100% in the last 12 months."

A Good Program for Expert Traders?

Trading is risky when own capital is involved. However, under the Darwinex Zero, expert traders can trade risk-free without investing any capital; of course, they will only get a portion of the return.

Darwinex Zero will share 15 percent of the generated return on the seed capital with the traders. Darwinex manages external investor capital for a market standard 20 percent success fee, paying traders 75 percent of that 20 percent. Darwinex shares 5 percent of the 20 percent success fee.

"One of the key advantages is that traders do not need to promote their brand – Darwinex raises for all traders. This has the benefit of keeping traders outside the regulated perimeter and focusing their efforts on the market and only the market," the Darwinex CEO said.

"Our goal when seeding emerging traders is first to prepare them for outside investment. The second goal is to raise their visibility with our investors. Once they receive external funding, we participate in the upside by sharing 5% in the 20% success fee, and free up our capital to seed the next cohort of good traders."

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