A percentage allocation management module, also known as percentage allocation money management or "PAMM," is the mini-version of a mutual fund for forex trading. It offers a simple pick-and-choose option for investors, enabling them to select money managers who trade forex using clients' money to generate profits for a predetermined commission. (For more, see: Investopedia explains – How PAMM accounts work)
Forex PAMM account brokerage firms play an important role as they act as intermediaries between investors and money managers. They also provide the required technology, trading platforms, and related infrastructure such as capital allocation, trade facilitation, reporting tools, and money manager performance tracking dashboards.
There are two features to forex PAMM accounts that should be taken into careful consideration before selecting a forex broker for a PAMM account:
1) Forex is a 24/7 market and brokers may be operating from beyond the geographical boundaries and purview of your local regulators.
2) Through PAMM accounts, investors basically bet on the performance of money managers. Brokers offering PAMM accounts (and their investor clients) must ensure that such money managers are eligible and qualified individuals with a clean track record.
Here is a list of forex brokers offering PAMM accounts to both investors and money managers. The list is not exhaustive and includes international forex PAMM account brokers, as there are only a limited number of brokers offering these services to US residents:
- Alpari PAMM: Alpari Limited is registered in the West Indies and their forex business is regulated in the US by the National Futures Association. Alpari claims to be the pioneer of PAMM account services. The company has a presence in 40 countries, including Russia, the UK, and Nigeria. In 2013, it had $155 billion in trading revenues, more than 650,000 global investors, and the largest number of money managers on board. Features offered to PAMM account investors include a ratings-based dashboard system that indicates historical performance, ranking, manager’s capital, performance over different time periods, profit percentage, and several other criteria, enabling investors to select the money manager of their choice.
Money managers, both individuals and business entities, can signup for a PAMM money manager account. Manager accounts can start with as little as $300. Managers get full control, promotional tools, and the ability to bring in an acquisition partner and auxiliary partner.
: Registered in Belize and regulated by that country's International Financial Services Commission (IFSC),
offers PAMM account services to investors through its MultiTrader platform. The system is backed by selected trading strategies that are the basis of trades by PAMM money managers. Multiple types of accounts are available depending upon client requirements and expected services. The minimum deposit required ranges from $500 to $5,000, depending on account type. The system allows risk parameters to be set by the investor. A dedicated account manager is also available.
- FXOpen: FXOpen Ltd. PAMM account offers services using the nomenclature "Master" to indicate a money manager and "Slave" to indicate and investor. Currencies available for PAMM account trading are USD, AUD, CHF, EUR, GBP, JPY, and RUB. Minimum deposits required for investors (or "slave accounts") vary depending on criteria set by the master account (money manager). Depending on PAMM account types, master account fund requirements range from $200 to $5000. The company offers a comprehensive ratings-based dashboard, enabling investors to select a money manager based on their own criteria.
- FXTM: Regulated by Belize's IFSC, Forex Time (FXTM) PAMM offers easy account opening for PAMM services. There are no account management fees; investors only pay a performance fee to the money manager. Available features for investors include a trading platform, flexibility in choosing/switching forex portfolios, and customized solutions. The company only sets financial targets and risk limits, and FXTM’s portfolio management department arranges for an appropriate portfolio for an investor’s needs. Also available is a rating system aimed at helping investors select money managers based on defined criteria. FXTM does not offer its services to residents of the US.
- InstaForex: With more than two million clients across a variety of offerings, InstaForex offers standard PAMM account services to its clients. Investors enjoy the flexibility of low deposit amounts and the ability to choose from multiple PAMM money managers. InstaForex also offers features to make recurrent investments and automatic withdrawals. US residents cannot open an account with InstaForex.
The Bottom Line
Regulatory and jurisdictional restrictions define what a broker can or cannot offer a client, particularly in global forex markets. PAMM accounts add another layer of complexity for investors, as they bet their money on the performance of money managers. Care should be taken to verify the regulatory status, geographical purview, and applicability of investors' rights before selecting a PAMM account forex broker.
Disclaimer: At the time of writing this article, the author was not having any accounts with any of the mentioned brokerage firms. Regulations and applicability of mentioned services may vary depending upon an individual’s country of residence.