How do commissions on the marketplace work?

In this article, we’ll explain in detail all the mechanics of marketplace commission calculations. The system might initially seem complicated, but hopefully, it will be much easier to understand after reading this article.

What are commissions taken for?

Right now, the only commission on the Marketplace is a success fee for your profit earned using the products available on the TradeLink Marketplace.

By default, every product on the marketplace has a 35% success fee. This means, that if you turn $100 into $200 using Marketplace products, you’ll need to pay $35 worth of commissions to TradeLink.

The billing period is 1 month, and all commissions are shown as invoices in your dashboard. Invoices are being sent on the 5th of every month, and currently have 1 week deadline for the payment. In case the invoice is not paid: the investment will be stopped, and further usage of the Marketplace will be suspended until the bill is paid.

How is Success Fee calculated?

As you might know, the main product on the Marketplace is an index, that consists of many trading strategies.

The usual logic of success fee calculation on index products is just to take a commission from the total user’s profit, and call it a day. However, as in most cases our index has many or even tenths of different traders involved, we are unable to simply distribute profit between traders, as it would create very unpleasant situations where a trader whose strategy is losing money for 3 months in a row earns more, than those who are earning the most.

This is why we decided to create a system that would reward traders differently, directly based on the profits their strategy was able to earn you.

All the profit distribution info is available directly in every invoice, however, for your convenience the invoice is paid as a sum of commissions for using all the strategies, so you do not have to spend a lot of time and money on transaction commissions.

As you might see on the screenshot above, there might be billing periods when one or more strategies lose money. Also, as you can see, many strategies have commission values that are nowhere near 35%. Let’s find out why this is so, as well as how the commission is calculated when one or more strategies are losing money.

HWM

All the investment products have an issue in common, which is: that the investment return is not a constantly growing value, and it might change from month to month. What should the service do if you’ve earned $100, and paid the service $35 worth of commissions, but the next month your investment lost that $100? Should the service return your commission? Should you pay the commission for the second time after you earn your loss back? What happens if you deposit after you’ve earned $100? Should the service return you more commissions than you’ve paid? And how to do all of that when you invest in the strategies of 15 different traders?

The common solution in the investment sphere is to implement the so-called HWM indicator, so we decided to do so.

High Water Mark indicator, commonly known as HWM. This arbitrary value helps to save the highest profit value that the commission was paid for, and doesn’t allow for double commission payment.

So, when you are copying 2 strategies in one index from the marketplace, you’ll always have your HWM value for every strategy. HWM is always equal to the maximum relative profit of the strategy. When using TradeLink Marketplace, you are paying a success fee only for change in HWM. This way, you can never pay the commission twice for earning the same money on the same strategy.

HWM is calculated using Unrealized Relative Profit on the second timestamp, which means it always equals the highest income of the strategy that could have lasted a bit for long.

Free period

After creating your TradeLink account, the first investment you start will be free of any fees for the next 30 days. This includes the HWM mechanic, which works exactly as during the paid period. So, if during the free period, HWM of the strategies in your index was up 20% but then fell back, when the trial ends you’ll not have to pay commissions on these strategies until the HWM will not be updated.

If you have any additional questions – please, don’t hesitate to reach out to our support team, we’ll be always more than happy to resolve all of your questions regarding the billing system, or any other platform mechanic.