Understanding MAM & PAMM

A trade decision. Multiple accounts.

A manager decides to buy or sell an instrument. Several investors have empowered them to manage their accounts. Allocation software translates the central trading decision into shares for the participating accounts.

MAM stands for Multi-Account Manager; this designation is used by the technical documentation used here. Under the mentioned term MAMM we treat this multi-account management. PAMM is, inter alia, Percent Allocation Management Modules denoted by reference. Providers use different variants of designation and construction.

Both names describe technical organizational and distribution models. They are not a statement about a guaranteed return, a permitted administrative activity or a specific legal form.

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Understanding the difference between MAM and PAMM.

The limit is not sharp: A MAM can also distribute capital proportionally and thus generate the same calculation as our PAMM example. For its part, PAMM does not necessarily mean that money is legally in a single common fund. Decisive are contracts, account management and the concrete technical solution.

^{[MAMMANUAL][PAMMDOCU][MAMAXI]}

Try the allocation yourself.

Start with PAMM. Then compare the same lots or the weighted MAM rule. All results refer to a completed example period without deposits or withdrawals.

The starting example in numbers.

At € 1,000 loss, the example spreads −100 €, −300 € and −600 €. A success fee does not apply in our rule. Other ongoing fees could still arise; they are not included in the simulation.

The same lot number per account, on the other hand, would distribute the total result to one third each. In the event of a loss, the same amount of euro would be account A relatively significantly stronger than account C. This is a comparison with a fixed total volume and the same assumed total result.

Performance fees: understand the threshold first.

One High Water Mark is an agreed reference for the success fee. In our model, only the positive amount above the previous threshold is paid. Example: An account starts at $1,000 after losses, the previous threshold is $1,200. If it rises to 1,100 €, there is no success fee despite a positive period result.

The simulation uses: Fee = Set × max(0, account value before fee − High-Water-Mark). The minimum threshold here is the starting value. Billing is done once at the end of the example; no subsequent period is simulated.

In real contracts, among other things, reference period, settlement time, hurdle rate, deposits and withdrawals as well as the treatment of a change of manager must be checked. A deposit must not be misunderstood as a trading profit in the results analysis. The simulator formula is its own illustration, not a reproduction of a specific fee agreement.

ESMA shall address loss recovery and HWM models in its guidelines for UCITS and certain AIFs. This explains the concept, but does not automatically make these fund guidelines applicable to every MAM/PAMM agreement.

Definition of HWM and scope of ESMA guidelines

Who decides, who holds the funds and who bears the loss?

Check whether the power of attorney is actually limited to trading, who can debit fees and where withdrawals can be made. From the label MAM or PAMM, no general payout lock for the manager can be derived.

“Pool” can mean a technical summary of trading volume. Whether there are individual accounts, a collection structure or a legally organized fund, answer the account contracts and the actual money management.

Where the same strategy produces different results.

Weighting: The MAM example rule multiplies account values with freely selected factors and distributes a fixed master volume accordingly. This is not a certified “equal risk” method. A larger factor means only a larger relative share in the example.

Design: Minimum volume, lot increments, margin, late execution and deviating prices can affect accounts differently. The invoice assumes an identical instrument, complete execution, equal prices and exactly proportional results.

Change in capital: New deposits, payouts and already open positions change the calculation basis. Decisive are valuation time, equity or balance and the rules for joining and leaving.

Incentives: Success compensation involves the manager in the positive result without automatically imposing the same euro loss on him. Volume-based remuneration can create an incentive for more trade. The manager’s equity can approximate interests, but it does not guarantee diligence or success.

Proof of results: Return alone is not enough. Drawdown, open risks, costs, capital movements and actual payouts are all part of the assessment. A smooth chart is not proof of a sustainable strategy.

Technical delegation and legal responsibility.

Whether a service constitutes authorised portfolio management or another activity depends on its actual powers, products and jurisdiction. The technology label does not decide this.

For Copy Trading, the FCA explains that automatic execution can be categorised as portfolio management without an individual decision of the client; if each transaction requires a client decision, the assessment is different. ESMA shall address such boundaries and supervisory expectations in its copy trading briefing of 2023. These are comparison standards, not a blanket classification of all MAM/PAMM offers.

For a specific offer, the legal person of the manager, scope of permission, power of attorney, customer protection and cross-border service provision must be examined individually.

FCA · ESMA

Copy Trading and A-/B-Book.

“PAMM” therefore does not mean “A-Book”. “MAM” proves neither external execution nor internal counteraction. The manager management and the risk treatment of the broker are at different levels.

Track the client order and the broker hedge · Understanding the Broker’s Business Model

Before the power of attorney: the right questions.

1. Identity: Who is the manager and which company owes the performance?
2. Powers: Is he only allowed to act, trigger fees or transfer money?
3. Distribution: Which rule applies, at what time and with what rounding?
4. Limits: Which instruments, levers and risk limits are actually agreed and technically implemented?
5. Remuneration: Which fees, HWM, reference periods and refunds exist?
6. Exit: How are power of attorney, open positions, fees and withdrawal on termination treated?
7. Supporting documents: Are performance, drawdown and capital movements traceable?

The sources show different concrete implementations. The site explains mechanics and testing tasks; it does not recommend a provider and does not claim general standardization.

Explore related topics

Social, Copy and Mirror Trading: Overall View · CFD Loss Rates: Calculation and Significance

Sources & scope

Check the evidence.

1. MetaFX · Multi Account Manager · User Guide

   Technical manufacturer documentation; concrete MAM implementation, not a universal standard. In particular, allocation by volume, balance and equity.

   Open the source ↗
2. Dukascopy · Percent Allocation Management Modules

   Provider description: managed accounts, power of attorney and proportional allocation. No provider recommendation.

   Open the source ↗
3. Axi · Multi-Account Manager

   Provider example of different MAM allocation methods; advertising is not used as proof of quality.

   Open the source ↗
4. FCA · Copy trading

   UK classification of automatic execution and customer decision; no global classification of MAM/PAMM.

   Open the source ↗
5. ESMA35-42-1428 · Copy Trading · 30.03.2023

   Supervisory briefing; legal classification depends on the actual activity.

   Open the source ↗
6. ESMA34-39-992 · Performance Fees

   In the case of CFDs managed by a CFD provider, the CFD provider shall provide the client with the following information:

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