Alternative derivative exchange
backRisk management

Margin Efficiency Mechanisms

Efficient margin management made easy with ADE

ADE natively offers margin efficiencies for those that make a two-sided market even if they are not part of any Designated Market Making Programs. Additional Mass Quoting functionality will also include further Margin efficiency benefits for Designated Market Makers (DMM). However, it will be up to DCM's to choose to apply these margin benefits to their client accounts. In other words, while ADE will offer certain benefits at both real time and post trade level it will be up to the DCM to choose to apply these for their clients.

ADE offers margin efficiencies for market makers providing two-sided quotes, and additional benefits for those participating in designated market making programs. However, it is ultimately up to the FCMs to decide whether or not to apply these margin benefits to their clients' accounts. ADE provides the tools and options for margin efficiencies, but the FCMs are responsible for determining how they want to use these tools to manage their clients' margin requirements.

At ADE, we offer our clients the benefit of calendar spread margin efficiency, allowing for more cost-effective trading strategies. Our maximum calendar spread margin efficiency is an impressive 95%, but this value is only applicable to spreads that are next to each other and monthly serial expires. Conversely, the minimum calendar spread margin efficiency is 50%, which is only assigned to spreads that are furthest away from one another. We base this on a three-year curve, and the formula for the post-trade spread is calculated based on this curve. Using this formula, a 36 serial month curve will offer a decreasing efficiency of 1.324% with every increase in time delta between expires.

One of the advantages of trading calendar spreads is that they can make it cheaper and less risky to roll positions from one contract to another. Rolling a position involves closing out an expiring contract and opening a new one with a later expiration date. By using calendar spreads, traders can roll their positions without having to take delivery of the underlying asset, which can be costly and logistically challenging. Instead, they can simply offset their position by taking an opposing position in a later-dated contract, which can be less risky and more cost-effective. Additionally, using calendar spreads can prevent physical settlement, which may not be desirable for some traders.

This allows our clients to optimize their trading strategies, with the aim of reducing costs and increasing profitability.

Correlation Matrix
ADAAVAXBNBBCHBTCDOTETHSOL
ADA100%96%99%87%96%99%35%10%
AVAX96%100%95%84%92%95%36%11%
BNB99%95%100%88%97%100%36%10%
BCH87%84%88%100%91%90%39%13%
BTC96%92%97%91%100%98%39%6%
DOT99%95%100%90%98%100%36%10%
ETH35%36%36%39%39%36%100%22%
SOL10%11%10%13%6%10%22%100%

In addition to calendar spread margin efficiency, ADE Bahamas also offers a margin efficiency system based on inter-contract spreads. This system takes into account correlations between different assets, such as BTC, ETH, and DOT. Because price variations between these assets may be correlated, opposite positions in two different combined contracts can lead to a reduction in the global risk of the position. As a result, the performance bond requirement can be decreased, with the ADE Risk System computing a credit expressed as a percentage of the performance bond amount called for the Combined Contract position. It's important to note that inter-contract spread efficiencies will only be applied to contracts that have the same expiry. A priority table is also supplied for this purpose, ensuring that the most efficient margin credit is applied to eligible positions. This system provides an added layer of risk management for clients looking to optimize their margin efficiency and reduce their overall risk exposure.

Calendar Spread Margin Matrix
00010203040506070809101112131415161718192021222324252627282930313233343536
01100%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%
0200%100%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%
0300%00%100%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%
0400%00%00%100%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%
0500%00%00%00%100%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%
0600%00%00%00%00%100%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%
0700%00%00%00%00%00%100%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%
0800%00%00%00%00%00%00%100%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%
0900%00%00%00%00%00%00%00%100%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%
1000%00%00%00%00%00%00%00%00%100%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%
1100%00%00%00%00%00%00%00%00%00%100%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%
1200%00%00%00%00%00%00%00%00%00%00%100%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%
1300%00%00%00%00%00%00%00%00%00%00%00%100%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%
1400%00%00%00%00%00%00%00%00%00%00%00%00%100%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%
1500%00%00%00%00%00%00%00%00%00%00%00%00%00%100%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%
1600%00%00%00%00%00%00%00%00%00%00%00%00%00%00%100%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%
1700%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%100%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%
1800%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%100%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%
1900%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%100%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%
2000%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%100%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%
2100%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%100%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%
2200%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%100%00%00%00%00%00%00%00%00%00%00%00%00%00%00%
2300%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%100%00%00%00%00%00%00%00%00%00%00%00%00%00%
2400%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%100%00%00%00%00%00%00%00%00%00%00%00%00%
2500%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%100%00%00%00%00%00%00%00%00%00%00%00%
2600%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%100%00%00%00%00%00%00%00%00%00%00%
2700%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%100%00%00%00%00%00%00%00%00%00%
2800%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%100%00%00%00%00%00%00%00%00%
2900%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%100%00%00%00%00%00%00%00%
3000%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%100%00%00%00%00%00%00%
3100%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%100%00%00%00%00%00%
3200%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%100%00%00%00%00%
3300%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%100%00%00%00%
3400%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%100%00%00%
3500%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%100%00%
3600%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%00%100%