Whilst it’s the matchers decision, we recommend that the matcher hedges the trade. Given your collateral automatically applies the counter trade to the traders position, you’ll need to apply the same trade as your traders position including leverage. This will protect your position in case of the traders position closing in profit.
See the diagram below and let’s consider the following scenarios:
Scenario (Trader Profit)
Trader ends the position in profit:
Outcome A (Hedged): Matcher has protected position by hedging and nets out positive with interest accrual. Remember: The matcher automatically countertrades the traders position.
Outcome B: Matcher did not hedged the position
Given Matcher is only in a countertrade position without protection, they will gain on the interest received from the trade but make a loss on the trade itself.
Scenario (Trader Loss)
Trader closes the position in loss:
Outcome A (Hedged): Matcher has protected position by hedging and nets out positive with interest accrual.
Outcome B: Matcher did not hedge the position. Matcher gains on both the counter trade and the interest accrual.
Note: Whilst a Matcher can gain more without hedging, it comes at high risk. We encourage safe and considered trading.
