Seed CX offers a robust suite of credit controls and risk mitigating mechanisms designed with institutional needs in mind. We break them down in the following ways:
For a participant to trade on Seed Digital Commodities Market ("SCXM"), the participant must:
- Submit a detailed KYC/AML onboarding questionnaire which includes information on financials, legal structure and beneficial owners, and is reviewed and verified over several days by Seed CX operational and compliance staff;
- Deposit funds as collateral to cover the margin obligations of their trading activity; and
- Assign credit limits to their trading activity to restrict their potential exposure to levels covered by their deposited collateral.
Initial Margin Requirements
SCXM calculates initial margin ("IM") requirements for all instruments traded on the exchange. IM is calculated using a combination of risk-based analysis and static floor data. The risk-based system calculates IM daily using a 5-day Value-at-Risk (VaR) model with a 500-day look-back period. In addition, to account for long periods of low volatility, a margin floor is imposed on each digital asset based on current and historical data.
Real-Time Credit Monitoring
With collateral deposits, credit limits and IM values calculated, SCXM then facilitates high-frequency trading with confidence by monitoring credit usage in real-time. This is documented in detail on the dedicated page on how our real-time credit system works.
Beyond our automated system, SCXM’s risk team monitors market, settlement, concentration, credit and liquidity risk throughout the trading session via the risk and operations control centre (the "ROCK"). The team has established protocols for addressing these risks to limit the possibility of a participant failing to meet their settlement or delivery obligations.