BEST EXECUTION POLICY WOLFGANG STEUBING AG WERTPAPIERDIENSTLEISTER

Transcription

1 BEST EXECUTION POLICY OF WOLFGANG STEUBING AG WERTPAPIERDIENSTLEISTER Wolfgang Steubing AG Wertpapierdienstleister Goethestrasse 29, D Frankfurt am Main Supervisory Board: Wolfgang Steubing (Chairman), Frank Wiebols, Ernst J. Neumeier, Christoph Bokelmann, Dietmar Schmid, Achim Vandreike Management Board: Alexander Caspary Carsten Bokelmann Commercial register no. HRB VAT ID DE Registered office and place of jurisdiction Frankfurt/Main

2 Contents Preamble... 3 Order Execution Principles Principles of best execution General information on selection of execution venues Execution inside or outside Germany Fixed-price transactions Priority of instructions from client General Instructions through issue of particular order types Alternative execution of orders in foreign financial instruments Fixed-price transactions Agreement on OTC execution Review of the Best Execution Policy... 8 Annex I: List of execution venues... 9 Page 2

3 Preamble 1 Scope of best execution requirement Under Section 33a Securities Trading Act (Wertpapierhandelsgesetz WpHG) investment firms are required to establish principles for the execution of orders (known as a Best Execution Policy ) to the best possible standard when executing client orders. Once the new rules come into force, the principle of market priority when executing client orders which has applied up to now will cease to apply. The duty of best execution only generally applies for the execution of orders originating from private investors or professional clients. However, Steubing AG receives its orders to perform investment services from other financial institutions within the meaning of the German Banking Act (Kreditwesengesetz KWG), investment services companies and insurance companies (referred to as eligible counterparties under the terms of Section 31a(4) Securities Trading Act (WpHG)). In these cases, the best execution requirement in principle does not apply (cf. Section 31b(1) Securities Trading Act (WpHG)). However, the orders issued by the eligible counterparties are based on different circumstances. For example, they come from other institutions within the meaning of the German Banking Act (KWG) (e.g. investment companies known as Kapitalanlagegesellschaften), other institutional investors (e.g. insurance companies) or the eligible counterparty itself. However, there are also orders from other professional clients as defined in Section 31a(2) no. 1 g) h) and nos. 2 and 5 Securities Trading Act (WpHG) who first transmit their orders to the eligible counterparty who then places them with Steubing AG for execution. The provision in Section 31b(1) Securities Trading Act (WpHG) takes into account the reduced need for protection of eligible counterparties by explicitly excluding the applicability of the best execution requirement under Section 33a Securities Trading Act (WpHG) to principal broking services, investment and contract broking, own-account trading and directly associated ancillary investment services between eligible counterparties. Yet if the eligible counterparty is required to guarantee best execution of orders to its client, Steubing AG has an indirect obligation to comply with the principles of best execution. This is likely to arise in two specific sets of circumstances: (1) Steubing AG receives an order issued by an eligible counterparty for one of its retail clients as part of its finance portfolio management. In this case the eligible counterparty must ensure in accordance with Section 33a(8) Securities Trading Act (WpHG) that the entity it selects makes appropriate provisions to satisfy its best execution obligation. Consequently, the eligible counterparty is obliged towards its client to ensure the best possible execution, apart from its obligation to select the executing institution according to the due procedure. Steubing AG will therefore execute any orders issued by a portfolio manager for one of its (retail) client portfolios in accordance with its Best Execution Policy. 1 The Preamble is not part of the Best Execution Policy. Page 3

4 (2) An eligible counterparty places an order issued by a retail client or professional client with Steubing AG for execution: In this case the eligible counterparty is also required under Section 33a(8) Securities Trading Act (WpHG) to ensure that the investment services company to which it transmits orders carries them out to achieve the best possible result. As a consequence, Steubing AG will also execute orders which are transmitted to it without an instruction and are based on an order from a retail client in accordance with the Best Execution Policy. Special features of the Best Execution Policy of Steubing AG It is important to Steubing AG that its Best Execution Policy takes into account the interests of institutional investors in executing orders in a way that is flexible and protects the investor s interests. Institutional investors generally issue orders with an instruction. In such cases Steubing AG is not obliged to execute the order according to the Best Execution Policy. This also applies if the order is based on an order from a retail client. An instruction is also generally issued when orders are issued taking into account certain execution criteria, such as execution at a volume-weighted average price (VWAP or AQR) or with a specific relation to total turnover (e.g. one third of volume). In such cases execution will be geared to the market which is relevant for measuring the average volume-weighted price in the relevant time period, without Steubing AG being bound to use the execution venue stated in the Best Execution Policy. Where orders are issued without instructions Steubing AG will execute them according to the Best Execution Policy provided that they are based on an order from a retail client or professional client or if application of the Execution Policy has been agreed on. If Steubing AG does not have direct access to an execution venue, it makes use of an intermediary, e.g. an intermediary broker. Steubing AG works together with intermediaries who have offered prompt and reliable execution in the past. In order to achieve the most beneficial execution conditions for investors, Steubing AG will review and if necessary renegotiate the commission for every asset class in the course of its annual review of the Best Execution Policy. The Best Execution Policy was drafted by the Trading department on behalf of the management and reviewed by the Compliance unit, internal auditors and a specialist law firm. The policy will be reviewed at least once a year. This review will also be performed at shorter intervals if there is reason to believe that it is advisable or necessary to amend it at an earlier date. Page 4

5 Order Execution Principles (the Execution Principles ) These Execution Principles apply to the execution of orders to buy or sell a financial instrument which is subject to the requirements of Section 33a of the Securities Trading Act (Wertpapierhandelsgesetz WpHG) where the order is executed by Steubing AG in the context of principal broking services, contract broking or ownaccount trading. The following terms and conditions apply for execution of such orders: 1. Principles of best execution 1.1. General information on selection of execution venues Under the rules in these Execution Principles Steubing AG will execute client orders to the best possible standard to the provisions of Section 33a Securities Trading Act (WpHG). When drafting these principles, Steubing AG has borne in mind the prices of the financial instruments, the costs associated with the execution of orders, the speed of execution and settlement of orders and the size and nature of orders. It has weighted these criteria taking into account client category, client order, financial instrument and execution venue. Steubing AG thereby attributed the greatest importance to reliability of execution in order to safeguard the interest of its clients. The second step was to incorporate the price of the financial instruments, including the costs associated with execution and the speed of execution, in the assessment of the execution venues, with the weighting of these two criteria varying depending on the liquidity of the market in specific financial instruments. The third step was to consider the size of the order, reliability of execution and settlement of the orders. These factors were rated equally. If several trading centres have the same high quality of execution for one financial instrument, Steubing AG made a choice between these execution venues on a best judgment basis. The result of the selection process is found in Annex I, which is part of these principles of best execution. When executing client orders, the basic rules in figs to 1.3. are observed Execution inside or outside Germany Orders regarding financial instruments issued by German issuers ( domestic financial instruments ) which are traded in Germany on one or more stock exchanges or on one or more multilateral trading systems as defined in Section 2(3) no. 8 of the Securities Trading Act (WpHG) will be carried out at the execution venues for this financial instrument referred to in Annex I. Page 5

6 Where financial instruments issued by foreign issuers ( foreign financial instruments ) are traded in Germany on one or more regulated markets under the terms of Section 2(5) Securities Trading Act (WpHG) (stock exchanges) or on one or more multilateral trading systems as defined in Section 2(3) no. 8 Securities Trading Act (WpHG), orders with an order volume of below EUR 20,000 or an equivalent amount in another currency will be executed at the execution venue specified for this financial instrument in Annex I unless the client gives an instruction to the contrary (see subsection 2.3.). If a financial instrument is not traded in Germany, then the client order will be transmitted to and executed abroad by a selected intermediary Fixed-price transactions If according to Annex I a financial instrument is traded exclusively over-the-counter because there is no exchange trading in these instruments (over-the-counter transactions) or if the quotations of securitised derivatives, in particular warrants and certificates, do not guarantee sufficient liquidity on the trading floors, which depending on the issuer is generally the case for orders with a volume of more than EUR 50,000, then such orders will be executed as fixed-price transactions on appropriate terms and conditions in line with the market (see also 2.4.). Based on market liquidity and quotations, execution of orders with a volume below EUR 50,000 could be executed as a fixed-price transaction on appropriate terms and conditions in line with the market. Steubing AG will select the execution venue on a best judgement basis. Note: Over-the-counter transactions are executed outside a regulated market as defined in Section 2(5) Securities Trading Act (WpHG) (stock exchanges) and outside a multilateral trading system as defined in Section 2(3) no. 8 Securities Trading Act (see also subsection 3.). 2. Priority of instructions from client 2.1. General The client may determine the execution venue and the nature of trading for a single transaction or in general. Such an instruction by the client always has priority. Steubing AG will follow a client s instruction when carrying out an order to buy or sell. Note: Where clients issue instructions to Steubing AG, they accept that through their instructions Steubing AG is released from the requirement to execute the order in accordance with subsections of its Execution Principles. Page 6

7 2.2. Instructions through issue of particular order types Instructions may also only relate to the manner of execution, without the specification of a concrete execution venue by the client. This relates in to particular to interest-protecting orders (discretionary order). These are when Steubing AG receives an instruction from the client to perform the order for securities in several stages according to the market situation. The exchange usages for order executions between stock exchange participants apply for discretionary orders. If the client explicitly instructs Steubing AG to perform the order as an discretionary order, then the order also contains an instruction to Steubing AG to select the execution venue in its own discretion according to the best interests of the client in the individual case; the principles under subsections 1.1. to 1.4. above and the provisions in Annex I do not apply in this case. When using its discretion in the context of an discretionary order, Steubing AG will take into account pricing quality, costs arising through execution at an execution venue, speed of execution, likelihood of execution and settlement of the order as well as size of the order. Note: A client instruction also exists in the event of an instruction relating to the manner of execution, in particular for a discretionary order (see subsection 2.1). In this case the order may be executed either on the stock exchange or over-the-counter inside or outside Germany, if necessary by placing it with an intermediary Alternative execution of orders in foreign financial instruments The client hereby instructs Steubing AG to execute orders in foreign financial instruments with an order volume of below EUR 20,000 abroad in the event that insufficient liquidity is guaranteed in the market specified for the instrument in Annex I according to subsection 1.2. para. 3, contrary to subsection 1.2. para Fixed-price transactions If Steubing AG and the client agree on a fixed price for a single transaction (fixedprice transaction), then a purchase agreement shall come into effect; correspondingly, Steubing AG as the buyer will take over the securities from the client or supply the securities to it as the seller. Steubing AG will charge the client the agreed price, plus any accrued interest for interest-bearing debt securities, taking into account the market situation. The agreement of a fixed-price transaction is also possible in other cases apart from those in subsection 1.3. Page 7

8 Note: If fixed-price transactions not covered by the cases in the first alternative under subsection 1.3. are agreed on, it is also possible to execute the order at the execution venues specified in Annex I. An agreement on a fixed-price transaction includes an instruction by the client, meaning that Steubing AG s obligation to execute the transaction according to the principles of best execution according to paragraphs above does not apply. 3. Agreement on OTC execution As long as this policy provides for the possibility of over-the-counter execution, the client hereby agrees to execution outside a regulated market and outside a multilateral trading system. 4. Review of the Best Execution Policy Steubing AG will review its selection of execution venues made under this Best Execution Policy on an annual basis. In addition, it will carry out a review when there is reason to believe that important criteria in favour of a certain execution venue are no longer valid. The client allows Steubing AG to perform adjustments to this effect on its own initiative. Steubing AG will inform clients of any changes to its Best Execution Policy so that they can amend their instructions for effecting orders if necessary. Page 8

9 Annex I List of execution venues A. Shares Shares issued by domestic issuers Liquid domestic shares DAX securities, MDAX, SDAX, LDAX,L-MDAX, TecDAX, other German indices Xetra, Exchange Trading floors*, MTFs** Illiquid domestic shares Xetra, Exchange Trading floors*, MTFs** Shares issued by foreign issuers order volume below EUR 20,000 Xetra, Exchange Trading floors* order volume above EUR 20,000 most liquid market for the financial instrument concerned through an eligible intermediary B. Fixed interest securities Listed, liquid fixed-interest securities issued by domestic issuers Frankfurt Stock Exchange and Exchange Trading floors*, OTC Listed, liquid fixed-interest securities issued by foreign issuers Frankfurt Stock Exchange and Exchange Trading floors*, OTC Fixed-interest securities without a liquid secondary market OTC, possibly Exchange trading floors* Page 9

10 C. Securitised Derivatives Securitised derivatives (warrants and certificates) (order volume up to EUR 50,000) Frankfurt Stock Exchange, Stuttgart Stock Exchange/EUWAX, OTC Securitised derivatives (warrants and certificates) (order volume above EUR 50,000) Fixed-price transaction (OTC) D. Funds Exchange Traded Funds Xetra, Exchange trading floors*, MTFs** Other Funds Xetra, Exchange trading floors* *Exchange trading floors: Frankfurter Wertpapierbörse, Börse Berlin, Börse Stuttgart, Börse Hamburg, Börse Hannover, Börse Düsseldorf, Börse München, Tradegate **MTF: Most liquid market for the financial instrument concerned through an eligible intermediary Page 10