B E S T E X E C U T I O N P O L I C Y

Transcription

1 True Trade Limited Best Execution Policy POLICY INFORMATION Policy date February 2018 Policy owner Head of Legal and Compliance Contact person John Rufford Version Overview This Best Execution Policy is applicable to the Matched Principal Broker services provided to you by True Trade LTD ( True Trade or the Firm ) and this Policy should be read in conjunction with the Firm s Standard Terms of Business. This Policy will be reviewed annually. 1.1 Introduction True Trade s business is facilitating liquidity to retail clients, professional clients and eligible counterparties principally in Rolling Spot Forex and Contracts for Difference ( CFDs ). As a broker, from time to time True Trade may introduce other financial products. Your trades will be executed on True Trade s trading platform or via a third party user interface or an API. Those trades will be immediately matched through a panel of carefully selected liquidity providers and True Trade s clients orders residing on True Trade s limit order book. All trading is done using a straight through processing model and True Trade does not have its own dealing desk. Following the implementation of the Markets in Financial Instruments Directive II ( MiFID II ) and pursuant to Section 11.2A of the FCA s Conduct of Business Sourcebook ( COBS ) when facilitating liquidity to you in relation to Rolling Spot Forex and CFDs or any other financial instruments, the Firm will take all sufficient steps to achieve the best overall trading result for you. This means that the Firm will aim to provide best execution, subject to and taking into account the nature of your orders, the prices available to the Firm in the market, the nature of the market in question and a reasonable assessment of the sometimes overlapping and conflicting execution factors (which are detailed below). The MiFID II requirement to take all sufficient steps replaced the original MiFID requirement to take all reasonable steps. ESMA s view is that the requirement for all sufficient steps sets a higher bar than all reasonable steps and that firms will be expected to meet the higher standard by monitoring their execution arrangements and execution policies. The Firm s intention is, so far as possible, to exercise consistent standards and operate the same processes across all markets, clients and financial instruments in which the Firm operates. Annex 1 to this document lists those financial instruments to which MiFID II will apply.

2 The Firm also intends to provide you and other market participants with access to (where possible) tradable prices on a non-discriminatory basis. However, the diversity in those markets and instruments, and the kinds of orders that you may place, mean that different factors will have to be taken into account in relation to any particular transaction. Annex 2 to this document provides further detail on the nature of the services the Firm, as a Matched Principal Basis ( MPB ) firm, provides to its clients. In the Matched Principal model, True Trade facilitates it clients in anonymous trading activity. True Trade will not trade for any client except pursuant to a detailed, firm, client order to buy or sell, and True Trade will not trade for its own account. 2 Exemptions from the provision of Best Execution The best execution requirements in COBS 11.2A apply to firms carrying on designated investment business from an establishment maintained by them, or their appointed representatives, in the UK and are directly applicable to firms, such as True Trade, providing the service of executing orders on behalf of clients (or when providing the service of reception and transmission of orders, whilst transmitting those client orders to other entities for execution). Notwithstanding this and the intentions expressed above, the Firm does not undertake to provide best execution if you fall within any of the following exemptions: 2.1 Eligible Counterparties If you are classified as an Eligible Counterparty you are not entitled to best execution under the UK FCA or equivalent EU rules. This is in accordance with Article 24 of MiFID, which provides that the best execution obligation under Article 21 will not apply. Nevertheless, all True Trade clients will have equal access to True Trade s order book unless they are liquidity providers that exercise a last look, in which case their orders will receive a lower queue priority. 2.2 Client Instructions Where you provide the firm with a specific instruction in relation to your order, or any particular aspect of your order, including an instruction for your trade to be executed on a particular venue, the Firm will execute the order in accordance with your instructions. However, note that in following your instructions, the Firm will be deemed to have taken all sufficient steps to provide the best possible result for you in respect of the order, or aspect of the order, covered by your specific instructions. For the remaining orders placed by you, the Firm will still be under the obligation to take all sufficient steps to obtain the best possible result, as set out in COBS G. Note too that the Firm will never induce a client to instruct it to execute an order in a certain way, by expressly indicating or implicitly suggesting the content of the instruction to a client, if the Firm ought to reasonably know that an instruction to that effect is likely to prevent it from achieving best execution. 3 Categorisation of Clients The Firm deals with Retail Clients, Professional Clients and Eligible Counterparties as defined in MiFID and by the FCA. As stated above, this Policy applies to both the Firm s Retail and Professional Clients, although it should be made clear that for Professional Clients the assumption is that they do not rely on the Firm to achieve best execution. However, to reach this conclusion, the Firm applies a four-fold cumulative test, which addresses which party initiates the transaction, questions of market practice and

3 the convention to shop-around, the relative levels of price transparency and the information provided by the Firm and any agreement reached. Because the Firm always intends to handle orders in an equitable and consistent manner, once a client is classified, for the purposes of a particular instrument, that client may not then elect to be re-classified for the purposes of one transaction of a type it customarily undertakes. However, a client may seek to be re-categorized generally for all purposes, such determinations to be made in the Firm s sole discretion. Exceptional circumstances may be taken into account at the time, with the consent of the Firm (the Firm may decline to provide a service should a reclassification be requested). 4 Execution Venues The Firm is your venue of execution. We do NOT act as a Market Maker with respect to your transactions. In all circumstances an order identical to one on our order book will be matched against that order. As True Trade, will be managing the order book, you, along with other True Trade clients and liquidity providers, can participate by placing your own order on the book to be matched. The Firm has identified those venues on which the Firm will most regularly seek to execute your orders and which the Firm believes offer the best prospects for achieving the best possible results for you, taking into account the execution factors detailed below. The Firm is currently able to transmit orders on your behalf to the following execution venues: - Saxo Bank - CFH Clearing The Firm reserves the option to add additional venues in the future and this policy will be updated accordingly. Note that although the Firm may transmit Client orders for execution (on a matched principal basis), contractually the Firm remains the sole counterparty to the Clients trades and any execution of the order is done in the Firm s name. 5 Liquidity Providers Selection Criteria The following criteria are used when selecting liquidity providers: They operate in the markets in which the Firm operates, and in the currencies and financial instruments that they are able to support; Their geographical location and ability to provide real time access to markets; Time availability of prices in many markets there are lulls and spikes in trading as negotiations align trading interests at different times and different parts of the curve; accordingly, the last traded price may not always be available or act as a reliable indicator of current price.

4 6 Execution Factors and Criteria To provide Best Execution we are obliged to consider certain execution factors for each transaction. We have defined these criteria below for your review. In accordance with our regulatory responsibilities, if you have been classified as a Retail Client under MiFID, then we must determine whether we have provided you with Best Execution by reference to the total consideration paid (price and cost of execution). In order to do this we will take into account all relevant factors concerning the underlying market at the time and any specific instructions for your orders. Our execution factors and criteria are an important aspect of the process to ensure that the best possible result is obtained for execution (and at all times and in accordance with FCA expectations, the relative importance that the Firm gives to those execution factors must be designed to obtain the best possible result for the execution of its client orders). These execution factors in the markets in which the Firm operates have been listed in order of priority and will include, but are not restricted to: Price and costs of execution: The automated system will seek out the best overall outcome for the transaction and this is likely to be the most important execution factor to our clients. The Firm employs a transparent cost structure with no hidden commissions or fees. All trades incur a pre-agreed fee per lot that is disclosed up front. Likelihood and speed of execution: Through the use of an automated trading platform, orders will be executed promptly with only rare opportunities for price slippage to occur on some types of orders. Due to the nature of the platform, it is likely that speed of execution will be of high importance to our clients. We aim to update our prices as frequently as reasonably possible; however, our ability to do so may be limited by technological factors, including liquidity providers price feed, hardware, software and data communications links. We execute all trades at the prices communicated to us by liquidity providers and in accordance with our Standard Terms of Business. Size, nature and characteristic of the order: A typical transaction consists of a currency or CFD trade. The platform will seek to provide you with the best outcome for your order considering the factors described above. Characteristics of the clients: Our client base will be comprised of a mixture of Retail Clients, Professional Clients and Eligible Counterparties. The Firm is aware that Retail Clients are afforded the highest protections and will place greater emphasis on any obligations owed to them. This Best Execution Policy applies to both our Retail and Professional Client categories. 6.1 Contracts for Differences (CFD) The Firm recognises that when closing out an open position, the client must close out the contract with the firm that sold the contract to them, even if there is a better price elsewhere. However, in these circumstances the Firm will always disclose any associated costs to you and seek out the best possible consideration on the underlying instrument. 6.2 Price Slippage It is acknowledged that in rare circumstances, price slippage may occur despite the automated nature of the platform. There are several factors that may lead to price slippage, for example, market data latency, the speed of a client s Internet connection or high market volatility. You should be aware that

5 when price slippage occurs it can be to your disadvantage. However, we will always seek the best possible outcome for you wherever possible and any price slippages in your favour will be also passed onto you. 6.3 Discretion and Trades outside Market Hours The Firm does not intend to obtain any quotes outside of market hours and we will not use our discretion when placing any orders to achieve the best result for you. 7 Fees and Costs The Firm does not charge different fees or costs depending on the venues used in order to ensure that costs are transparent and fully disclosed to you, the client. For all transactions, the Firm offers a clear and transparent charging structure; we charge a flat fee and we do not apply any additional commission or costs except as set forth below. All implicit costs are therefore disclosed to you for complete clarity. Additional costs that you should be aware of and which may be applied are: Transaction fees; Conversion of realized P/L to base currency; and Inactivity fees. 7.1 Payment for Order Flow The Firm does not receive Payment for Order Flow, meaning that we do not receive commissions or fees for arranging transactions with market makers, thereby ensuring that there is no conflict created by fees in our execution arrangements. 8 Conflicts of Interest The Firm recognises that conflicts may exist between the interests of the Firm and its clients. The platform on which orders are transmitted will display the best available price from a number of liquidity providers and clients, thereby reducing the scope for conflicts. On occasion your order may be matched with an order from a party who is also a client of the Firm. At no stage will any sensitive information about you be released to the other party in those cases and they will only be selected in the event that they are able to offer the best outcome for your order. The Firm does not direct orders to any specific liquidity provider or price maker and will not therefore actively select another client to match your order with if that client is not able to provide you with the best outcome. As the Firm does not direct orders, we are also able to demonstrate that other execution venues have not been disadvantaged when clients of the Firm also act as price makers. The Firm will always take steps to manage, mitigate and avoid potential and actual conflicts and internal systems are in place to ensure that otherwise comparable client orders are carried out sequentially and promptly unless the characteristics of the order or prevailing market conditions make this impractical or it is not in the best interests of the client. 9 Monitoring and Review The Firm will monitor the effectiveness of its order execution arrangements and Best Execution Policy in order to identify and, where appropriate, incorporate any amendments to procedures.

6 The Firm will assess, on a regular basis and at least annually, whether the execution venues included in the Best Execution Policy provide for the best possible result for its clients or whether the Firm needs to make changes to its execution arrangements. The Firm will review its order execution arrangements and Best Execution Policy at least annually or whenever a material change occurs that affects its ability to continue to obtain the best possible result for the execution of client orders on a consistent basis using the venues included in its Best Execution Policy. The Firm will notify you of any material changes to its order execution arrangements or Best Execution Policy as described above by posting the information on the Firm s website. 10 No Fiduciary Relationship The Firm s commitment to provide you with best execution does not mean that it owes you any fiduciary responsibilities over and above the specific regulatory obligations placed upon it or as may be otherwise contracted between the Firm and yourself. You remain responsible for your own investment decisions and the Firm will not be responsible for any market trading loss you suffer as a result of those decisions. 11. Disclosure and Client Consent MiFID regulations require this Policy to be disclosed and in addition, the Firm is required to obtain the Client s prior consent. The disclosure obligation applies to both the Firm s Retail and Professional Clients (although Retail Clients are entitled to certain enhanced disclosure concerning costs incurred and best execution quality data for execution venues listed in this Policy). In accordance with COBS 11 Annex 1EU the Firm will summarise and make public on an annual basis, for each class of financial instruments, the top five execution venues in terms of trading volumes, where it executed client orders in the preceding year, together with information on the quality of the execution obtained. For the avoidance of doubt, this obligation will apply to the both the Firm s Retail and Professional Clients and the data will include certain core data, additional information on execution venues and on any inducements received by the Firm. Whenever the Firm executes orders, it will obtain the prior consent of its clients to its execution policy. In the event the Firm executes an order outside a trading venue, it will obtain the express prior consent of its clients prior to proceeding either in the form of a general agreement or in respect of individual transactions. Whenever executing orders, the Firm will also inform the client of where the order was executed.

7 Annex 1: Financial Instruments As Defined by MiFID 1. Options, futures, swaps, forward rate agreements and any other derivative contracts relating to securities, currencies, interest rates or yields, or other derivatives instruments, financial indices or financial measures which may be settled physically or in cash 2. Options, futures, swaps, forward rate agreements and any other derivative contracts relating to commodities that must be settled in cash or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event) 3. Options, futures, swaps, and any other derivative contract relating to commodities that can be physically settled provided that they are traded on a regulated market and/or an MTF 4. Options, futures, swaps, forwards and any other derivative contracts relating to commodities, that can be physically settled not otherwise mentioned in 6 and not being for commercial purposes, which have the characteristics of other derivative financial instruments, having regard to whether, inter alia, they are cleared and settled through recognised clearing houses or are subject to regular margin calls 5. Derivative instruments for the transfer of credit risk 6. Financial contracts for differences 7. Options, futures, swaps, forward rate agreements and any other derivative contracts relating to climatic variables, freight rates, emission allowances or inflation rates or other official economic statistics that must be settled in cash or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event), as well as any other derivative contracts relating to assets, rights, obligations, indices and measures not otherwise mentioned in this Section, which have the characteristics of other derivative financial instruments, having regard to whether, inter alia, they are traded on a regulated market or an MTF, are cleared and settled through recognised clearing houses or are subject to regular margin calls

8 Annex 2 Matched Principal In the matched principal model, the broker facilitates its clients in anonymous trading activity in products by taking part in a matched transaction as principal. The broker can provide for its clients an indication of market prices and volumes for Foreign Exchange The Firm will not trade speculatively for a client or for his own book in the market. The trade will only be executed as a result of a Firm client order to buy or sell at a set price or size. Once the trade is complete, price, volume and terms are communicated through the broker and back office confirmations. Settlement is made between each client based on the market convention with the agreed brokerage fee through a monthly invoice. Our model is a transparent flat fee per lot. Example: Matched Principal Step 1 Step 2 Step 3 Step 4 BROKER provides access to the OTC market place for the trading of illiquid cash fixed income transactions. BROKER facilitates quotes from clients and publishes them on an anonymous basis as an indication of the current market price in the OTC market For OTC transactions, once BROKER has two or more interested clients, the price and trade terms are verified. Once BROKER is certain of execution (or potential for execution) on both sides of an OTC trade, it confirms the trade against the two clients. BROKER sends a confirmation to each client of the principal transaction. Settlement is made with each client based on the market convention.