A CYPRUS INVESTMENT FIRM REGULATED BY THE CYPRUS SECURITIES AND EXCHANGE COMMISSION

Transcription

1 License Number: KEPEY 066/06 Reg. office: 2-4 Arch Makarios III Ave, Capital Center, 9th Floor, P.O.Box 21255, CY-1505, Nicosia, Cyprus Head office: Alpha Business Center, 1 st Floor, Block B, 27 Pindarou Street, CY-1060, Nicosia, Cyprus Postal Address: P.O. Box 20934, CY-1665, Nicosia, Cyprus Tel: Fax: Contents 1. INTRODUCTION The Purpose of This Document Scope Background and regulatory context Ownership/obligations Review Execution Orders and Client Execution Order aggregation and allocation Selection of Execution Venue Demonstrating Best Execution Specific Instructions Reception and Transmission of Orders Client Order Handling Disclaimer

2 1. INTRODUCTION 1.1. The Purpose of This Document SIB (Cyprus) Limited ( SIB or the Company ) holds a license from the Cyprus Securities and Exchange Commission ( CySEC ), which permits the Company to operate as a Cyprus Investment firm and to provide investment and ancillary services in relation to specific financial instruments. The Markets in Financial instrument Directive (Directive 2004/39/EC) ( MiFID ) imposes a general obligation on SIB, when providing services to clients, to act honestly, fairly and professionally in accordance with the best interests of its clients. More specifically, MiFID requires Investment Firms to maintain and operate an order execution policy in respect of orders it executes for its clients in order to ensure it takes all reasonable steps to provide the best possible result for its clients. The expression best execution is not defined in MiFID or related legislation or regulations. It may be best described in line with the Committee of European Securities Regulators' guidance (the "CESR Guidance") as the requirement for investment firms to take all reasonable steps to obtain the best possible result for their clients, taking into account price, costs, speed, likelihood of execution and settlement, size, nature or any other consideration relevant to order execution. The CESR Guidance describes the best execution requirement to be of a general and overarching nature. On this basis, investment firms are able to apply a certain degree of flexibility in setting relevant parameters for how they propose to achieve best execution for their clients. This document sets out how SIB proposes to meet its best execution obligations bearing in mind the nature of its business and of its clients in relation to the execution, allocation and aggregation of orders or transactions as well as management of client orders, or arranging for an approved third party to do so on the Company s behalf. This policy applies to all SIB permanent staff (full time, directly employed or seconded or other relevant staff within the Sberbank Group organization as well as short-term and long-term contractors. In particular, this Policy sets out the key aspects applicable to the execution process, namely: (i) Execution factors and criteria to achieve best execution; (ii) The execution process followed by the Company; (iii) The order management process and; (iv) Disclosures and client consents required by the Company Scope It is the Company s policy not to accept any retail clients. Consequently, this policy applies only to Professional Clients of SIB. The Company s obligations under this Policy only relates to relevant MiFID business we conduct in financial instruments listed in Annex I of the MiFID Directive (reproduced for reference at Appendix 1), either in isolation or as part of a structured transaction, where: (i) The financial instrument has been admitted to trading on an EU regulated market, ( RM ), whether or not the transaction is carried out on a RM; and 2

3 (ii) The financial instrument is not listed or traded through an RM, for example Over The Counter ( OTC ) transactions. The fact that a transaction may be specific to client requirements does not preclude the application of this Policy. We are not obliged to provide best execution to you in the following cases: (i) Where on a non-standard basis and where it is commercially expedient for a Professional client to elect treatment as an ECP. (ii) Where you have given us a specific instruction in relation to your entire order, or any particular aspect of your order, in which case our obligation to provide best execution will be considered to be discharged by virtue of the fact we are following your instruction. While we will not solicit specific instructions from you, we may ask you to express a preference between identified potential execution venues, provided the use of those venues is consistent with this policy. If you provide specific instructions in respect of part of your order only, we will apply this execution policy to the remainder of your order Background and regulatory context This Policy implements the requirements of the Law which Provides for the Provision of Investment Services, the Exercise of Investment Activities, the Operation of Regulated Markets and Other Related Matters Law 144(I)2007. It further implements the relevant requirements of Part VI of Directive DI for the Professional Competence of Investment Firms and the Natural Persons Employed by them which is issued by the Cyprus Securities and Exchange Commission ( CySEC ) Ownership/obligations The ownership and maintenance of this policy is the responsibility of the Compliance Department. It will be reviewed every 12 months, or as necessary to keep pace with any changes. When reissued, changes will be highlighted so that staff is aware of the amendments Review The Company undertakes to review this Policy, in addition to the order execution arrangements to which it relates, on an annual basis. In the event of a change that has a material impact upon the Company s ability to obtain the best possible result for client orders, a review will be readily undertaken to assess the arrangements the Company has in place to achieve best execution on a consistent basis. The Company will notify clients of any subsequent changes to this Policy. Any change will be made without the need to obtain prior consent. 2. Execution Orders and Client Execution In the absence of specific client instructions, when managing client orders through to execution or upon facilitating the receipt and transmission of an order, the Company will take all reasonable steps to achieve the best possible result for clients in a comprehensive and consistent way. The Company will take into consideration, inter alia, a combination of the following execution factors: Price: which will vary according to factors such as market liquidity, market rules regarding quotations, bids and offers, etc; Speed: the speed with which we are likely to be able to execute your order on the venues available to us, meaning the time between reception of the order by the venue and the time it is allocated; 3

4 Nature and type of the order; Costs: including transaction costs, fees, taxes, charges directly referable to the execution of your order that you will pay to any third parties and venue costs; Size: the influence the size of your order may have on the other execution factors, including the type of Financial Instrument and the type instruction, such as the availability of liquidity for large orders; Market impact; Likelihood of execution and settlement: including the relative liquidity of the venues available for execution; and Certainty of settlement: Any other relevant peripheral consideration relevant to the execution of the order. Using the Company s commercial judgment and market expertise, the Company will consider the relative importance of these execution factors when weighed against the following order criteria: Characteristics of the client; Characteristics of the order; Prevailing market conditions; Financial instrument and its suitability and appropriateness for the client, and Characteristics of the execution venues to which the order can be directed. The process by which the Company undertakes this assessment is neither uniform nor directly comparable in each instance. The Company s execution obligations will be discharged in a manner that takes into account the different circumstances associated with the execution of the order as they relate to the particular financial instruments involved. Emerging markets may also present lower volumes of liquidity and for practical necessity, particular emphasis will be placed on the speed and therefore likelihood of execution (also referred to as fill rate ). Execution may not be at the lowest price available, but the certainty of execution for the whole order may increase overall. Similarly, where there is a large order that may exceed the available liquidity of the market (or where the likely impact on the market may be too great), execution of the order may, if you have provided your express consent to the Company, occur in stages, to allow the Company to facilitate the execution appropriately. Clients will be informed of any anticipated difficulties in executing an order before the trade. 4

5 3. Order aggregation and allocation SIB endeavours to achieve the prompt, fair and expeditious execution of your orders placed with SIB in accordance to our obligations under MiFID. In doing so we will: Carry out comparable orders sequentially and promptly unless the characteristics of the order including the market conditions at that point in time make this impracticable or the interests of the client require otherwise; and Accurate record and allocate the orders executed for you This Policy shall not unduly conflict with contractual obligations or specific client instructions in relation to the management of a particular order. Without further reference or notice to you, SIB may combine your orders with our orders, or with orders of other clients. However we will only combine such orders in a manner where it will unlikely that this aggregation and transactions will work overall to your disadvantage; Any aggregation of your orders may result in you obtaining on some occasions a more favourable price and on others a less favourable price than if your order had been executed separately; Client orders will be dealt with on a first-in first-out basis. In the case of aggregation of limit orders, in the case of partial execution, the allocation will be done in accordance with the time of reception of the client order; In case of aggregation of orders, we will prevent reallocation in a way that is detrimental to the client in the case of transactions for own account which are executed in combination with client orders; Where the Company aggregates transactions for own account with one or more client orders it shall not allocate the related trades in a way that is detrimental to a client; Where the Company aggregates a client order with a transaction for own account and the aggregated order is partially executed, the Company should allocate the related trades to the client in priority to the Company. However, if the Company is able to demonstrate on reasonable grounds that without the combination it would not have been able to carry out the order on such advantageous terms, or at all, it may allocate the transaction for own account proportionally, in accordance with the provisions of this Policy; SIB may execute your order as a series of transactions at different times and apply the average price to such transactions; SIB will not be responsible for any delays or inaccuracies in the transmission of orders or the execution thereof in either case due to any cause whatsoever beyond the reasonable control of such party; Reallocation of transactions will be considered where a client has been unfairly detrimented in the circumstances or where unfair precedence has been given to the Firm s own trading interests. There will be no reallocation of transactions for own account executed in combination with client orders, if such reallocation is detrimental to the client; SIB shall not misuse information relating to or between pending client orders. The Firm shall take all reasonable steps to prevent the misuse of such information by any relevant persons or employees; 5

6 Any use of information in relation to a pending client order by the Firm, in order to deal on own account in the financial instruments to which the client order relates, or in any related financial instruments, will be considered as a misuse of that information; Where necessary, due to market conditions or where it is advantageous to the client, large orders may be executed over more than one day. SIB may allow for the delayed allocation of the order in the following situations; to avoid uneconomic allocations, mitigate high settlement costs or to optimize average pricing for the client. 4. Selection of Execution Venue The Company has access to a variety of different execution venues either directly or through third parties. This way, the Company is able to handle on a consistent basis its clients orders on financial instruments traded in domestic and international markets. The types of execution venues used by the Company when executing client orders may be: Regulated Markets ( RM ); Over the Counter ( OTC ) market networks, or Market Maker or any other EEA approved liquidity provider. Multilateral Trading Facility ( MTF ); Systematic Internalisers ( SI ); Orders for stocks which are listed will usually be carried out on an RM or OTC whereas orders for stocks which are not listed will usually be carried out OTC. Orders for bonds or derivatives may be executed on any of the five types of venue set out above. Orders for structured products may be carried out on any of the five types of venue listed above except for an RM. The choice of venue will be influenced by the factors set out above. The Company may execute orders in a venue that is not a regulated market or an MTF under the legislation implementing MiFID. Where the relevant financial instruments are admitted to trading on a regulated market or an MTF, SIB will not execute orders regarding these financial instruments outside a regulated market or an MTF, unless it has obtained the client s prior express consent 5. Demonstrating Best Execution The Company endeavours to provide best execution in relation to all relevant MiFID business activity. However, where the client believes that it has reasonable grounds to assert that best execution was not obtained, the client can make a written request (see Section Specific Instructions below), for the Company to provide the following: An analysis of the procedures used to select that particular execution venue, Data reconstituting the trade information available to the Company at the time. 6

7 6. Specific Instructions When executing an order following a specific client instruction, the Company will execute the order in line with those instructions and will treat its best execution obligations as satisfied in respect of the part (or aspect) of the order to which those instructions relate. The remaining part (or aspect) of the order will be executed in line with this Policy. Clients should be aware that, by providing the Company with specific order instructions this may encumber the ability of Company to obtain the best overall result. The Company will not solicit specific instructions (or expressly or implicitly suggest the content of such instructions) if the Company knows that in doing so such conduct might prevent it from obtaining the best possible result for the client. However, this should not prevent the Company inviting a client to choose between two or more specified trading venues, provided that those venues are consistent with this Policy. 7. Reception and Transmission of Orders Subject to any specific instructions that may be given by a client (see above), the Company may transmit an order that it receives to another Sberbank Group entity or affiliate or to an approved third party broker, for execution, which have such execution arrangements that enable SIB to comply with its obligations under this Policy. In doing so, the Company will act at all times in the best interests of the client and will also comply with the above requirements. The Company will regularly monitor the execution quality the entities identified above. 8. Client Order Handling Subject to any specific instructions that may be given by a client (see above), the Company may transmit an order that it receives to another Sberbank Group entity or affiliate or to an approved third party broker, for execution. In doing so, the Company will act at all times in the best interests of the client and will also comply with the above requirements. The Company will regularly monitor the execution quality the entities identified above. 9. Disclaimer This document does not relate to financial instruments specifically excluded from the scope of MiFID business activity or jurisdictions outside of the EEA where business is not undertaken on behalf of Sberbank Group. This document does not constitute legal advice and clients, irrespective of categorization, are advised to seek legal opinion where appropriate. We are not acting as the client s financial adviser or in a fiduciary capacity in respect of any transaction with the client unless otherwise expressly agreed by us in writing. Before entering into any transaction the client should take steps to ensure that he/she understands the transaction and have made an independent assessment of the appropriateness of the transaction in the light of the client s own objectives and circumstances, including the possible risks and benefits of entering into such transaction. The client should also consider seeking advice from his/her own advisers in making this assessment. 7

8 APPENDIX 1 Financial Instruments 1. Transferable securities 2. Money-market instruments 3. Units in collective investment undertakings 4. 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 5. 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) 6. 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 7. Options, futures, swaps, forwards and any other derivative contracts relating to commodities, that can be physically settled that are not otherwise mentioned in paragraph 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 8. Derivative instruments for the transfer of credit risk 9. Financial contracts for differences 10. 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 paragraph, 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