Foreign Exchange Dealing & Business Practices Disclosure

Transcription

1 Foreign Exchange Dealing & Business Practices Disclosure This disclosure clarifies certain aspects of the trading relationship between you and Wells Fargo Bank, N.A. ( WFBNA, we, us or our ) and discloses relevant practices of WFBNA when acting as a dealer in the over-the-counter ( OTC ) foreign exchange ( FX ) market. We urge you to consider this information in deciding whether to transact FX or place FX orders with us as our counterparty. Applicability and Scope The information provided in this disclosure applies to any FX transactions 1 you execute or discuss with us, subject to the terms of any agreement between you and us, and supplements any other disclosures that we may furnish to you in connection with FX transactions or swap transactions, including through our Disclosure of Material Information for Swaps website. 2 Principal Trading WFBNA is a dealer and market maker in the foreign exchange market. As such, we engage in price quoting, order taking, trade execution and other related activities with counterparties and other dealers and for our own account. Unless we otherwise agree in writing, WFBNA acts as principal on an arm s length basis, does not act as your agent, fiduciary, financial advisor or in any similar capacity, and does not provide you with best execution for orders or transactions unless otherwise agreed in writing or required under applicable law. Although WFBNA takes steps to prevent and manage conflicts of interest, counterparties may have divergent or conflicting interests from time to time. Each counterparty is expected to evaluate the appropriateness of any transaction, based upon its own circumstances and assessment of costs, benefits and risks. Statements made by WFBNA should not be construed as recommendations or advice unless otherwise specified in writing. Market Making As a market maker in foreign exchange, WFBNA may receive requests from multiple counterparties for quotations and multiple orders for the same or related currency pairs, and while customer service is a high priority for us, WFBNA also manages its own independent risk management objectives. Except where otherwise prohibited by applicable law, we retain discretion with respect to how to satisfy counterparty requests and to achieve these objectives, including with respect to order execution, aggregation, priority and pricing without any obligation to disclose to a counterparty that we are handling other counterparties orders or our own orders ahead of, or at the same time as, or on an aggregated basis with, a counterparty s order. These activities may conflict with or adversely impact your interests, including the prices we offer you and the availability of liquidity at levels necessary to execute your order. They can also trigger stop loss orders, barriers, knock-outs, knock-ins and similar conditions of FX transactions we may execute 1 2 For purposes hereof, FX transactions means transactions involving the purchase or sale of one currency against another, or transactions involving payments or deliveries based upon the change in one or more FX rates, prices or indices, whether physically deliverable or non-deliverable, and including but not limited to foreign exchange spot, forward, swap and option transactions. See 1

2 with you. In addition, WFBNA attempts to make an appropriate return on transactions where possible, taking into account WFBNA s position, including its inventory and risk management strategies, costs, risks, and other business factors and objectives in WFBNA s discretion. Foreign Exchange Pricing WFBNA strives to provide fair and competitive FX pricing to its customers. Unless otherwise agreed or disclosed, any actionable or indicative price quoted by WFBNA in respect of an FX transaction is an allin price. The all-in price typically includes WFBNA s bid or offer spread for the requested transaction, and/or a charge in order to compensate WFBNA for any number of considerations, such as risks taken, costs incurred and services rendered (i.e., mark-up ), without any obligation (subject to applicable law) to furnish a breakdown of the constituent components, including the amount of revenue WFBNA expects to earn from the transaction. If any additional fee applies, such as a wire transfer fee, such fee will be disclosed at the time of transacting or charged pursuant to any relevant written fee arrangement we may have with you. Some factors that may affect foreign exchange pricing include but are not limited to credit, capital and funding costs, applicable trading venue or platform, regulatory requirements, relationship factors such as service level provided and volumes traded by you, the type of trade request, and business costs such as fees related to exchanges, brokers or other intermediaries. Spreads may also vary based upon trading behavior and market conditions such as demand, frequency, timing and volatility. WFBNA may offer different prices to different counterparties for the same or similar transactions, and no representation is made that WFBNA s pricing is reflective of prices being offered by other dealers. During extreme market conditions such as liquidity events, the notional size and price levels we can offer may not match levels provided in normal market conditions. This is particularly true of transactions we may offer or trade electronically. WFBNA may determine to suspend electronic delivery of pricing prior to or during such events, in order to protect WFBNA and/or its counterparties, but is under no obligation to do so or provide notice thereof. Risk Management and Hedging Practices As a market maker for a wide and diverse customer base and with a portfolio of various positions, WFBNA may enter into transactions in the market in consideration of overall customer need or anticipated need. In addition, when you make us aware of your intent to trade or submit an order or trade request, unless agreed otherwise, we may look for opportunities to satisfy your pricing and/or volume objectives while earning a reasonable return on our market making activities, by building up our inventory or positioning our risk book for such purposes, taking into consideration applicable market conditions (such as liquidity), transaction size and other factors we consider relevant, and we may riskmitigate or hedge our exposure in connection with any anticipated or executed transaction or order with offsetting or other risk-mitigating transactions, positions or strategies for our own account. As part of market-making, these activities are subject to the Market Making disclosures above, including how these activities may conflict with or adversely impact your interests and how they could affect pricing, liquidity, stop loss orders, etc. Orders Placing orders. When a counterparty places an order with WFBNA (as that term is used herein) for an FX transaction, WFBNA will treat that order as an offer by the counterparty to enter into that FX transaction. WFBNA s receipt of an order does not obligate us to accept such order, and our acceptance of an order does not constitute acceptance of such offer to enter into that FX transaction 2

3 nor a guaranty that WFBNA will be able to fill (i.e., execute) such order. Instead, acceptance of an order expresses WFBNA s willingness to attempt to enter into the FX transaction with the counterparty within the parameters of the order. Unless otherwise specifically agreed, WFBNA will exercise its discretion in deciding whether to work an order, which orders it would be willing to execute, when it would be willing to execute them, and how it would execute them, including whether to execute all or part of the order, unless we otherwise expressly agree to different terms of execution. As such, WFBNA s receipt or acceptance of an order, or any indication of working an order, does not create a contract that commits WFBNA to execute all or any part of the order. Unless otherwise agreed, you may cancel or amend an order only before we have begun filling it. WFBNA reserves the right to decline an order or revoke its acceptance of an order, in whole or in part, without explanation and without incurring any liability. Once WFBNA executes an order for an FX transaction, the counterparty s offer for that FX transaction shall be deemed accepted, in whole or in part as the case may be, forming a contract that is binding on both parties. All FX transactions resulting from order execution shall be confirmed in writing in a manner agreed by the parties or established by course of conduct. Partial fills. A partial fill means that only a certain portion of an order has been executed. Except as otherwise agreed or provided by an order s terms, WFBNA reserves the right to partially fill a counterparty s order for an FX transaction without completing the entire order due to market conditions or otherwise, and for counterparties that deal on certain platforms that offer a partial fill feature, WFBNA intends to communicate partial fill decisions as soon as practicable taking into consideration the functionality of the applicable platform. Stop loss/taking profit orders. In connection with a stop loss or take profit order, WFBNA may use any reasonable means available to accommodate such order, including entering into one or multiple transactions, unless otherwise instructed. Algorithmic execution. Upon agreement and only following your request, WFBNA may enable you to submit orders involving algorithmic execution. Algorithmic orders employ pre-defined rules to determine execution methods for individual portions of an overall transaction in order to fill the order. In determining whether to employ algorithmic execution, considerations may include the order s size, the time window for execution and market activity, liquidity and volatility. For example, we may agree to execute at a time-weighted average price ( TWAP ), which involves averaging prices observed at specified times agreed in advance. Any such arrangement between you and WFBNA will not constitute agency trading unless otherwise agreed in writing, and WFBNA s objective calculation of an average or fill price does not alter the arm s-length nature of our relationship. Benchmark orders. A benchmark order is an order to buy or sell a specific amount of currency at the requested benchmark level, such as WM/Reuters (WMR) fixing order execution. Orders for transactions using certain FX benchmarks to price such transactions can create order execution and risk management concerns. 3 You should be aware that WFBNA may engage in activities that may impact a benchmark rate, including sourcing liquidity for other customer orders that are unrelated to a benchmark fixing, acting as a market maker or engaging in risk management activities. Such activities may cause WFBNA to execute unrelated FX transactions during a time period that may impact transactions relating to a benchmark fixing. If referencing an FX benchmark in pricing a 3 For example, see the Financial Stability Board s Final Report on Foreign Exchange Benchmarks ( for additional information. 3

4 transaction would not include a bid or offer spread or charge, WFBNA may also charge you a fee agreed in advance as part of the all-in price of such transaction. Voice or Desk Trading You may execute FX transactions or provide instructions or orders to WFBNA by telephone. Transactions are formed and parties are committed to the terms thereof upon their agreement, verbal or otherwise, or in the case of orders, as described above. Unless otherwise agreed, any systematic restriction, control or process you may have established for purposes of dealing via electronic platforms may not apply when you initiate FX transactions by telephone. To the extent you are subject to any risk management policies and procedures or other requirements, WFBNA will not be responsible for your compliance with them, whether you enter into FX transactions by telephone or otherwise. Desk trades are executed on an all in price basis, subject to applicable pricing considerations and factors described under Foreign Exchange Pricing above. Following execution, amendment or termination of a voice transaction, WFBNA will deliver or make available a written confirmation of such transaction containing the trade details. It is your obligation to review each confirmation and contact your WFBNA representative as soon as practicable following receipt if you believe it contains any errors. Recording of Conversations WFBNA is required by law to record the telephone calls of its foreign exchange sales and trading specialists and certain other personnel. When you or your personnel communicate by telephone with us over such recorded lines, we will consider you and your personnel to have consented to such recording without further notification or assent. Such recordings may be accessible to regulators or other officials, with or without a subpoena, and we reserve the right to use such recordings in legal proceedings or otherwise to resolve disputes to the extent permitted by applicable law. Information Handling and Confidentiality Protecting the confidentiality of counterparty information is an important part of how we do business. WFBNA has policies and controls that are designed to protect a counterparty s confidential information. Counterparties should understand, however, that WFBNA makes use of information provided to it as a principal in the course of its FX and other trading business in order to effectuate and risk manage transactions. Specifically, unless otherwise agreed, WFBNA may use the economic terms of a transaction (but not counterparty identity) in order to source liquidity and/or execute risk-mitigating transactions. WFBNA may analyze transaction-related information on an individual and aggregate basis for a variety of purposes, including risk management, sales coverage and counterparty relationship management. We also may disclose information regarding transactions (but not counterparty identity) together with other relevant market information, internally and to third parties, as market color or statistical data. Notwithstanding any existing or future agreement to the contrary, by dealing with or continuing to deal with WFBNA you are deemed to have consented to the disclosure of, and agree that we are authorized to disclose, information (including, as applicable and without limitation material confidential information within the meaning of CFTC Rule (c)) you provide to us from time to time (i) as may be requested by any regulatory or self-regulatory organization or judicial or governmental authority or any derivatives clearing organization or securities exchange having or claiming authority to have jurisdiction over us that requests or requires such information from us (whether by statute, law, rule, regulation, court order, subpoena, deposition, civil investigative demand or otherwise), (ii) in connection with the investigation or defense of any actual or threatened proceeding, inquiry or investigation by any such organization or authority, or (iii) in connection with any actual or threatened proceeding or arbitration to which at least you and we are parties or are joined. In addition, by dealing with or continuing to deal with WFBNA, you 4

5 are deemed to have consented to the disclosure of information by us or our affiliates to third parties to the extent required by, or in order for us or our affiliates to comply with, any applicable law or regulation to which we or our affiliates are subject, or any legal process, order or directive issued or commenced by any authority or body or agency to which we or our affiliates are subject, including any that mandates reporting and/or retention of transactions and similar information. Such disclosures may include pricing and other data furnished to a trade repository, and such disclosures could result in such information becoming available to the public. In addition, by dealing with or continuing to deal with WFBNA you are deemed to have consented to and agree that we are authorized to use information, including without limitation confidential information you provide to us from time to time, and disclose such information to and between our head office, branches, affiliates and our and their respective agents, advisors and third-party providers of products or services (on the basis that such entities protect the confidential information in the same or similar manner that WFBNA protects such information), in either case for the purposes of (i) providing products or services to you, (ii) the performance of obligations or exercise of rights under such products or services, (iii) the compliance by us or our affiliates with legal, compliance, accounting or risk management policies, (iv) the effective execution of any transaction for or with you or any related hedging or mitigating any actual or potential exposure (whether market risk, liquidity risk, credit risk or otherwise) that may be executed for or with you (including anticipatory hedging), whether such exposure is yours, ours or an affiliate s, or (v) meeting or complying with any applicable legal or regulatory requirement as described above. You should be aware that your information may also be shared with domestic or foreign intermediary banks, affiliates, service providers, vendors and other agents or third parties, as applicable, to the extent necessary for executing, processing, clearing, novating, or settling your transaction or order, as may be applicable, on the basis that such entities will be responsible for protecting customer information they receive in carrying out such services. This Foreign Exchange Dealing & Business Practices Disclosure may be revised from time to time without notice. Version: Updated June 20,