Order Execution Policy KAS BANK N.V.

Transcription

1 Order Execution Policy KAS BANK N.V.

2 Disclaimer The most recent version of this policy document is kept in our Policy House site at KAS Point. Be aware that printed documents can be out of date quickly. In case of an (interpretation) difference between the Dutch version of this document and the English version, the Dutch version is binding. Copyright All information and images from this policy document are the copyright of KAS BANK N.V. (hereinafter: KAS BANK), unless stated otherwise. This policy is only intended for internal use by employees of KAS BANK. No information or image from this policy may be copied, reproduced, republished, downloaded or distributed in whole or in part to any person or organization outside KAS BANK. An exception to this exists if the KAS BANK Compliance Department has given permission in writing by or otherwise. 2

3 Table of Contents 1. INTRODUCTION BACKGROUND OBJECTIVE SCOPE CONTEXT / DEPENDENCE RELATED ADMINISTRATIVE AND ORGANISATIONAL PROCESSES DEFINITIONS POLICY GOVERNANCE GENERAL PROVISIONS REGARDING ORDER EXECUTION ORDER EXECUTION OF FINANCIAL INSTRUMENTS WITH THE EXCEPTION OF FOREIGN EXCHANGE TRANSACTIONS AND SECURITIES BORROWING AND LENDING TRANSACTIONS BEST EXECUTION EXECUTION FACTORS SEGREGATION ORDER EXECUTION FACTORS IMPLEMENTATION ASPECTS SELECTING A PLACE OF EXECUTION BROKERS FOREIGN EXCHANGE TRANSACTIONS SECURITIES BORROWING AND LENDING MINIMUM STANDARDS AWARENESS & TRAINING REVIEW POLICY DEVIATION FROM POLICY COMPLIANCE WITH THIS POLICY EFFECTIVE DATE

4 APPENDIX...16 Table Financial Instrument Preferred place of execution Table Financial Instrument Preferred place of execution Table Financial Instrument Preferred place of execution

5 1. Introduction In this policy document, KAS BANK describes the current policy and associated procedures with regard to order execution. This involves compliance with standards and requirements from laws and regulations, guidelines, best practices and codes of conduct and the management of the associated risks. 1.1 Background KAS BANK is the European specialist for the custody and administration of securities and highquality risk and reporting services. KAS BANK focuses entirely on business securities services to professional parties in the pension and securities industry. It preserves the assets of investment funds and institutions, banks, insurers, brokers, charities and other wealthy parties. This policy document sets out the basic principles used by KAS BANK to comply with the requirements of laws and regulations, regulations, best practices and codes of conduct with regard to the execution of orders in financial instruments ("orders"). From the Treasury activities, KAS BANK executes orders in financial instruments for its professional clients (including Eligible Counterparties) on the basis of execution only. 1.2 Objective The purpose of this order execution policy is to arrive at a correct, timely and complete execution of the order provided by the client in a manner that gives the client the best possible result. With this policy, KAS BANK also wants to control the risks associated with this activity by adequately responding to changes in laws and regulations, regulations, best practices and codes of conduct. It also wants to manage these risks by adequately responding to changes in the economic, political and technological fields. Good management of the integrity risks associated with the requirements of laws and regulations, regulations, best practices and codes of conduct ensure the integrity, care and continuity of KAS BANK's services. 1.3 Scope This policy applies to KAS BANK, KAS TRUST and all branches and is particularly relevant to the Treasury department including GFS. This policy must be read in conjunction with related internal process descriptions, codes of conduct and regulations. This policy relates to order execution. This topic is regulated in the following laws and regulations: The Netherlands: Act on financial supervision; Decision Conduct Supervision of Financial Enterprises Wft. 5

6 European: AIFM Directive; MiFID II. These laws and regulations apply to KAS BANK as a bank and investment firm. This policy relates to the execution of orders given by clients to KAS BANK regarding: a. Listed financial instruments (such as shares, units and shares in investment institutions, bonds and other fixed-income securities, and derivatives) b. Unlisted financial instruments (such as shares, units and shares in unquoted investment institutions, bonds and other fixed-income securities, and derivatives) c. Securities Borrowing and Lending (SBL) d. Financial instruments on the money and foreign exchange market as far as financial instruments in the sense of Art. 1 Wft (such as FX Forwards / Swaps, FX NDFs). With regard to currency transactions and securities borrowing and lending, this policy only applies if KAS BANK acts as an agent. This policy does not apply to currency transactions and securities borrowing and lending transactions where KAS BANK acts as principal Evaluation and information to be published annually Treasury, as policy owner, evaluates this policy annually. If substantial changes to the execution of orders occur or have occurred, Treasury will also evaluate the policy in the interim and adjust it if necessary. KAS BANK makes available annually on the previous year, via its website: information on the quality of implementation for each category of financial instruments for each category of financial instruments an overview of the main five execution venues (including OTC) in terms of trade volumes. If KAS BANK uses fewer than five execution venues, it can demonstrate that the selected location (s) of execution will enable it to always achieve the best results for its clients. KAS BANK must be able to demonstrate at the request of its clients that it has executed their orders in accordance with this policy. KAS BANK must also be able to demonstrate to the AFM that it has executed the orders in accordance with this policy Communication and consent of the client KAS BANK will make its order execution policy available to its clients before the start of the service. Clients must agree to the order execution policy before the start of the service. In addition, KAS BANK makes the policy available on its website on an ongoing basis. KAS BANK provides the client with the information he needs to access the website. KAS BANK will publish a material change to the Order Execution Policy via its website to its clients. 6

7 1.4 Context / dependence This policy is part of the compliance focus area 'Business integrity' and part of the compliance standards framework theme 'Business partners'. Related policies and procedures: This policy is related to the following KAS BANK policy and internal procedures: Policy framework Client acceptance and procedures Business conflicts of interest and procedures KAS BANK Code of Conduct Whistleblower regulation Incident scheme CSR and SRI policy Client classification under MiFID (II) All procedures, as described in chapter 4 Minimum Standards 1.5 Related administrative and organisational processes KAS BANK has set up suitable technical and organizational processes in which the risks and minimum standards from this policy must be safeguarded. In the specific processes below, the following issues are guaranteed: Order execution process Access Management, guarantees adequate access control to information; Client Data Management, ensures careful processing of data; Supplier Management, that in the agreements with the agreements the requirements of this policy document are complied with; Incident Management, the timely identification and resolution of incidents including data leaks; Broker Selection, ensures that the selection and monitoring of brokers is carried out in accordance with the service description; Payment management, guarantees timely payment to the external parties. 7

8 2. Definitions In this policy, KAS BANK uses the following definitions: Agent: Person or institution / department that is authorized to act for another (the client). Best execution: Principle of the execution of an order in the manner that leads to the best possible result for the client. Settlement: The administrative settlement of transactions in financial instruments; the delivery by the seller of the financial instruments to which the transaction related and the (usually simultaneous) payment of the countervalue by the buyer. Investment institution: An investment company or an investment fund that offers the opportunity to participate in a collective investment property in order to make the participants share in the return on investments. Broker: An investment firm (under local law) that has been engaged by KAS BANK to execute or settle orders in the markets where KAS BANK can not act itself. Derivatives: Derived instruments. Financial products whose characteristics and value are based on another underlying value. Explanation: Usually a right or obligation to buy or sell an underlying asset at a pre-determined time in the future or for a predetermined period (duration). Effects: Securities (such as shares and bonds) that are traded on the capital market. Execution only Execution-only investment services means that KAS BANK receives and transfers orders or executes orders in financial instruments at the request of the client. With execution only, the client decides on his investment decisions completely, without any personal investment advice underlying this. KAS BANK's involvement is in principle limited to passing on and / or executing orders that the customer enters on its own initiative. 8

9 Financial instruments: Financial instruments as defined in Article 1.1 Wft MTF: Multilateral Trading Facility (multilateral trading facility): a trading platform as referred to in the EU Markets in the Financial Instruments Directive (MiFID) and the Dutch Financial Supervision Act (Wft), on which several buyers and suppliers of financial instruments can perform transactions in these instruments. Explanation: MTFs are legally regulated, alternative (web-based) trading platforms in addition to existing (known) regulated exchanges, developed for trading via the internet. Order: Assignment to execute a transaction (purchase or sale) in a financial instrument. Order execution policy: Policy on execution of orders. OTC: Over the Counter. Private market - outside of a regulated market or MTF - in financial instruments. Professional client: client who is classified as such by KAS BANK on the basis of its "Client categorization under MiFID" policy Home market The regulated market (stock exchange) where a financial instrument has its primary listing. A commonly used term is Primary Exchange or Primary Venue. Transaction: Agreement between two or more parties where financial instruments are bought or sold. Explanation: Act or combination of actions of or on behalf of a client that KAS BANK has taken note of for that service. Transparency: Degree in which a market is characterized by fast and accurate availability of price and turnover data Fixed income: Financial instruments with a periodic fixed interest rate (such as bonds) 9

10 3. Policy 3.1 Governance KAS BANK operates according to the 'Three lines of defence model' (hereinafter: 3LoD), which originates from the Risk Governance Model of KAS BANK. Within this principle, each line (i.e. the first, second and third line) has its own role and responsibility in recognising, controlling and preventing the risks associated with order execution. As first line, Treasury has taken measures and set up procedures to identify and adequately manage the risks when executing an order. Treasury has the responsibility for implementing and effectively complying with this policy. This means, among other things, that it ensures that the employees are aware of this policy and of the associated procedures and measures, and that this policy is properly safeguarded. Treasury is responsible for, among other things: the selection of KAS BANK's brokers and the annual monitoring of the existing broker network; the annual assessment of the orders executed by KAS BANK brokers. Compliance advises and supports as a second line Treasury in the implementation of the policy. Compliance performs periodic monitoring of this policy and the associated procedures. Compliance submits the monitoring report to the Board of Directors (or the ERMC or the ORMC) for approval. The Managing Director Treasury receives a copy of this report. As a third line, the Internal Audit Department has the task of giving an independent opinion on the effectiveness of, design and operation of this policy. The Internal Audit Department reports on the results to the Board of Directors and the Audit Committee of KAS BANK. 3.2 General provisions regarding Order execution KAS BANK executes orders in financial instruments exclusively for professional clients. KAS BANK takes sufficient measures to achieve the best possible result for its clients when executing orders. It takes into account the price, the costs, the speed, the likelihood of execution and settlement, the size, the nature and all other aspects relevant to the execution of the order. This is discussed in more detail in chapters 4 and 5. KAS BANK receives no remuneration, discount or non-monetary benefits for the routing of orders from clients to a particular trading platform or place of execution. 10

11 Specific instructions The client has the right to give a specific instruction to KAS BANK. This specific instruction may relate to any or all parts of the execution of the order. The parts specified by the client replace the choices to be made by KAS BANK within the order execution policy of KAS BANK. A specific instruction may prevent KAS BANK from following one or more steps of its order execution policy. The instructions of the client can lead to a different execution than according to the Best Execution principles of KAS BANK. KAS BANK will then be deemed to have taken all steps to achieve the best possible result for the client. 4. Order execution of financial instruments with the exception of foreign exchange transactions and securities borrowing and lending transactions The provisions of this chapter apply to orders concerning: Listed financial instruments (such as shares, units and shares in investment institutions, bonds and other fixed-income securities, and derivatives) Unlisted financial instruments (such as shares, units and shares in non-listed investment institutions, bonds and other fixed-income securities, and derivatives. 4.1 Best execution When KAS BANK executes orders on behalf of the client, it will take all adequate measures to achieve the best possible result for the client (Best Execution), taking into account the relevant implementation factors as mentioned in paragraph Execution factors KAS BANK determines the relative weight of the execution factors, based on its commercial insight and experience, in light of the available market information and taking into account the implementation aspects as described in section Segregation As Agent, KAS BANK always carries out orders from the client separately from orders from other clients. KAS BANK always carries out separate orders from the client, unless the client requests that orders be combined. 4.4 Order KAS BANK executes orders in the order of receipt unless there are compelling reasons for KAS BANK to deviate from this. 4.5 Execution factors KAS BANK takes into account the following factors when executing a received order: price of the financial instrument; transaction costs; 11

12 speed; probability of execution and settlement; size, nature or any other consideration important for the execution of an order. Although the price of the financial instrument and transaction costs related to the execution weigh heavily in the best execution assessment, KAS BANK may, in certain circumstances, for certain clients, orders, financial instruments or markets, in the absence of specific instructions from the client, determine at its discretion that other performance factors for achieving the best possible result outweigh price and costs. 4.6 Implementation aspects The implementation aspects that are considered for the determination of the relative weight of the execution factors are: The classification of the client as a professional investor; the characteristics of the order, including whether the order involves a securities financing transaction (SFT, securities financing transaction); the characteristics of the financial instruments that are the subject of the order; the characteristics of the execution locations where the order can be placed. An annex has been added to this policy in which KAS BANK provides an overview of the execution locations to which it relies to a significant degree, specified according to the different classes of financial instruments. 4.7 Selecting a place of execution The place of execution is determined on the basis of the implementation factors mentioned under section 4.5. Here is that: Depending on an appropriate assessment of the implementation aspects and factors, orders are executed at the place of execution that KAS BANK deems most suitable to achieve the best possible result. KAS BANK weighs heavily on liquidity and transparency. KAS BANK chooses to use the home market as standard, unless the evaluation as specified in section indicates that this is not in the interest of the client. Orders will only be executed outside a regulated market or multilateral trading facility (for example OTC) if KAS BANK implements execution outside a regulated market or multilateral trading facility as the most appropriate to achieve the best possible result. Orders in financial instruments will only be executed at locations other than the relevant place listed in Table 1 in the Appendix to this policy via the broker network of KAS BANK, if the client has explicitly granted his consent. 12

13 4.8 Brokers Treasury carefully selects its brokers. In doing so, it weighs in both qualitative aspects and solvency and rating. Furthermore, it also weighs in any aspects that could damage the integrity of KAS BANK. KAS BANK assesses the order execution policy and the quality of the execution of these third brokers annually. 5. Order execution of foreign exchange transactions and securities borrowing and lending transactions The provisions of this chapter 5 apply to orders concerning: financial instruments on the money and foreign exchange market as far as financial instruments in the sense art. 1 Wft. In short, this concerns forward exchange contracts. Securities Borrowing and Lending (SBL). 5.1 Foreign exchange transactions Where KAS BANK acts as an agent on behalf of clients in the execution of foreign exchange transactions, these transactions are carried out at the place of execution that KAS BANK deems most suitable to achieve the best possible result, also in light of the conditions that apply to the relevant client. agreed. For the optimal execution of custom financial instruments, KAS BANK collects relevant market data to check whether the price offered to a client is fair and meets the obligation of optimal execution. Here, currency transactions on behalf of a client are only concluded with counterparties selected by the client and KAS BANK in joint consultation. Table 2 in the Appendix to this policy lists the preferred place of execution of currency transactions. This is only deviated from on the request of the client. 5.2 Securities Borrowing and Lending Where KAS BANK acts as an agent on behalf of clients in the execution of transactions in the context of securities borrowing and lending, these transactions are executed Over the Counter. For the optimal execution of custom financial instruments, KAS BANK collects relevant market data to check whether the price offered for a client is fair and meets the obligation of optimal execution. In the event that insufficient market data is available, KAS BANK will charge transactions depending on the value of the transaction, the term, the collateral to be received and other characteristics of the transaction, including the liquidity of the securities to be borrowed. Table 3 in the Appendix to this policy specifies the preferred place of execution (and / or OTC). 13

14 6. Minimum Standards KAS BANK targets market parties with a low or normal risk profile. - the responsibilities of the departments involved have been elaborated; - there is a central registration of all parties; - the data collected in relation to clients is kept up to date; - this policy is, among other things, guaranteed in the order execution process. 7. Awareness & Training In the context of increasing the awareness of employees in the field of order execution policy, KAS BANK uses the following resources: presentations and training courses; training in the context of onboarding of new employees. 8. Review policy This policy document is reviewed annually by Treasury, unless there are circumstances for an interim review. Treasury, in cooperation with Compliance and possibly with other stakeholders, tests the policy for accuracy, completeness and to ensure it remains up- to-date. 9. Deviation from policy If there are circumstances that may justify deviation from the policy, a special procedure must be followed to obtain management approval. The Managing Director Treasury gives written reasons for deviating from this policy and requests Compliance for advice. The deviation from the policy is handed over to the ERMC with the Compliance advice, in which both the first and the second line are represented. The ERMC takes a decision, taking into account the Compliance advice. Decisions and actions taken are clearly described in the ERMC meeting minutes. 10. Compliance with this policy This policy stems from legal obligations that apply to KAS BANK. Non-compliance of this policy may result in administrative and criminal sanctions for KAS BANK, damage to its reputation and third-party claims. KAS BANK therefore expects its employees to act in accordance with this policy. KAS BANK can impose disciplinary measures for non- compliance. 14

15 11. Effective date This order execution policy will take effect on 3 January

16 APPENDIX Table 1 Financial Instrument Listed securities (such as shares, bonds, other fixed-income securities, investment institutions and derivatives) financial instruments traded outside the exchange (including shares, bonds, other fixedincome securities, investment institutions and derivatives) Participations / shares in unlisted investment institutions Preferred place of execution Home market Interbank, market makers, 'authorized participants' (eg with regard to ETF shares) Directly placed at investment institution Table 2 Financial Instrument Currency transactions, such as FX Forwards / Swaps, FX NDFs Preferred place of execution FX ALL (Thomson Reuters) (MTF) Table 3 Financial Instrument Securities Borrowing and Lending Preferred place of execution OTC (incl. Bloomberg) 16

17