J.P. Morgan Treasury and Securities Services Execution Policy May 2012 This document sets out information on JPMorgan Chase Bank, N.A., London Branch s, J.P. Morgan Securities Ltd. s and J.P. Morgan Europe Limited s ( J.P. Morgan ) Execution Policy and the approach adopted by Treasury and Securities Services (TSS) to providing Best Execution as required by the U.K. FSA Conduct of Business Sourcebook (COBS) in accordance with the Markets in Financial Instruments Directive (MiFID). 1 Policy Scope 1.1 This policy applies to all Clients classified by J.P. Morgan as Professional or Retail and only to dealing in Financial Instruments (each as defined in COBS). Best Execution is only owed when J.P. Morgan is executing orders where the firm owes contractual or agency obligations to the Client, or in other circumstances where it has otherwise expressly agreed to accept such Best Execution obligations. 1.2 Under COBS, Best Execution is defined as obtaining the best possible execution result, taking into account price as well as other factors such as costs, speed, likelihood of execution and settlement, size, nature and/or any other relevant order execution consideration including any other conditions set by the Client, whether we are executing orders on behalf of clients or placing orders with, or passing orders to, others for execution. This overarching obligation to obtain the best possible result for clients is referred to, in this document, as our obligation of Best Execution. The relative importance of the best execution factors can vary depending on the characteristics of the Client, the transaction, and the execution venues to which the transaction is directed. Where the Client has negotiated directly on transaction terms including price and no discretionary decisions are being applied by J.P. Morgan, this policy will not apply. 1.3 When J.P. Morgan provides quotes or negotiates a price with a Client on request (i.e., dealing on a Request for Quote or RFQ basis), irrespective of whether it has initiated the transaction, it will not be receiving a client order as part of a service where Best Execution will apply to determine the price given to the Client. The distinction is between: Where the Client is relying on J.P. Morgan to get the best price (i.e., for J.P. Morgan to act on behalf of the Client in protecting the Client s interests), and Where the Client merely requests or takes a price. 2 Factors Considered When Executing Transactions When executing on behalf of Clients in relation to Financial Instruments, J.P. Morgan will take all reasonable steps to obtain the best possible result for all Clients on a consistent basis, subject to and taking into account the Financial Instrument subject to the order, the nature of the order, the execution venues available (on reasonable commercial terms) for such Financial Instruments and the priorities placed by the Client upon J.P. Morgan executing those orders. For certain types of activity, the best possible result can be translated as optimising a Client s total financial return on a portfolio over the relevant period without breaching any specific guidelines specified by the Client.
J.P. Morgan will generally give price a higher relative importance when obtaining the best possible result for orders executed on behalf of the Client. However, J.P. Morgan may also take into consideration a range of different factors, including, the need for timely execution, availability of price improvement, the liquidity of the market (which may make it difficult to execute an order), potential price impact, the size of the order and the nature of the financial transaction including whether or not such transactions are executable on a Regulated Market, over-the-counter, or via either route. Also, the creditworthiness of the venue, market liquidity and the quality and cost effectiveness of any related clearing and settlement facilities. 2.1 Client Guidelines Where the Client provides investment guidelines or other execution guidelines, J.P. Morgan will execute in accordance with these guidelines. It should be noted that the nature of the Client specific requirements could impact J.P. Morgan s ability to obtain, what in its opinion might have been a best price in the absence of such requirement. In such circumstances, J.P. Morgan will take all reasonable steps to obtain best results having followed the Client s specific instructions. 2.2 Specific Instructions Where the Client gives J.P. Morgan a specific instruction, including specifying the characteristics of a bespoke product, either relating to an order or a particular aspect of an order, J.P. Morgan will execute so far as is reasonably possible in accordance with those instructions. This may prevent J.P. Morgan from taking the steps that the firm has put in place to obtain the best possible result for the execution of the Client s orders. In the absence of express instructions from the Client, J.P. Morgan will exercise its own discretion, having regard for the terms of the Client s order in determining the factors that it needs to take into account for the purpose of providing the Client with Best Execution. 2.3 Prices that optimise a Client s portfolio returns over the relevant period For certain types of activity where it is possible to execute transactions at different prices, all reasonable steps will be taken to ensure that executions are negotiated at a price that aims to optimise Client portfolio returns over the relevant period, subject to Client predefined guidelines (see 2.2 above), and J.P. Morgan does not therefore guarantee to always provide best price on individual transactions executed on a Client s behalf. Where available, market price sources will be used to negotiate execution pricing. In the absence of market sources, knowledge of market conditions will be relied on. 3 Execution Venues The Execution Policy includes, for each Financial Instrument in which we execute orders on the Client s behalf, those venues that we consider will enable us to obtain Best Execution on a consistent basis and will include as appropriate for each product, regulated markets, multilateral trading facilities, systematic internalisers, market makers and other liquidity providers. Please refer to Appendix 1 for a list of the main execution venues used by J.P. Morgan.
Loans and cash investments are generally executed in the Over-the-Counter market and the transaction counterparties ( execution venues ) are global banks and securities dealers. These may include J.P. Morgan affiliates acting as principal. J.P. Morgan will, on request, provide further details of the execution venues included in our Execution Policy. Where the selected venue is a J.P. Morgan affiliate, the pricing will be agreed on an arms length basis and subject to the same factors listed above. J.P. Morgan may also transmit the Client s order to another broker or dealer (which may be non-eea, including an affiliate) for execution, in which case the firm will either determine the ultimate execution venue on the basis described above, and instruct the other broker or dealer accordingly, or will satisfy itself that the other broker or dealer has arrangements in place to enable the firm to comply with its Best Execution obligations to the Client. 4 Monitoring 4.1 J.P. Morgan will monitor the effectiveness of its execution arrangements and this policy and assess on a regular basis at least annually whether the Execution Venues it has selected provide for the best possible result for orders it executes on behalf of the Client. If the Client requires further information, they should contact their client service representative. 4.2 The policy and the firm s order execution arrangements will be reviewed at least annually. Material changes will be notified to the Clients. 5 Record Retention Adequate records to support compliance with all sections of this policy will be retained in line with U.K. retention periods.
Appendix 1 Execution Venues used by J.P. Morgan (Please refer to section 3 of J.P. Morgan s TSS Execution Policy) J.P. Morgan uses the following execution venues when obtaining best execution as defined by COBS and MiFID. This list is not exhaustive and does not include the list of market counterparties that J.P. Morgan may use as execution venues in TSS business. It will be subject to change as described in the Execution Policy and will be re-issued from time to time. J.P. Morgan may also use other venues where it deems appropriate in accordance with the Execution Policy. Where J.P. Morgan acts as an execution venue it will have regard for the wider market in the relevant product, taking into account information source reasonably available, including but not limited to, exchanges, brokers/dealers and Multi-lateral Trading Facilities to meet its best execution obligation. Equities EMEA BATS Trading Ltd Borsa Italiana Milan: MTA Chi-X Deutsche Boerse: Xetra Frankfurt Stock Exchange Johannesburg Stock Exchange London Stock Exchange Madrid Stock exchange MICEX NYSE Euronext Amsterdam, Brussels, Lisbon, Paris NASDAQ OMX Stockholm, Helsinki, and Copenhagen Exchange Traded Derivatives and Commodities EMEA Athens Derivatives Exchange Borsa Italiana: IDEM Bolsas y Mercados Españoles: MEFF Eurex Deutschland / Eurex Zürich Dubai Gold & Commodities Exchange EDX London European Climate Exchange European Energy Exchange European Energy Derivatives Exchange NV(ENDEX) Euronext.liffe Bclear Euronext.liffe: London, Paris, Amsterdam Brussels, Portugal International Maritime Exchange (IMAREX) Oslo Bors NASDAQ Dubai PLUS Markets SmartPool ICE Futures Europe London Metal Exchange London Commodities Exchange
SIX Swiss Exchange Turquoise Warsaw Stock Exchange Vienna (Weiner Borse Stock Exchange) Xetra NASDAQ OMX Nord Pool OTOB Wiener Bourse Oslo Stock Exchange Powernext Energy Exchange Turkdex South African Futures Exchange (SAFEX Warsaw Stock Exchange U.S. and Latin America U.S. and Latin America American Stock Exchange (Options) American Stock Exchange BM&F Bovespa Bolsa de Valores Bolsa de Valores Columbia Bolsa de Valores de Santiago Bolsa de Comercio de Buenos Aires Bolsa Mexicana de Valores International Securities Exchange Montreal Exchange Mercado Electronico de Columbia Mercado de Valores de Buenos Aires Mercado Abierto Electronico S.A. National Stock and Option Exchanges NASDAQ New York Stock Exchange Bolsa De Mercadorias & Futures Boston Option Exchange Chicago Board Options Exchange Chicago Board of Trade Chicago Climate Futures Exchange Chicago Futures Exchange Chicago Mercantile Exchange Dubai Mercantile Exchange (NYMEX) Electronic Liquidity Exchange ICE Futures US International Securities Exchange Kansas City Board of Trade Mexican Derivatives Exchange Mercadorias & Futuros Mercado a Termino de Rosario Minneapolis Grain Exchange
NYFIX Euromillenium Pacific Stock Exchange Philadelphia Stock Exchange Pure Trading Toronto Stock Exchange TSX Venture Exchange Montreal Exchange NASDAQ options NYSE LIFFE NY Stock Exchange (options) New York Board of Trade New York Mercantile Exchange New York Mercantile Exchange (COMEX Division) One Chicago Pacific Stock Exchange Asia Australian Stock Exchange Bombay Stock Exchange Bursa Malaysia Securities Clearing Berhad Hong Kong Stock Exchange Philadelphia Stock Exchange Philadelphia Board of Trade Toronto Stock Exchange Winnipeg Commodity Exchange U.S. Futures Exchange Xtreame Indonesia Stock Exchange JASDAQ Korean Stock Exchange Karachi Stock Exchange (Guarantee) Limited Nagoya Stock Exchange National Stock Exchange of India Osaka Stock Exchange Singapore Exchange Securities Trading Limited Shanghai Stock Exchange Stock Exchange of Thailand Taiwan Stock Exchange Asia Australian Securities Exchange Bursa Malaysia Derivatives Berhad Central Japan Commodity Exchange Hong Kong Exchanges Joint Asia Derivatives Exchange Korean Exchange National Stock Exchange of India New Zealand Futures Exchange Osaka Securities Exchange
Tokyo Stock Exchange Singapore Exchange Derivatives Sydney Futures Exchange Fixed Income Bonds and Notes Taiwan Futures Exchange Thailand Futures Exchange Tokyo Commodity Exchange OTC Derivatives, Structured and Securitised Products and Notes Tokyo Financial Exchange Tokyo Grain Exchange Tokyo Stock Exchange Foreign Exchange *J.P. Morgan Securities Ltd, JPMorgan Chase Bank N.A., National Association London Branch and J.P. Morgan Markets Limited and their respective EU branches and affiliates ( JPMorgan )