BEST EXECUTION AGGREGATION AND ALLOCATION POLICY Green Street Advisors (UK) Ltd (GSA) Last reviewed: 12.2017 (MiFID II Update) BEST EXECUTION POLICY PART ONE: THE QUALITY OF EXECUTION In accordance with the provisions of the Financial Conduct Authority ( FCA ) Conduct of Business Sourcebook ( COBS ) at COBS 11.2, the Firm by providing order execution services is required to comply with the obligation to act in accordance with the best interests of its professional clients when placing orders with other entities for execution that result from the decisions by the firm to deal in financial instruments on behalf of its client ( best execution ). When executing orders on your behalf in relation to financial instruments, we will take all reasonable steps to achieve Best Execution of your orders. This means that we will have in place this policy and procedures which are designed to obtain the best possible execution result for your orders, subject to and taking into account any specific instructions from you, the nature of your orders, the markets in question. In providing you with Best Execution we will take into consideration a range of different factors which include not just price, but also other factors such as the cost of the transaction, the need for timely execution, the liquidity of the relevant market, the size of the order and the nature of the financial transaction including whether it is executed on a regulated market or over-the-counter. In the absence of express instructions from you, we will exercise our own discretion in determining the factors, and their relative importance, that we need to take into account for the purpose of providing you with Best Execution. We consider ourselves to be typically in receipt of an order and acting on your behalf where an execution instruction is given to us that gives rise to contractual or agency obligations owed by us to you. Whether these obligations arise is a question of fact that depends on whether yourely on us to protect your interests in relation to the price and other elements of Page 1 December 2017
a transaction that may be affected by the choices made by us when executing an order. Our policy, in providing you with Best Execution, is, so far as possible, to exercise the same standards and operate the same processes across all the different markets and financial instruments on which we execute your orders. However, the diversity in those markets and instruments and the kind of orders that you may place with us mean that different factors will have to be taken into account when we assess the nature of our execution policy in the context of different instruments and different markets. In some markets, price volatility may mean that the timeliness of execution is a priority, whereas, in other markets that have low liquidity, the fact of execution may itself constitute Best Execution. In other cases, our choice of venue may be limited (even to the fact that there may only be one platform/market upon which we can execute your orders). Where you provide us with a specific instruction in relation to your entire order, or any particular aspect of your order including selecting to execute on a particular venue, we will execute the order in accordance with your instructions. However, please note that where you provide us with a specific instruction this may prevent us from following some or all of the steps in our order execution policy that are designed to obtain the best possible result for the execution of your orders. In following your instructions we will be deemed to have taken all reasonable steps to provide the best possible result in respect of the order or aspect of the order covered by your specific instructions. Our obligation to provide you with Best Execution does not mean that we owe you any fiduciary responsibilities over and above the specific regulatory obligations placed upon us or as may be otherwise contracted between us. As part of the Firm s obligation in respect of best execution, our Client(s) must be provided with a Disclosure Statement which sets out an overview of our best execution policy. The Client(s) must consent to this policy together with the Firm s trading outside a regulated market or multilateral trading facility in respect of instruments admitted to trading by those means. MiFID Securities Executed By GSA: Page 2 December 2017
Equities For standard UK market orders, and in normal market conditions, the Firm may poll different execution venues (using automatic execution technology) to identify the best terms available at the point of trading for the equity concerned. Other orders, including those relating to international equities, that cannot be executed automatically will be dealt manually with another regulated firm or via a Multilateral Trading Facility (MTF). This involves a manual search for reference trading prices via market data feeds or by comparing prices offered by other market participants. When an appropriate counterparty is identified, the price is negotiated manually and executed on the best terms identified for the order in question. PART TWO: SUMMARY OF ORDER EXECUTION POLICY We have set out below information on the execution factors we consider in selecting the different venues on which we may execute your orders and have identified the types of venues on which we will most regularly seek to execute your orders and which we believe offer the best prospects for affording you Best Execution. In the absence of specific instructions from you, we will consider the following execution factors to determine the manner in which your order will be executed: price; costs; speed of execution; likelihood of execution or settlement; size of your order; nature of your order; venue; and any other consideration relevant to the efficient execution of your order. In the absence of specific reasons to the contrary, the total consideration that is likely to be achieved for a transaction will dictate the execution venue chosen. In some circumstances, costs, speed of execution and liquidity may also determine the manner in which your order will be executed. We will determine the relative importance of each factor using the following criteria: your characteristics (including your regulatory client categorisation as Professional); the characteristics and nature of your order, including whether any specific instructions are given; the characteristics of the financial instruments that are the subject of your order; the characteristics of the execution venues to which your order can be directed (including the ability of the venue to Page 3 December 2017
manage complex orders, the creditworthiness of the venue and the quality of any related clearing and settlement facilities). For each product in which we execute orders on behalf of clients we have included in our order execution policy those venues that enable us to obtain on a consistent basis the best possible result for the execution of client orders. In meeting our obligation to take all reasonable steps to obtain on a consistent basis the best possible result for the execution of your orders, we may use one or more of the following venues types when executing an order on your behalf: Regulated Markets; Multilateral Trading Facilities; Systematic Internalisers; third party investment firms and/or affiliates acting as a Market Maker or other liquidity providers; and/or non-eu entities performing similar functions. We will assess which venues within this list are likely to provide the best possible result for our clients on a product-by-product basis. In certain financial instruments, there may only be one execution venue, and in executing a trade in such circumstances we will presume that we have provided the best possible result in respect of these types of financial instruments. You should note that some of your orders may be executed outside a Regulated Market or a Multilateral Trading Facility where we believe we can achieve the best possible result for execution of your order by doing so. Whilst the Firm will naturally try to achieve the best possible result for its clients in every instance, the Firm does not need to obtain the best possible results for its Clients on every single occasion; rather it will verify on an ongoing basis that the execution arrangements it has established work well throughout the different stages of the order execution process. The Firm will take all appropriate remedial actions if any deficiencies are detected to achieve the best possible results for its Clients on an ongoing basis. More information on the execution venues that we have chosen for individual products is shown at Appendix 1 for Green Street. PART THREE: RECEIVING AND TRANSMITTING ORDERS Page 4 December 2017
We may transmit an order received from you to another dealer/our affiliate for execution. When we receive your order but pass it on to another dealer/an affiliate for execution, we will be under an obligation to take all reasonable steps to obtain the best possible result for you. The dealers/affiliates that we use have arrangements in place to enable us to comply with our obligations to you. Where we transmit orders to other brokers/ affiliates, we monitor the standard of execution being provided by them and, where appropriate, correct any deficiencies. PART FOUR: MONITORING, REVIEW AND REPORTING We monitor the effectiveness of our order execution arrangements and order execution policy in order to identify and, where appropriate, correct any deficiencies. We assess, on a regular basis, whether the execution venues included in the order execution policy provide for the best possible result for our clients or whether we need to make changes to our execution arrangements. We review our order execution arrangements and order execution policy at least annually or whenever a material change occurs that affects our ability to continue to obtain the best possible result for the execution of client orders on a consistent basis using the venues included in our order execution policy. We will notify you of any material changes to our order execution arrangements or order execution policy as summarised above. This review also takes account of broker concentration and commission split between brokers. The Firm will publish reports on an annual basis of the top five investment firms in terms of trading volumes where it transmitted or placed client orders for execution in the preceding year and the information on the quality of execution obtained and take account of that information and information published by execution venues on execution quality in their policies on best execution. PART FIVE: AGGREGATION AND ALLOCATION POLICY Page 5 December 2017
Whilst taking all reasonable steps to obtain the best possible result, or best execution, GSA also endeavours to execute all orders promptly, effectively and fairly without giving preference to any client. GSA does not deal on its own account. Therefore, client orders will never be aggregated with Firm orders nor will the firm ever be allocated ahead of its clients. Immediately upon receipt of a client s instructions, GSA will commence execution of the order. In line with the current FCA Regulations, comparable orders are executed in the order in which they are received unless this is impossible due to the characteristics of a particular order or prevailing market conditions. Aggregation The initial step, however, will be to assess whether in fact best execution may be obtained by aggregating different client orders. Such aggregation will only proceed if: 1. GSA reasonably believes such action will not disadvantage any of the clients involved; AND 2. GSA has the appropriate discretion to proceed on such course. Where the client permits GSA to exercise such discretion, the client accepts that an aggregation of orders may disadvantage any given individual client. The Firm may aggregate a client order with those of other clients (and clients of affiliates of the Firm) for the efficient execution of orders for the benefit of all clients. The Firm will endeavour not to carry out a client order or a transaction in aggregation with another order if it is likely that the aggregation of orders will work to the disadvantage of any client whose order is to be aggregated. In the event that an aggregation would disadvantage a client, it must be disclosed to each client whose order may be aggregated, that the effect of aggregation may work to its disadvantage in relation to a particular order. The Firm will take into account the investment strategy and risk profile of each client before allocating aggregated orders. Page 6 December 2017
If practicable, GSA undertakes to inform the client of such aggregation prior to executing client s order. If volume and price permit, all orders will be executed on the same trading day as they are received. If the order is received outside the normal business hours of the market place, the order will be executed when the market place reopens. Allocation When allocating an aggregated order, GSA will typically divide the order on a pro-rata and average price basis, thus giving the fairest possible outcome with regard to the prices and volumes involved. When allocating orders across funds or client accounts, the following methodologies and factors may be considered: Pro rata; Average Price; Pari passu; Volume of the order; Capacity of the relevant portfolio in line with investment restrictions; Time horizons; and Price of the order. As a general rule, allocations among clients with the same or a similar investment objective should be pro-rata based on the relative market values of the aggregated clients portfolios. Where the aggregated orders are executed in differently sized tranches and at different prices, the allocation will be made at the weighted average price achieved. If an order is partially executed, the subsequent related orders required to complete the original aggregated order must be allocated on the same basis as the original order. Deviations from the general rule may be permitted in the following specific circumstances where allocations may be based on: Page 7 December 2017
Existing positions in the client accounts; Different risk limits where the use of pro-rata based on portfolio assets may mean a client exceeds a risk limit; The availability of cash in the particular accounts; Tax reasons; and Shares to be allocated to the largest account if the securities traded are too small to be reasonably allocated to all clients. Reallocation of a transaction following its allocation must be preapproved by the Compliance Officer. Cross Trades Crosses are a typical event in relation to GSA s institutional asset management clients. In instances where the Firm transfers securities between client portfolios ( cross trades ), the Compliance Officer or the Director of Operations must be review periodically to ensure that such transfers are beneficial to both clients and are executed at a fair price. Allocation is monitored on an on-going basis to ensure compliance with the Firm s policy. Any exceptions to the policy must be preapproved by the Compliance Officer. Record Keeping The Firm maintains a record of allocations by client and updates the records where there is a re-allocation. Additional Information We endeavour to answer all reasonable and proportionate requests for information about the foregoing policies and arrangements promptly and clearly. For all queries, please contact Robin Russel, Director of Operations, rrussel@greenstreetadvisors.eu.com, or Natascha Collinson, Legal and Compliance Director, compliance@greenstreetadvisors.eu.com. Page 8 December 2017
APPENDIX 1 LIST OF EXECUTION VENUES FOR GREEN STREET ADVISORS (UK) LIMITED Page 9 December 2017