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Order Execution & Conflicts of Interest Policy Summaries
ORDER EXECUTION POLICY AND CONFLICTS OF INTEREST POLICY SUMMARIES
The following extracts are taken from the document "Our Services and Business Terms", dated 1st November 2007. All terms are as defined in, and the numbering is taken from, "Our Services and Business Terms", a complete set of which can be found here.
1.11 ORDER EXECUTION POLICY SUMMARY
1.11.1 Charles Stanley is required to put in place an order execution policy and to take all reasonable steps to obtain the best possible result (or "best execution") on behalf of Retail and Professional Clients, either when executing client Orders or receiving and transmitting Orders for execution. We are also required to provide a summary to Retail and Professional Clients of our order execution policy and obtain your consent to such policy. Requests for further information should be directed to our Compliance Department.
1.11.2 Our order execution policy applies only to Retail and Professional Clients and to financial Instruments, as defined by MiFID. The order execution policy applies where we carry out Retail and Professional Client Orders in such Financial Instruments, whether by executing such Orders "on a client's behalf", or transmitting them to a third party firm for execution. We will be executing orders "on your behalf" where you legitimately rely on us to protect your interests in relation to the pricing or other aspects of the transaction that may be affected by how we execute the Order. For example, this will be the case when we:
(i) execute your Order by dealing as agent;
(ii) execute your Order by dealing as riskless principal on your behalf; and
(iii) 'work' an Order on your behalf, where you place an Order with us and we execute it against our own proprietary position.
Please be aware that we may not be executing Orders on your behalf (and so will not owe best execution) where we publish a quote or provide a quote on request and you transact with us on the basis of that quote.
1.11.3 Subject to any specific instructions that may be given by you (see clauses 1.11.11 and 1.11.12 below), when executing Orders on your behalf we will take all reasonable steps to obtain the best possible result for you taking into account the execution factors listed in clause 1.11.4 below. We will determine the relative importance of the execution factors by using our commercial judgement and experience in light of market information available and taking into account the execution criteria described in clause 1.11.5.
1.11.4 The execution factors that will be taken into account are: price; costs; speed; likelihood of execution and settlement; size and nature or any other consideration relevant to the execution of the Order. The priority of the execution factors may vary, depending on your classification:
(i) If you are a Retail Client, the best possible result will be determined in terms of the total consideration, representing the price of the Financial Instrument and the costs related to execution. Speed, likelihood of execution and settlement, the size and nature of the order, market impact and any other implicit transaction costs will be given precedence over the immediate price and cost consideration only insofar as they are instrumental in delivering the best possible result in terms of the total consideration to you.
(ii) If you are a Professional Client, price will ordinarily merit a high relative importance in obtaining the best possible result. However, in some circumstances, for some clients, Orders, Financial Instruments or markets, we may appropriately determine that other execution factors are more important than price in obtaining the best possible execution result.
1.11.5 The execution criteria that will be taken into account are the characteristics of:
(i) the client;
(ii) the Order;
(iii) the Financial Instruments that are the subject of that Order; and
(iv) the Execution Venues to which that Order can be directed.
1.11.6 A list of the Execution Venues used by us is set out in clause 1.11.7 below. This list of Execution Venues comprises those Execution Venues on which we place significant reliance. We reserve the right to use other Execution Venues where we deem appropriate in accordance with our order execution policy and may add or remove any Execution Venues from this list. We will regularly assess the Execution Venues available in respect of any Financial Instruments that we trade to identify those that will enable us, on a consistent basis, to obtain the best possible result when executing orders. The list of Execution Venues will then be updated, where necessary, following such assessment. You should refer to www.charles-stanley.co.uk from time to time for the current list of Execution Venues. You will not be notified separately of any changes to these venues.
1.11.7 When carrying out your Orders, we place significant reliance on the following Execution Venues:
(i) member firms of the Stock Exchange and PLUS Markets;
(ii) member firms of the International Capital Market Association;
(iii) member firms of overseas stock exchanges;
(iv) Euronext.LIFFE Connect member firms;
(v) managers and administrators of collective investment schemes and other Investments; and
(vi) other UK and overseas Execution Venues that we deem appropriate and that accord with our order execution policy.
1.11.8 Where applicable, we will take steps so that we do not structure or charge our commissions in such a way as to discriminate unfairly between Execution Venues.
Selecting an Execution Venue
1.11.9 Subject to the above and to any specific instructions that may be given by you (see paragraph 1.11.11 below), in order to select an Execution Venue for an Order we will use the following methodology:
(i) When carrying out Orders on a Regulated Market or MTF, we will select the Execution Venue that we consider the most appropriate. The Execution Venue may be the Regulated Market or MTF itself, or a member firm of the Regulated Market or MTF.
(ii) For a Financial Instrument admitted to trading on a Regulated Market or MTF, where we believe that we can trade to your advantage or at no disadvantage to you, we may transmit an Order to, or execute an Order on, an Execution Venue that is outside a Regulated Market or MTF.
(iii) For a Financial Instrument not admitted to trading on a Regulated Market or MTF, we will select the Execution Venue that we consider the most appropriate.
(iv) Where we believe that we can trade to your advantage or at no disadvantage to you, Charles Stanley may be used as the Execution Venue.
Some Financial Instruments may have only one possible Execution Venue. In carrying out an Order on your behalf in such circumstances, it will be assumed that we have achieved best execution.
Where we act ourselves as the Execution Venue, we will consider all sources of reasonably available information, including Regulated Markets, MTFs, Systematic Internalisers, other liquidity providers, exchanges, brokers and data vendors, to obtain the best possible result for your Order.
Methods of execution
1.11.10 Subject to any specific instructions that may be given by you (see clause 1.11.11 below), we will carry out an Order by one of the following methods or combination of methods:
(i) On a Regulated Market or MTF by:
(a) executing your Order directly on a Regulated Market or MTF or, where we are not a direct member of the relevant Regulated Market or MTF, with a third party participant with whom we have entered into an agreement for handling orders for that Regulated Market or MTF; or
(b) executing your Order with, or transmitting it for execution to, a liquidity provider that forms part of a Regulated Market or MTF; or
(c) executing your Order with a matching Order from another client under the rules of a Regulated Market or MTF; and/or
(d) acting ourselves as the Execution Venue.
(ii) Where we have obtained your prior express consent, outside a Regulated Market or MTF by: (a) executing your Order with, or transmitting it for execution to, a liquidity provider that is not part of a Regulated Market or MTF;
(b) executing the Order with a matching order from another client outside the rules of a Regulated Market or MTF; and/or
(c) acting ourselves as the Execution Venue.
(iii) In respect of a Financial Instrument not admitted to trading on a Regulated Market or MTF, we will carry out your Order in the manner that we consider the most appropriate.
Specific client instructions
1.11.11 Where you give us a specific instruction as to the execution of an Order, we will execute the Order in accordance with those specific instructions. Where your instructions relate to only part of the Order, we will continue to apply our order execution policy to those aspects of the Order not covered by your specific instructions.
1.11.12 You should be aware that providing specific instructions to us in relation to the execution of a particular Order may prevent us from taking the steps set out in our order execution policy to obtain the best possible result in respect of the elements covered by those instructions. We reserve the right to refuse specific instructions from you regarding the execution of your Order, where in our opinion such instructions are not practicable or may be contrary to your best interests.
Publishing unexecuted Limit Orders
1.11.13 It may not always be possible to execute Limit Orders under the prevailing market conditions. We would then be required to make such Orders public ahead of execution, unless you agree that we need not do so. We believe that it is in your best interests if we exercise our discretion as to whether or not we make such Orders public, taking into account what we believe to be your best interests. Where you place a Limit Order with us that is not immediately executed, unless we believe that it would be in your best interest to do so, or you expressly request otherwise, we will not publish your unexecuted Limit Order during the period that it remains unexecuted.
Reception and transmission of Orders
1.11.14 Subject to any specific instructions that may be given by you (see clause 1.11.11 above), we may transmit an Order that we receive from you to another Charles Stanley entity or to an external entity, such as a third party broker, for execution. In doing so, we must act in your best interests and also comply with clauses 1.11.4 and 1.11.5 above.
Monitoring and reviewing
1.11.15 We will monitor compliance with our order execution policy. We will review our order execution arrangements and policy regularly and whenever a material change occurs that affects our ability to continue to obtain the best possible result for our clients. We will notify you of any material changes to our execution arrangements, including our Execution Venues, or our order execution policy by posting updates on www.charles-stanley.co.uk. You will not be notified separately of any changes.
1.11.16 You may request that we demonstrate that we have carried out your Orders in accordance with our execution policy.
1.11.17 We are required by the Rules of the FCA to obtain your prior consent to our order execution policy. You will be deemed to provide such consent when you first give an Order after receipt of these Terms.
1.11.18 In order for us to achieve the best results for your Orders when we execute them on your behalf, we may sometimes seek to place your Orders with an Execution Venue other than a Regulated Market or MTF. However, for a Financial Instrument that is admitted to trading on a Regulated Market or MTF, we are required to obtain your prior express consent before we execute an Order in such Financial Instrument outside a Regulated Market or MTF (save where no Regulated Market or MTF is included in the list of Execution Venues for that Financial Instrument). By signing the account opening document and agreeing to our terms thereby, you will be deemed to have provided such prior express consent.
1.11.19 We are required by the Rules of the FCA to obtain your express consent to exercise our discretion when deciding whether or not to publish any unexecuted Limit Orders. By signing the account opening document and agreeing to our terms thereby, you will be deemed to have provided such express consent. If you wish, in respect of a particular unexecuted Limit Order, that we should publish that Order ahead of its execution, you will need to include this request when placing your Order with us.
1.13 MATERIAL INTERESTS AND POTENTIAL CONFLICTS OF INTEREST
1.13.1 We are required by the Rules of the FCA to maintain a conflicts of interest policy identifying the circumstances that constitute or may give rise to a conflict of interest entailing a material risk of damage to the interests of one or more clients, and specifying the procedures that we follow and measures that we adopt in order to manage such conflicts. All financial services firms will face areas of potential conflicts of interest, the nature of these depending upon the nature of a firm's business model. We conduct a full service investment management, corporate finance and brokerage business. This section contains a description, in summary form, of our conflicts of interest policy. Clients requiring further information should contact our Compliance Department.
1.13.2 Where any firm acts for more than one client, there is the possibility of a conflict of interest. For example, when we recommend a transaction to you or enter into a transaction for you, we (or a Person connected with us) may face conflicts where we are:
(i) carrying out your Order by matching it with that of another client;
(ii) carrying out comparable Orders given simultaneously by different clients;
(iii) allocating Investments, where you are a discretionary managed client or your Orders are aggregated with those of other clients but full allocations are not possible;
(iv) acting as agent for a company issuing new securities to you; or
(v) issuing research where we also act for the company the subject of the research.
1.13.3 Conflicts may also exist between the interests of a firm, including Persons connected with it, and the interests of clients. For example, when we give you investment advice or (if you are a Discretionary client) arrange a discretionary transaction on your behalf, we (or a Person connected with us) may have an interest, relationship or arrangement that is material in relation to the Investment, transaction or service concerned. We (or a Person connected with us) could be dealing as principal for our (or the connected Person's) own account by selling the Investment concerned to you or buying it from you. We (or a Person connected with us) may be the trustee or operator (or an adviser to the trustee or operator) of a collective investment scheme or other Packaged Product in which you are advised to invest, or in which discretionary transactions are arranged for you if you are a discretionary client. We may receive remuneration or benefits from third party product providers or issuers of shares in respect of transactions carried out on your behalf.
1.13.4 The Rules of the FCA require authorised firms to maintain and operate effective organisation and administrative arrangements with a view to taking all reasonable steps designed to prevent conflicts of interest from constituting or giving rise to a material risk of damage to the interests of our clients. In respect of the business that we conduct with you, we take the following measures to manage, mitigate and avoid potential or actual conflicts:
(i) our employees are required to act in the best interests of each individual client and not to have regard to the interests of one client over the interests of any other. Our employees are required to comply with a policy of independence and disregard any intere
st other than your own when making recommendations to you or carrying out transactions on your behalf; (ii) we operate a policy of separate supervision of persons whose principal functions involve carrying out activities, or providing services to, clients whose interests may conflict, or whose interests may conflict with the interests of our firm;
(iii) we operate measures to prevent or limit any person from exercising inappropriate influence over the way in which a relevant person carries out services and activities, and to prevent or control the simultaneous or sequential involvement of relevant persons in separate services or activities where such involvement may impair the proper management of conflicts of interest;
(iv) we operate procedures to prevent or control the exchange of information (‘Chinese Walls') between persons engaged in activities involving a risk of a conflict of interest where the exchange of that information could harm interests of one or more clients;
(v) we operate a policy of the removal of any direct link between the remuneration of persons principally engaged in one activity and the remuneration of, or revenues generated by, different persons principally engaged in another activity, where a conflict of interest may arise in relation to those activities;
(vi) internal systems are in place to ensure that otherwise comparable client Orders are carried out sequentially and promptly unless the characteristics of the Order or prevailing market conditions make this impracticable, or the interests of the client require otherwise.
1.13.5 Although we may act, through our investment banking business, as agent for the company issuing shares to you, information and administrative barriers exist to ensure that advice given to investment clients, or discretionary transactions undertaken on investment clients' behalf, are conducted by employees who are acting solely for those investment clients, are not engaged in investment banking activities and are not supervised by or remunerated by reference to our investment banking division.
1.13.6 We have investment banking relationships with a number of the companies covered by our Research division. We may seek investment banking business from the companies referred to in our research. Charles Stanley and its connected companies, their directors, members, employees and members of their families may have positions in the securities or derivatives (including options and warrants) thereof of companies referred to in our research. From time to time, the author of a research report might be remunerated by reference to the profitability of the corporate finance and broking division of Charles Stanley. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity, independence and impartiality of our research. Where such conflicts exist, it is our policy to disclose them publicly in the research reports. We believe that our research is produced to a high quality standard. It is our view that the long-term interests of our firm and of all our clients, whether investment clients or corporate finance and broking clients, are best provided for by the provision by us of research that is well-researched and drawn from sources which we believe to be reliable.
1.13.7 Where the measures outlined in this section are insufficient, in our opinion, for the avoidance, mitigation and management of potential and actual conflicts of interest, we will disclose such facts to you, or decline to act for you.
1.13.8 In making any recommendation or in carrying out any transaction for you, we are not required to disclose that the other party to the transaction may be ourselves, a company connected with us, or another client of ours or of another company.