The Order Execution Policy
1. OVERVIEW
The purpose of this document is to provide clients of Brewin Dolphin (“BD”) with information about our Order Execution arrangements. Please note that you provide your consent to this Policy, our Order Execution Policy (the Policy) when you sign or agree to the declaration in the Account Opening Form.
This Policy outlines all the sufficient steps that BD must take to ensure that we obtain the best possible results when carrying out transactions on your behalf. This is referred to as “Best Execution” of orders.
2. CLIENT CLASSIFICATION
All BD clients will be treated as Retail clients for the purposes of Best Execution, although BD classifies its clients as Retail or Professional. Treating all clients as Retail clients provides the greatest level of protection to our clients under the Financial Conduct Authority (FCA) rules and regulations. BD will always aim to achieve Best Execution when carrying out transactions on your behalf.
3. SPECIFIC CLIENT INSTRUCTIONS
We will always aim to achieve Best Execution for you. However, if you provide us with specific instructions in relation to how an order should be executed there is a risk that we will not achieve Best Execution in respect of the aspect of the order covered by your specific instruction.
4. EXECUTION FACTORS
When dealing on your behalf we will consider the following criteria:
a) Your characteristics, including your regulatory client classification as noted in the Client Classification section;
b) Your order:
• the financial instrument of your order; and
• Where such orders can be carried out (i.e. the ‘execution venues’).
In assessing how to execute your order we will consider the following execution factors:
a) Price;
b) Costs;
c) Speed of execution;
d) Likelihood of execution and settlement;
e) Size and nature of the order; and
f) Any other consideration relevant to the execution of the order.
When dealing in a financial instrument on your behalf we will exercise our discretion in assessing the criteria that we need to take into account to achieve best execution. The relative importance of these criteria will be judged on an order-by-order basis, in line with our commercial experience and with reference to market conditions. In executing orders for Retail Clients, in the absence of any specific instructions, we generally give precedence to the factors that allow us to deliver the best possible result in terms of value to the client. For further information on the relative importance of the execution factors, please see below.
Price
For most liquid instruments (frequently traded), market price will be the overriding factor in attaining best execution. With other factors, such as costs remaining equal, our execution arrangements will drive BD to find the most advantageous (best) price available. This will be the case for the majority of orders for Retail Clients where the size of the order does not limit BD’s choice of venue. However, in some circumstances, for some of our clients, the orders, financial instruments or markets and other execution factors may become more important than price in obtaining the best possible execution result. Certain instruments, such as collectives (Unit Trusts & Open-ended Investment Companies) will have only one price, and one venue.
Costs
Where explicit costs (such as exchange fees or settlement/custody costs) would make the overall consideration of the execution prohibitive because of the cost of many small executions on an order book for example, this cost as an execution factor may become the most important.
In some circumstances other costs (e.g. overseas brokerage commissions) may be the most important factor. Although other factors might be more favourable to the execution of your order, where these costs have an adverse impact on your total consideration, BD will consider cost to be of higher importance than other factors.
Speed of execution
Similarly, the speed of execution may be important for some types of order, or client. Speed will be a high priority for a Retail Client executing an order in a liquid equity in a fast market or for an execution only client.
Likelihood of Execution and Settlement
In some instances, BD’s ability to execute and settle the order will be the primary factor to be considered. Where the instrument is illiquid (i.e. rarely traded), the size of the order is prohibitive, or some other factor impacts the order, the policy ensures that actually executing and settling the order takes precedence over other factors.
To deliver a better overall result for the client and achieve Best Execution BD will consider the likelihood of execution and settlement as taking precedence over total consideration (where total consideration is the price of the financial instrument and the cost related to execution). This will become the most important factor.
Size and Nature of the order
The best price in a market is usually represented by the opportunity to trade in a particular size (i.e. number of shares, units, contracts etc.) which may not match the size of the client’s order. Where the order is bigger than the typical quoted size, then the part of the order executed over and above the threshold may only be available at a less favourable price. There are various strategies for trading large orders and BD will exercise its discretion where there is no other instruction from the client. Large or illiquid orders will be executed on a manual basis using the skills of our in-house dealing team. In such cases our dealers will source the best available terms by comparing the prices offered by a variety of market participants (including other regulated firms and Multilateral Trading Facilities (MTF)) with reference market data.
Any other consideration relevant to the execution of the order
BD will take into account any other factor relevant to the order that it believes warrants consideration in terms of how that order should be executed. This could simply be whether it is a buy or sell order, a limit order, or the market the instrument is traded on.
5. EXECUTION VENUES (Competing Markets)
BD will select a set of execution venues and market counterparties on which it places significant reliance in enabling BD to obtain, on a consistent basis, the best possible result for the execution of client orders. The types of venues we use are as follows:
- Regulated Markets (RM) such as the London Stock Exchange
- Multilateral Trading Facilities (MTF – for example Bloomberg)
- Retail Service Provider (RSP) networks which are automated platforms utilising market counterparties that have access to RMs and MTFs.
There will be instances when BD passes an order to a counterparty (i.e. a broker) for execution. Typically, this will occur when BD is not a member of the regulated market, but may also occur in order to access alternative liquidity sources. In these circumstances, BD remains under an obligation to monitor the counterparty’s performance and does not remove BD’s obligation to obtain the best possible result for the client.
Our selection criteria take into account, but are not limited to, the following:
- the historic performance, including the quality of executions obtained over a period of time;
- the extent of services that may be provided to enable us to meet our obligations to our clients; and
- market reputation and any matters arising from our due diligence process
We consider a number of factors to determine the appropriate venue or market counterparty for each asset class and instrument type. The factors include the asset coverage and liquidity provided by these venues/market counterparties as well as the various costs, exchange fees and any other ancillary charges.
We regularly assess the execution venues available and may add or delete venues in accordance with our obligation to provide you with the best possible execution result on a consistent basis. We will notify you of material changes1 which would impact our Order Execution Policy. An up to date list of execution venues and the coverage/type of financial instruments executed on these execution venues/market counterparties can be found in Appendix One – List of Execution Venues and Counterparties
As noted above, we may deem it appropriate or advantageous to execute your order outside a Regulated Market or MTF even if the financial instrument concerned is traded on a Regulated Market or MTF.
BD is required to obtain your consent before executing orders outside an RM or an MTF. By agreeing to this Policy and our terms and conditions, you are giving your express consent to this requirement.
BD is required to provide you with further information about the consequences of BD executing your order outside of a Regulated Market or MTF. One of the consequences could be counterparty risks2. Please note that under our terms and conditions, in the event that the market counterparty defaults in its obligations or it becomes insolvent, we will not be responsible to you for any loss suffered by you by reason of any cause beyond our control.
6. EXECUTION METHODOLOGY
We will assess the relevant criteria and any specific instructions provided by you, including selecting the most appropriate venue(s) from those available and execute your order in a timely manner taking into account all relevant aspects of the trade.
7. PUBLISHING LIMIT ORDERS
If you give us an investment instruction at a specified price limit or better and for a specified size (a limit order), then it may not always be possible to execute that order under the prevailing market conditions. In such instances we are required to make your order public (i.e. show the order to the market) unless you agree that we need not do so. We believe it is in your best interests if we exercise our discretion as to whether or not we make your order public. By agreeing to this Policy, you agree that we will not make your order public unless we consider it to be in your best interest to do so.
8. GENERAL DEALING ARRANGEMENTS
UK Equities
In normal market conditions and for liquid orders (i.e. frequently traded) UK equities, BD will use its order management system to identify the best available terms by polling a variety of execution venues including the RSP network. Large or illiquid orders will be executed on a manual basis by our in-house dealing team. In such cases our dealers will source the best available terms by comparing the prices offered by a variety of market participants (including other regulated firms and MTFs) with reference to market data.
Overseas/International Equities
Overseas/International Equity orders will normally be executed on the following basis:
For overseas delivery securities (traded locally in the relevant domestic market), BD will utilise its execution technology where available to identify the best terms by polling accessible execution venues (including other regulated firms). Large, non-automated or illiquid orders will be executed on a manual basis utilising our network of local market participants to source the best available terms. Execution of international equity orders may occur off exchange.
Collective Investment Schemes / UCITS
BD executes orders in collective investment schemes / UCITS either directly with the fund manager or through a third party. Orders are executed on negotiated terms, not generally available to individual clients.
Debt Securities
For smaller debt security orders BD will use its order management system to source the best available terms from a variety of bond market participants. For larger orders and less liquid bond instruments, BD will utilise its network of Tier 1 and secondary market participants to source the best available terms. UK Government Bond orders (gilts) may be executed via our order management system or on a negotiated basis via our network of market counterparties.
Exchange Traded Funds (ETFs)
In normal market conditions and for liquid ETF orders, BD will use its order management system to identify the best available terms by polling available execution venues. Larger or less liquid orders will be executed on a manual basis as per the arrangements for UK equity orders.
Structured Products
Structured products are executed with the product provider concerned. In such cases the Product Provider is the sole execution venue for that product. BD follows an established internal process to analyse and compare market data, ensuring a fair price is obtained for clients.
9. ORDER AGGREGATION
We may combine (or ‘aggregate’) two or more client orders. BD would only aggregate a client order if it is unlikely to work to the overall disadvantage of the client. However, the effect of aggregation may on some occasions work to the client’s disadvantage and may, on occasion, result in clients obtaining a worse price than if their order was executed separately. All aggregated trades will be allocated in accordance with our procedures for treating clients fairly.
10. MONITORING AND REVIEW
BD will actively monitor compliance with this Policy. To assist with the comprehensive review of BD’s best execution arrangements, BD has put in place a set of tools and processes aimed to satisfy our monitoring obligations and provide clients with the best possible execution, including but not limited to:
- Order Execution Policy Committee – A committee established to review the adequacy of the Policy and ensure compliance with BD’s obligations under the Policy
- Performance Monitoring – Daily monitoring measures to ensure the best possible result for the client orders.
- Review of Market Counterparties – Where we use chosen market counterparties, we take sufficient steps to monitor their performance to ensure we obtain the best possible results for you on a consistent basis.
- Monthly reviews are conducted by our compliance team to assess effectiveness of Performance Monitoring
BD will regularly, and at least annually, review this Policy and arrangements, and will notify you of any material changes.
BD monitors price achievement to ensure best execution is reached on a consistent basis. It is important to recognise other venues and consider prices available on these venues. To complete that, BD monitors its price achievement against benchmark prices on a number of venues through an independent best execution monitoring solution. This system alerts BD to any prices that appear to be out of line with our Order Execution Policy (“outliers”). These outliers are investigated, challenged and, where appropriate, amended to ensure best execution is obtained on a consistent basis.
Where you have not registered for our online valuation service and elected to receive electronic communications from us, we will send you an updated hard copy should we make any material change to this Policy. All clients can request a hard copy of the Policy at any time by contacting their Investment Manager or Financial Planner.
BD is required to demonstrate, at the request of a client, that it has executed the their orders in accordance with this Policy. Therefore, if requested, BD will provide to you the necessary analysis to demonstrate our adherence to this Policy for the required period.
Please note that as this Policy is required by our Regulator, we cannot accept any amendments to this policy.
11. REGULATORY PERMISSIONS
BD holds FCA permission to deal in investments as agent and therefore BD will execute all your orders in its capacity as agent.
12. REGULATORY REQUIREMENTS
This Policy is based on BD obligation to comply with the FCA best exaction requirements as stated in the FCA handbook COBS 11.2A. The obligation requires BD to take all sufficient steps to obtain best execution when executing clients’ orders.
13. CLIENT DECLARATION
BD operates on the basis that all customers would be legitimately relying on BD to deliver best execution for all transactions, regardless of how they arise.
By signing or agreeing to the declaration in the account opening form, you (or your authorised intermediary) consent to this Policy including those sections that require your prior express consent as noted in Execution Venues (Competing Markets) section.
Please note that if you do not provide your consent to this Policy you may be limiting our ability to execute your orders on the most advantageous terms for you. Accordingly, if you do not consent to this Policy we may be unable to open an account for you.
Should you require further information or assistance in relation to this Policy or would like BD to demonstrate how best execution has been achieved on any order executed for you, please contact your Investment Manager or Financial Planner, who will be able to assist you and answer your queries within a reasonable time.
July 2022
1 Material Changes, in the context of this Policy, refers to any significant event of an internal or external nature that could impact the best execution factors of cost, price, speed, likelihood of execution, size, nature or any other consideration relevant to the execution of the order. An external event that may have a significant impact on execution factors is a merger of two execution venues resulting in a change in the firm’s assessment of the newly formed venue. An internal event that may have a significant impact on execution factors may be a change in execution strategies or policy decisions on certain execution venues.
2 Counterparty risk is the risk to each party of a contract that the counterparty will not live up to its contractual obligation, for example where the counterparty has inadequate resources to meet the settlement obligation
Appendix One – List of Execution Venues and Counterparties
These are the venues and counterparties upon which Brewin Dolphin places its reliance as referred to in the Order Execution Policy. Please note that this list of Execution Venues and Counterparties is not exhaustive but comprises of those on which Brewin Dolphin places significant reliance. This list will be reviewed and updated in line with Brewin Dolphin’s Order Execution Policy.
Brewin Dolphin reserves the right to use other Execution Venues additional to those listed here where it deems appropriate in accordance with Brewin Dolphin’s Order Execution Policy and to remove any Execution Venues from the list.
UK
| Venue | Asset Coverage |
|---|---|
| London Stock Exchange | All asset classes |
| MTFs (1) – BATS, Chi-X, Equiduct, Turquoise | All asset classes |
| NYSE Arca Europe | All asset classes |
(1) via Winterflood Securities’ Direct Market Access
OVERSEAS COUNTERPARTY
| Overseas counterparty | Market/ asset coverage |
|---|---|
| Bank Of America Merrill Lynch | All markets/ Bonds |
| Barclays Bank PLC | All markets/ Bonds |
| BNP Paribas | All markets/ Bonds |
| Bridport | All markets/ Bonds |
| Canaccord Genuity | All markets/ Bonds |
| Citigroup London | US/ Bonds |
| CLSA (UK) | Far East/ Australasia/ Equities |
| Credit Agricole Corporate & Investment Bank | All markets/ Bonds |
| Credit Suisse International | All markets/ Bonds |
| Daiwa Capital Markets Limited | All markets/ Bonds |
| Danske Bank | All markets/ Bonds |
| Davy | Europe/ Equity/ Bonds |
| Goodbody Stockbrokers | Europe/ Equity/ Bonds |
| Guy Butler Limited | All markets/ Bonds |
| Baader Bank AG – Helvea Inc. | Europe/ Equity |
| HSBC Bank PLC. | All markets/ Equity |
| ING | All markets/ Equity |
| Investec | All markets/ Bonds |
| Janney Montgomery Scott | US/ Equity/ Bonds |
| Jeffries International | All markets/ Bonds |
| J P Morgan | All markets/ Bonds |
| KGC Europe | All markets/ Equity |
| King & Shaxson Limited | All markets/ Bonds |
| KochBank Frankfurt | Europe/ Equity |
| Kredietbank Luxembourg | All markets/ Bonds |
| Stifel Nicolaus Europe Limited | All markets/ All asset classes |
| Lloyds Bank PLC | All markets/ Bonds |
| Mitsubishi UFJ Securities | All markets/ Bonds |
| Mizuho International | All markets/ Bonds |
| Morgan Stanley | All markets/ Bonds |
| National Australia Bank | All markets/ Bonds |
| NCL Investments | All markets/ Bonds |
| Nomura | All markets/ Bonds |
| Oppenheimer | All markets/ Bonds |
| Rabobank | All markets/ Bonds |
| RBC Capital Markets | All markets/ Bonds |
| RBS | All markets/ Bonds |
| Redburn Europe Ltd. | Europe/ Equity |
| RIA Capital Markets | All markets/ Bonds |
| Robert W Baird | US/ Equity |
| Sanford Bernstein | All markets/ Bonds |
| Santander | All markets/ Bonds |
| Sasfin Securities | South Africa/ Equity |
| Shaw Stockbroking | Australia/ Equity |
| Societe Generale | All markets/ Bonds |
| TD Securities | All markets/ Bonds |
| UBS AG | All markets/ Bonds |
| UOB | Far East/ Australasia/ Equity |
| WH Ireland | Australia/ Europe/ Equity |
| Williams Capital Group | US/ Equity |
| Winterflood Securities | All markets/ Bonds |
| Zurcher Kantonalbank | All markets/ Bonds |