Order Execution Policy
RC Brown Investment Management PLC (RCBIM) manages portfolios of investments on a discretionary and advisory basis for investment funds and managed account clients (“clients”). RCBIM is authorised and regulated in the United Kingdom by the Financial Conduct Authority to undertake regulated investment business.
This document outlines the Order Execution Policy (“the Policy”) for executing a client order as required by the Financial Conduct Authority (FCA) Conduct of Business sourcebook (COBS 11.2) and as stipulated by the EU Markets in Financial Instruments Directive (‘MiFID II”) and EU Markets in Financial Instruments Regulation (“MiFIR”).
We will take all sufficient steps to obtain the best possible result for our clients by abiding by this policy when executing orders, or receiving and transmitting orders to other entities for execution.
Aside from the explicit best execution rules explained in this policy, we have an overriding duty to act honestly, fairly and professionally in accordance with the best interests of our clients at all times.
Our Order Execution Policy applies to the execution of client orders by RCBIM on behalf of Retail and Professional Clients for the following classes of financial instruments: Equities, Derivatives (both Exchange-traded and OTC), Units/Shares in Collective Investment Schemes, Fixed Income Instruments, Money market and cash instruments, as well as any other financial instruments in which we may execute orders from time to time.
RCBIM will always execute client orders as Agent, which we pass on (i.e. transmit) at our discretion to another broker or dealer (‘Third Party’) for execution.
3. Client Orders
These may result from:
A decision by us to deal on behalf of a discretionary client;
A client instruction to deal, following a recommendation from us or as a result of our advice
Where we are appointed Discretionary Manager the timing of transmitting orders will be at our discretion. Where we are acting on an instruction from a client, the order will be transmitted as soon as practicably possible following receipt of the instruction.
4. Execution Factors
When executing trades on behalf of its clients and the Funds it manages, RCBIM places all orders with another entity for it to execute on behalf of the client (e.g. a broker or investment bank). In these instances, Article 24 of MiFID II and Article 65 of the Delegated Regulation will apply. In such scenarios, while we will owe our client a duty of Best Execution, we will also receive a duty of best execution from the third party. We select brokers that we are satisfied provide “Best Execution” in accordance with MiFID II and FCA regulations and we have established and implemented order execution arrangements that enable us to obtain on a consistent basis the best possible result for our own clients.
Subject to any specific instructions received, RCBIM will take the following execution factors into consideration in determining how to obtain the best possible result for the order, namely:
- Price paid for the investment
- Costs incurred as a result of the transaction being placed (including clearing and settlement costs)
- Speed of the execution and settlement
- Likelihood of the order being executed and settled
- Liquidity in the instrument being traded
- Size and nature of the transaction
- Nature of the financial instrument including whether it is executed on a regulated market, multilateral trading facility (MTF), Organised trading facility (OTF), over-the-counter (OTC) or with a Systematic Internaliser (SI)
- Any other consideration relevant to the execution of the order
In determining the relevant importance of each of the above factors when executing an order, we will use our commercial judgement, experience in light of current market information as well as the following criteria (as defined in COBS 11.2.6):
- The characteristics of the client including the categorisation of the client as retail or professional;
- The characteristics of the client order;
- The characteristics of financial instruments that are the subject of that order;
- The characteristics of the execution venues to which that order can be directed and
- For UCITS schemes, the objectives, investment policy and risks specific to the scheme, as indicated in its prospectus or instrument constituting the fund.
The total consideration of the trade (i.e. the price of the financial instrument and the costs related to execution) will be our primary focus for the majority of transactions, although in some circumstances we may determine that other execution factors are more important in obtaining the best possible execution result for our clients.
5. Execution venues
An execution venue is the term used to describe a place where a client order is executed and includes Regulated Markets, Multi-lateral Trading Facilities (MTF), Organised Trading Facilities (OTF) Systematic Internalisers (SI) and market makers or any other liquidity providers.
RCBIM will in all instances transmit client orders, or place client orders with, a broker for execution. The broker will choose the execution venue used for a particular trade. In choosing which broker to use, RCBIM will take into consideration the following factors relating to that broker:
- Access to alternative markets and trading venues;
- Adequate coverage to asset classes globally
- Commission rates and prices/spreads provided;
- Execution speed/latency;
- Quality of execution and service, both historical and current;
- Clearing and settlement efficiency and capabilities;
- Risk profile and creditworthiness; and
- Regulatory status and reputation
6. Broker Approval Process
RCBIM has a process for the selection of brokers, with whom it executes client orders or transmits client orders to for execution.
All brokers are reviewed/assessed on an on-going basis against mentioned above factors (see Section 6) in accordance with our obligation to provide the client with the best possible execution results on a consistent basis.
Each quarter we receive a best execution report from each of our top 5 brokers, which we monitor to ensure they are actually meeting their obligations regarding this. We also undertake an annual review of all brokers utilised by RCBIM. This includes assessments of execution quality, service delivery, regulatory status and the financial standing of the firm.
A list of all Brokers that we use for execution is available on request, however, we reserve the right to change the Brokers we use from time to time, as we deem appropriate subject to our internal authorisation process and this Policy.
In order to minimise the risk of potential conflicts of interests, RCBIM does not receive any form of remuneration, discount or non-monetary benefit for directing orders to a particular venue or broker for execution. The selection of a broker for an order is driven solely by the factors and inputs as described in Section 6 of this Policy.
7. Limit Orders under Client instruction
Limit orders are specific instructions received from the client to deal on their behalf where the client places a ‘limit’ on the price for execution. If an order has been placed with us with a ‘limit’ on the price for execution, we may not be able to execute it immediately. We, nor our brokers, will publicly disclose details of any unexecuted part of such ‘limit’ order without your consent.
8. Order Management and Aggregation
RCBIM will take all sufficient steps to obtain the best possible execution result for its clients. For all client orders, we will consider the different execution factors in the context of the clients’ instructions in order for us to form a suitable execution strategy.
Where practical, RCBIM will look to aggregate purchase or sell orders for the same security or other instrument for multiple accounts so that the clients may be able to benefit from the better prices achieved through larger, bulk transactions in line with our obligation to treat customers fairly. RCBIM aggregates order when it considers doing so appropriate and in the interest of its clients generally and may elect block trade treatment, when available, as prescribed by the FCA in COBS 11.3.7
Although it may do so in certain circumstances, RCBIM does not always aggregate orders for different accounts, if the portfolio management decisions relating to the orders are made by separate portfolio management teams, if aggregating is not appropriate or practicable from RCBIM’s operational or other perspective or if doing so would not be appropriate in light with applicable regulatory considerations.
The executed orders are allocated to clients fairly and proportionately in accordance with RCBIM’s Trade Aggregation and Allocation policy.
9. Review of RCBIM’s Execution Policy
RCBIM reviews this execution policy annually, as well as whenever there is a material change that affects its ability to continue to obtain the best possible result for the execution of orders on a consistent basis.
Appendix 1- Execution Methodology for Financial Instruments
Equities, Investment Trusts, Fixed Income & Exchange Traded Funds (ETF’s)
In order to meet these distinct needs of each order, we consider the following factors:
a) Price and liquidity– as a general rule, we will try to identify brokers which are sources of natural liquidity before entering an order into the market; deep liquidity is likely to provide material opportunities which may take the form of a better price and the ability to trade significant additional size at a similar price
b) Speed and likelihood of execution– this is the rate at which we are able to progress your order; we will seek a balance between creating market, and thereby potentially moving the price, and executing your order in a timely manner so as to reduce execution risk.
c) Size and nature of the order
d) Costs – we believe that one of the steps to achieve best execution is equity markets is to negotiate the lowest possible terms for the explicit cost of trading (such as commissions) and minimise the implicit costs (such as market impact and opportunity cost).
e) Likelihood of settlement– our approved broker selection process as described in Section 6 helps us mitigate the credit and settlement risk we may face. We will generally not use a broker if we cannot either settle a transaction or resolve failed settlements
Units/Shares in Collective Investment Schemes
This policy covers Units/Shares in Collective Investment Undertakings for open-ended funds, e.g. Unit Trusts, OEICs. For orders in collective investment schemes (e.g. Unit Trusts, OEICs) we will place the order directly with the relevant fund manager/platform provider and/or the operator of the collective investment scheme.
Foreign Exchange (FX)
RCBIM trades deliverable Spot contracts which are not financial instruments within the scope of MiFID II and therefore Best Execution requirements will not apply to stand-alone spot FX transactions.