Order execution policy summary

 

1) Introduction

This is a summary of the order handling and execution arrangements we use when we execute orders on your behalf or transmit them to a third party to execute. We aim to obtain the best possible result on a consistent basis when carrying out orders for our clients.

2) Our obligation

Our stance is that both retail and professional clients are legitimately relying on JM Finn to obtain the best outcomes for their orders. We therefore regard our obligation to transact orders on the appropriate terms for our clients as an obligation that extends to both retail and professional clients.

3) Execution Venues

When we are carrying out client orders we may use any of the following execution venues dependent on the type of security the order is for:

Trading Venues

  • Regulated Markets (RM) – we are a member of the London Stock Exchange.
  • Multilateral Trading Facilities (MTFs) – we are a member of the Bloomberg MTF.
  • Organised Trading Facilities (OTFs) – JM Finn does not currently use any OTFs as part of our execution policy but we will keep this under review.

Non-trading Venues

  • Systematic Internalisers (SIs) – firms which, on an organised, frequent, systematic and substantial basis, deal on their own account in investments outside of a Trading Venue.  
  • Market makers – firms that assume the risk of holding a certain number of shares of a particular security in order to facilitate the trading of that security, with whom we deal outside of a Trading Venue.  
  • Other liquidity providers such as brokers.

We will ordinarily execute orders via a trading venue. However, non trading venues can be used where we are able to determine we can obtain a price improvement on that available on a trading venue. There are risks of executing orders outside of a trading venue such as counterparty risk. This is the risk of an execution venue not being able to settle a trade. We seek to mitigate this risk by carrying out reviews on the execution venues we use and placing trading limits or blocks on any we have concerns about.

A list of the main venues JM Finn use to execute orders with or transmit orders to can be viewed on our website  at www.jmfinn.com/order-execution. We place a reliance on the venues on our list but may, from time to time, seek to use alternative venues where they are deemed to offer the opportunity of enhancing the outcome for the client. We regularly review the execution venues available to identify those that enable us to obtain the best possible result on a consistent basis.

3.1) Executing orders

We ordinarily execute orders in UK instruments and debt instruments of any jurisdiction through our direct access to execution venues. The following methods of dealing can be adopted dependent on the nature and size of an order:

Retail Service Providers (RSPs)

  • For some UK equities and exchange traded products (ETPs) that we consider are particularly liquid (where there are high volumes traded on a daily basis) orders are set up to route via the RSP network which allows for automatic execution of orders.
  • Dealers have the option to place orders manually on the RSP where we have not set up automatic routing. 

Electronic order books

  • Our dealers can place orders in UK equities electronically, in all but the smallest securities, on SETS which is an anonymous order book provided by the London Stock Exchange. The order book functionality allows limits to be displayed and organises buy and sell orders by price. All trading is settled through a centralised counterparty, providing anonymous trading.

Market makers and brokers

  • Our dealers can contact market makers and brokers directly to establish what price they will bid or offer for an order in a security. This method can be applied to orders in UK equities and ETPs.

Agency cross

  • This is when JM Finn match a buyer and seller in-house and the order is struck at a price fair to both parties.

Request for quotes

  • Our dealers will place an electronic request for quotes to all available venues via Bloomberg multilateral trading facility (BMTF) and Fidessa RSP in order to execute orders in debt instruments.

Platforms and fund managers

  • Our trade support team will either place orders in unit trusts on a platform where a wide range of fund managers make their products available to trade in, or they will place an order with a fund manager directly.
3.2) Transmitting orders

We will transmit an order to another party for execution where we do not have membership or access to a particular execution venue. This is the case for orders in securities traded on overseas exchanges. We review the parties we use to transmit orders to in order to satisfy ourselves that they have satisfactory order execution policies and procedures in place that mean that they can consistently achieve the best possible result.

4) Order Execution

Subject to any specific instructions that you may give, we will take all sufficient steps to obtain the best possible result on a consistent basis, taking into account execution factors and their relative importance in obtaining the best possible result. In order to fulfil this obligation we have procedures in place for each asset class that our dealing desk follow in their efforts to obtain best execution.

4.1) Execution factors

The execution factors that we take into account when executing orders are:

Price

  • We will usually assume that total consideration is the most important outcome for clients, price is a key component of this.

Costs

  • We will look to use the execution venue that offers a combination of the lowest cost and best price to achieve the best total consideration.

Speed

  • The size of the order will always need to be considered when evaluating the speed of carrying out that order in terms of obtaining the best price. Whilst we place a higher importance on achieving the best price there may be occasions where speed is of greater importance to a client.

Likelihood of execution and settlement

  • We need to have an understanding of the ability of the venues we use to carry out orders to our satisfaction and that they will have the ability to settle those orders. We consider the financial stability of venues and maintain a register of the risk we feel each venue poses to the settlement of any order. This information allows us to place restrictions on the size of any order or orders which we give to a venue to help us minimise any risk of non-settlement.

Size

  • The size of an order may dictate how it is carried out. For orders that we consider are small in size and in liquid stocks (where there are high volumes traded on a daily basis) our systems are programmed to route orders directly the Retail Service Provider (RSP) network which allows for automatic execution of orders. Larger orders or orders in less liquid securities are usually executed via our dealing desk so that they can exercise their expertise and knowledge of the market for that stock.

Nature

  • The nature of the order will impact the way in which it is dealt although achieving the best possible total consideration will ultimately be the most important outcome. For example, whether an order has a limit price (a price below which we will not sell or above which we will not purchase) on it may determine how it is dealt.

Any other consideration relevant to the execution of the order

  • A client may give us a specific instruction in relation to the execution of their order thereby dictating something other than total consideration as the best possible result for them. It should be noted that if a retail client asks us to direct an order to a specific venue, we will only do so if that venue will achieve the best possible result for the client.
4.2) Execution criteria

We consider the following criteria for determining the relative importance of the execution factors:

  • The characteristics of the client including the categorisation of the client as retail or professional;
  • The characteristics of the 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
  • Our own commercial judgement and experience.

 

4.3) Relative importance

The relative importance of the execution factors will be determined by using our commercial judgement and experience in light of market information available and taking into account the execution criteria. The following gives an overview of relative importance of execution factors for each asset classes we carry out orders in:

Equities

  • Price and costs are given the most importance for both retail and professional clients. The order characteristics and financial instrument characteristics will mean that the size of the order and the liquidity of the instrument will normally be the next consideration as larger orders or orders in less liquid stocks can impact the price obtained. The size will feed through into the consideration of the speed at which the trade may be executed. For example, trading patiently for larger or less liquid orders to limit a negative impact on the available price. These execution factors may become secondary should we have concerns over the likelihood of execution or settlement by a venue, in which case we may use an alternative venue that is not offering as good a price or we may use multiple venues. If the order is in a foreign equity we will give a higher importance to the venue we transmit the order to with the focus on using the one which will provide the best total consideration.
  • Clients can instruct us to trade at a certain price (limit order). Where this is the case price and costs remain the most important factor but we will continue to consider the other execution factors although we note that they may be impacted because of the limit.
  • Professional clients are able to direct orders, i.e. request which venue we place an order with. In such instances, the client instruction becomes the most important factor as we are no longer in a position to impact the price and costs incurred.

 Debt instruments            

  • Price is given the most importance for both retail and professional clients. We only have access to a limited number of venues who are all polled to determine the best price available to us. In rare circumstances, where the instrument is less liquid, the size of order will become a factor that may also impact upon the speed in which the order is filled and the likelihood of the order being completed. We do not need to give consideration to costs as charges do not differ regardless of venue used.
  • Clients can instruct us to trade at a certain price (limit order). Where this is the case price remains the most important factor but we will continue to consider the other execution factors although we note that they may be impacted because of the limit.           

Exchange traded products (ETP)

  • Price and costs are given the most importance for both retail and professional clients. The order characteristics and financial instrument characteristics will mean that the size of the order and the liquidity of the instrument will normally be the next consideration as larger orders or orders in less liquid instruments can impact on the price obtained. The size will feed through into the consideration of the speed at which the trade may be executed. For example, trading patiently for larger or less liquid orders to limit a negative impact on the available price. These execution factors may become secondary should we have concerns over the likelihood of execution or settlement by a venue, in which case we may use an alternative venue that is not offering as good a price or we may use multiple venues. If the order is in a foreign ETP we will give a higher importance to the venue we transmit the order to with the focus on using the one which will provide the best total consideration.
  • Clients can instruct us to trade at a certain price (limit order). Where this is the case price and costs remain the most important factor but we will continue to consider the other execution factors although we note that they may be impacted because of the limit.
  • Professional clients are able to direct orders, i.e. request which venue we place an order with. In such instances the client instruction becomes the most important factor as we are no longer in a position to impact the price and costs incurred.

Unit trusts         

  • Unit trusts tend to only price once a day, although some may price and trade less frequently, and prices are inclusive of costs. Fund managers can, at their discretion, charge what is known as a dilution levy. This levy is applied after an order has been placed so we are unable to take it into account when considering costs. Therefore, we will give the most importance to the speed with which we place an order so that we reduce the risk of an order being placed after a fund managers cut off time for processing an order.

Other instruments          

  • On rare occasions, we will be required to trade in an instrument not covered by the above categories. We will give price and costs the most importance for both retail and professional clients. However, orders may be restricted to a limited number of venues that we have connections with and so we will assume that best execution was achieved by reference to the prices provided by those venues.

5) Order handling

We will execute client orders promptly and execute comparable client orders sequentially unless:

  • The characteristics of the order or prevailing market conditions make this impossible.
  • The interests of the client require otherwise.
  • The orders are received by different media and it would not be practicable to do so.

We may combine your orders with orders of other clients. We will only combine orders with those of other clients where we reasonably believe that this will not operate to a client’s disadvantage. However, on occasions the effect of aggregation may work to the client’s disadvantage in relation to a particular order. Where an order for multiple clients is only partially executed we will usually allocate on a pro rata basis. If this allocation would result in uneconomic or unsuitable holdings for the clients concerned we may allocate other than on a pro rata basis. We will take reasonable steps to ensure that any non pro rata allocation is in the best interest of all clients concerned.

6) System Failures

In the unlikely event of system failure, any orders received from clients will be accepted on the basis that they could be executed once the relevant system has been restored. JM Finn will conduct a subsequent review to ensure that best execution has been achieved.

7) Monitoring and review

We review our performance and the performance of the venues we transmit to daily using data collated by an independent third party. The firm’s Dealing Committee considers the findings of this monitoring quarterly or more regularly should the reviews highlight any significant issues. The Dealing Committee can agree to changes being implemented to our execution arrangements where it is felt necessary in order for us to continue to provide the best results for our clients. Changes may be, but are not limited to, accessing execution venues not currently used or no longer using certain venues to execute orders through or to transmit orders to. Our Compliance Department also carries out periodic monitoring to ensure compliance with the Order Execution Policy and execution arrangements.

We will assess, on a regular basis, the quality of execution afforded by the venues we use, the information published by those venues on their execution quality and whether we need to change our execution arrangements as a result of our monitoring. We will also assess our execution arrangements whenever a material change occurs which affects our ability to continue to obtain the best possible result in terms of execution factors on a consistent basis. We will notify you of any material changes to our execution arrangements, including our execution venues, or our order execution policy, by posting updates to www.jmfinn.com/order-execution. You will not be notified separately of any changes other than as part of notification of changes to our Terms and Conditions which this Order Execution Policy Summary forms part of.

8) Reports and disclosures

Upon reasonable and proportionate request we can provide further information about the entities where orders are placed or transmitted for execution, our policies and arrangements and how they are reviewed. You also have the right to request evidence to demonstrate that trades have been executed in accordance with the Order Execution Policy.

9) Consent

By accepting out Terms and Conditions, you give us your prior express consent to execute orders outside of a trading venue. We will only seek to do this when we believe it is in your best interests to do so, for example because a better price can be obtained.

We are also required, unless you expressly instruct otherwise, to publish certain limit orders (orders for execution at a certain price or better) in a manner which is easily accessible to other market participants should market conditions be such that we cannot immediately execute the order. Such publication will not always be in the client’s interest (for example, because doing so can itself sometimes adversely affect the market price). Our Terms and Conditions incorporate the client’s express consent that, when dealing with a limit order that is not immediately executable, we may exercise discretion not to publish the order.

In all other respects, by using our service after receiving this summary, clients will be deemed to have consented to having their orders handled by us in accordance with the arrangements summarised in this document.