The Best Execution Policy aims to select the venues and methods of execution that ensure the best possible result when executing orders, taking into account the following factors:
- trading price
- trading cost
- speed of execution
- likelihood of successful execution and settlement
- size of the order
- nature of the order
- any other consideration that might affect the execution of the order
The Bank takes the following criteria into account in determining the relative importance of the above-mentioned factors:
- characteristics of the Client, including their categorisation
- characteristics of the order concerned
- characteristics of the financial instruments concerned by the order
- characteristics of the venues where the order can be executed
Application of the Best Execution Policy
The Best Execution Policy applies to all transactions in financial instruments except in the cases specifically excluded (see below). The Bank trades with regulated markets, Multilateral Tranding Facilities, market makers, systematic internalizer or other liquidity provider.
The Bank may also trade on an over-the-counter market.
The Best Execution Policy applies to Professional and Retail Clients.
When the Bank executes an order on behalf of a Retail Client, the best possible result is determined on the basis of total cost.
The total cost is the price of the financial instrument plus the costs associated with execution, which include all expenses incurred by the Client directly in connection with the execution of the order, including the direct costs incurred at the execution venue, those in settlement and delivery and all other expenses that may be due to any third parties having taken part in the execution of the order. To this end the bank may employ direct market access (DMA).
The Best Execution Policy for Professional Clients differs depending on the category of financial instrument being traded:
For large capitalisation stocks, the main execution factors are generally trading cost and speed of execution. The Bank reserves the right to employ direct market access (DMA).
The Bank uses the DMA execution service of a broker for orders with a notional value inferior to €100,000. In this case, the broker checks the liquidity (<1% of the Accumulation/Distribution/Volume (ADV) 20 days) and the market impact (<0.10%) of the order. A backup broker will intervene in case of system failure from the first one.
For mid-capitalisation stocks, the main execution factors are generally the trading price and likelihood of successful execution and settlement. For small capitalisation stocks or stocks from emerging markets, the main execution factors are generally the likelihood of successful execution and settlement and the size of the order.
Negotiable debt securities
For sovereign debt securities, the main execution factors are generally trading cost, order size and swiftness of execution. For corporate debt securities, the main execution factors are generally the trading price and likelihood of successful execution and settlement.
For currency instruments the main execution factors are generally the size and nature of the order and swiftness of execution. Nearly all currency trades are executed with the Bank as principal acting as counterparty.
For derivative instruments traded on regulated markets, the main execution factors are generally trading cost and speed of execution.
For derivatives traded over-the-counter, where the Best Execution Policy applies, the main execution factors are generally the trading price and the likelihood of successful execution and settlement. The over-the-counter derivatives trades may be executed with the Bank as principal acting as counterparty.
Where an order is executed on a financial instrument that does not require the choice of a venue or method of execution, as in some primary market transactions, the trade is automatically considered to have obtained the best possible result.
NB: When processing certain orders, traders check the counterparties' limits defined by the bank or by the client, in order to avoid any overruns of the authorized limits.
Non-application of the Best Execution Policy
A Client can give specific instructions on how to execute their order. Where specific instructions are given the Bank may disregard the measures set out in the Best Execution Policy for the items covered by these instructions. The Bank is therefore exempted from its obligation to obtain the best possible result for those factors covered by the specific instructions issued by the Client. If a Client requests a quote from the Bank for a transaction involving a particular financial instrument, which leads to the Bank publishing a price, and a Client agreeing to this published price, the Bank shall not apply the Best Execution Policy as such, as the transaction will then come under the specific instruction regime.
For transactions relating to structured or complex products issued by the Bank and traded over the counter with a Client, the Bank shall not apply the Best Execution Policy as such since the factors and criteria defined above need to be adapted to the context and the type of instrument concerned. As a result, the price offered by the Bank will take into account the costs of its economic model, notably the costs of setting up the sales and monitoring processes, but also including the cost of hedging the transaction or the use of its capital for this transaction, including the cost of credit risk.