Related provisions for COBS 18.2.6
1 - 13 of 13 items.
A firm must take all reasonable steps to obtain, when executing orders, the best possible result for its clients taking into account the execution factors. [Note: article 21(1) of MiFID and article 25(2) first sentence of the UCITS implementing Directive]2[Note: The Committee of European Securities Regulators (CESR) has issued a Question and Answer paper on best execution under MiFID. This paper also incorporates the European Commission's response to CESR's questions regarding
If a firm provides a quote to a client and that quote would meet the firm's obligations to take all reasonable steps to obtain the best possible result for its clients if the firm executed that quote at the time the quote was provided, the firm will meet those same obligations if it executes its quote after the client accepts it, provided that, taking into account the changing market conditions and the time elapsed between the offer and acceptance of the quote, the quote is not
The obligation to deliver the best possible result when executing client orders applies in relation to all types of financial instruments. However, given the differences in market structures or the structure of financial instruments, it may be difficult to identify and apply a uniform standard of and procedure for best execution that would be valid and effective for all classes of instrument. Best execution obligations should therefore be applied in a manner that takes into account
(1) 2A management company should, for each UCITS scheme or EEA UCITS scheme it manages, act in the best interests of the scheme when directly executing orders to deal on its behalf or when transmitting those orders to third parties.(2) When executing orders on behalf of any such scheme it manages, a management company is expected to take all reasonable steps to obtain the best possible result for the scheme on a consistent basis, taking into account price, costs, speed, likelihood
When executing a client order, a firm must take into account the following criteria for determining the relative importance of the execution factors:(1) the characteristics of the client including the categorisation of the client as retail or professional;(2) the characteristics of the client order;(3) the characteristics of financial instruments that are the subject of that order;(4) the characteristics of the execution venues to which that order can be directed; and2(5) for
Where a firm executes an order on behalf of a retail client, the best possible result must be determined in terms of the total consideration, representing the price of the financial instrument and the costs related to execution, which must include all expenses incurred by the client which are directly related to the execution of the order, including execution venue fees, clearing and settlement fees and any other fees paid to third parties involved in the execution of the order.
For the purposes of ensuring that a firm obtains the best possible result for the client when executing a retail client order in the absence of specific client instructions, the firm should take into consideration all factors that will allow it to deliver the best possible result 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,
A firm's execution policy should determine the relative importance of each of the execution factors or establish a process by which the firm will determine the relative importance of the execution factors. The relative importance that the firm gives to those execution factors must be designed to obtain the best possible result for the execution of its client orders. Ordinarily, the FCA would expect that price will merit a high relative importance in obtaining the best possible
For the purposes of delivering best execution for a retail client where there is more than one competing venue to execute an order for a financial instrument, in order to assess and compare the results for the client that would be achieved by executing the order on each of the execution venues listed in the firm's order execution policy that is capable of executing that order, the firm's own commissions and costs for executing the order on each of the eligible execution venues
The obligation to deliver best execution for a retail client where there are competing execution venues is not intended to require a firm to compare the results that would be achieved for its client on the basis of its own execution policy and its own commissions and fees, with results that might be achieved for the same client by any other firm on the basis of a different execution policy or a different structure of commissions or fees. Nor is it intended to require a firm to
A firm would be considered to structure or charge its commissions in a way which discriminates unfairly between execution venues if it charges a different commission or spread to clients for execution on different execution venues and that difference does not reflect actual differences in the cost to the firm of executing on those venues. [Note: recital 73 to the MiFID implementing Directive]
A firm must establish and implement effective arrangements for complying with the obligation to take all reasonable steps to obtain the best possible result for its clients. In particular, the firm must establish and implement an order execution policy to allow it to obtain, for its client orders, the best possible result in accordance with that obligation. [Note: article 21(2) of MiFID and article 25(3) first paragraph of the UCITS implementing Directive]2
The order execution policy must include, in respect of each class of financial instruments, information on the different execution venues where the firm executes its client orders and the factors affecting the choice of execution venue. It must at least include those execution venues that enable the firm to obtain on a consistent basis the best possible result for the execution of client orders. [Note: paragraph 1 of article 21(3) of MiFID]
(1) When establishing its execution policy, a firm should determine the relative importance of the execution factors, or at least establish the process by which it determines the relative importance of these factors, so that it can deliver the best possible result to its clients.(2) In order to give effect to that policy, a firm should select the execution venues that enable it to obtain on a consistent basis the best possible result for the execution of client orders.(3) A firm
The provisions of this section which provide that costs of execution include a firm's own commissions or fees charged to the client for the provision of an investment service should not apply for the purpose of determining what execution venues must be included in the firm's execution policy. [Note: recital 72 to the MiFID implementing Directive]
The provisions of this section as to execution policy are without prejudice to the general obligation of a firm to monitor the effectiveness of its order execution arrangements and policy and assess the execution venues in its execution policy on a regular basis. [Note: recital 74 to the MiFID implementing Directive]
(1) Whenever there is a specific instruction from the client, the firm must execute the order following the specific instruction.[Note: article 21(1) of MiFID](2) A firm satisfies its obligation under this section to take all reasonable steps to obtain the best possible result for a client to the extent that it executes an order, or a specific aspect of an order, following specific instructions from the client relating to the order or the specific aspect of the order. [Note: article
When a firm executes an order following specific instructions from the client, it should be treated as having satisfied its best execution obligations only in respect of the part or aspect of the order to which the client instructions relate. The fact that the client has given specific instructions which cover one part or aspect of the order should not be treated as releasing the firm from its best execution obligations in respect of any other parts or aspects of the client order
A firm should not induce a client to instruct it to execute an order in a particular way, by expressly indicating or implicitly suggesting the content of the instruction to the client, when the firm ought reasonably to know that an instruction to that effect is likely to prevent it from obtaining the best possible result for that client. However, this should not prevent a firm inviting a client to choose between two or more specified trading venues, provided that those venues
(1) A firm must provide a retail client with the following details on its execution policy in good time prior to the provision of the service:(a) an account of the relative importance the firm assigns, in accordance with the execution criteria, to the execution factors, or the process by which the firm determines the relative importance of those factors;(b) a list of the execution venues on which the firm places significant reliance in meeting its obligation to take all reasonable
2(1) A firm (other than a management company providing collective portfolio management services for a UCITS scheme or an EEA UCITS scheme) must obtain the prior consent of its clients to the execution policy.2(2) In the case of a management company providing collective portfolio management services for an ICVC that is a UCITS scheme, or for an EEA UCITS scheme that is structured as an investment company, the management company must obtain the prior consent of the ICVC or investment
A firm must obtain the prior express consent of its clients before proceeding to execute their orders outside a regulated market or an MTF. The firm may obtain this consent either in the form of a general agreement or in respect of individual transactions. [Note: paragraph 3 of article 21(3) of MiFID]
A firm must monitor the effectiveness of its order execution arrangements and execution policy in order to identify and, where appropriate, correct any deficiencies. In particular, it must assess, on a regular basis, whether the execution venues included in the order execution policy provide for the best possible result for the client or whether it needs to make changes to its execution arrangements. The firm must notify clients of any material changes to their order execution
(1) A firm must review annually its execution policy, as well as its order execution arrangements.(2) This review must also be carried out whenever a material change occurs that affects the firm's ability to continue to obtain the best possible result for the execution of its client orders on a consistent basis using the venues included in its execution policy. [Note: article 46(1) of the MiFID implementing Directive and article 25(4) second paragraph of the UCITS implementing
2(1) A firm other than a management company must be able to demonstrate to its clients, at their request, that it has executed their orders in accordance with its execution policy.2(2) A management company must be able to demonstrate that it has executed orders on behalf of any UCITS scheme or EEA UCITS scheme it manages in accordance with its execution policy.2 [Note: article 21(5) of MiFID and article 25(5) of the UCITS implementing Directive]2
A firm must, when providing the service of portfolio management or, for a management company, collective portfolio management,2 comply with the obligation to act in accordance with the best interests of its clients when placing orders with other entities for execution that result from decisions by the firm to deal in financial instruments on behalf of its client. [Note: article 45(1) of MiFID implementing Directive and article 26(1) of the UCITS implementing Directive]2
In order to comply with the obligation to act in accordance with the best interests of its clients when it places an order with, or transmits an order to, another entity for execution, a firm must:[Note: article 45(3) of the MiFID implementing Directive and article 26(1) of the UCITS implementing Directive]2(1) take all reasonable steps to obtain the best possible result for its clients taking into account the execution factors. The relative importance of these factors must be
This section is not intended to require a duplication of effort as to best execution between a firm which provides the service of reception and transmission of orders or portfolio management and any firm to which that firm transmits its orders for execution. [Note: recital 75 to the MiFID implementing Directive]
The provisions applying to a firm which places orders with, or transmits orders to, other entities for execution (see COBS 11.2.30 R to COBS 11.2.33 G) will not apply when the firm which provides the service of portfolio management or collective portfolio management2 and/or service of reception and transmission of orders also executes the orders received or the decisions to deal on behalf of its client's portfolio. In those cases the requirements of this section for firms who
This section applies to a firm that acts as an investment manager when it executescustomer orders that relate to:(1) shares; and(2) (a) warrants;(b) certificates representing certain securities;(c) options; and(d) rights to or interests in investments of the nature referred to in (a) to (c);to the extent that they relate to shares.
(1) An investment manager must not accept goods or servicesin addition to the execution of its customer orders if it:(a) executes its customer orders through a broker or another person;(b) passes on the broker's or other person'scharges to its customers; and(c) is offered goods or services in return for the charges referred to in (b).(2) This prohibition does not apply if the investment manager has reasonable grounds to be satisfied that the goods or services received in return
(1) Where the goods or services relate to the execution of trades, an investment manager should have reasonable grounds to be satisfied that the requirements of the rule on use of dealing commission (COBS 11.6.3 R) are met if the goods or services are:(a) linked to the arranging and conclusion of a specific investment transaction (or series of related transactions); and (b) provided between the point at which the investment manager makes an investment or trading decision and the
Examples of goods or services that relate to the execution of trades or the provision of research that the FCA does not regard as meeting the requirements of either evidential provisions COBS 11.6.4 E or COBS 11.6.5 E include:(1) services relating to the valuation or performance measurement of portfolios;(2) computer hardware; (3) connectivity services such as electronic networks and dedicated telephone lines; (4) seminar fees;(5) subscriptions for publications;(6) travel, accommodation
This section applies only to arrangements under which an investment manager receives from brokers or other persons goods or services that relateto the execution of trades or the provision of research. It has no application in relation to execution and research generated internally by an investment manager itself.
An investment manager that enters into arrangements under this section must make adequate prior disclosure to customers concerning the receipt of goods or services that relate to the execution of trades or the provision of research. This prior disclosure should form part of the summary form disclosure under the rule on inducements (COBS 2.3.1 R).
(1) The prior disclosure required by this section should include an adequate disclosure of the firm's policy relating to the receipt of goods or services that relate to the execution of trades or the provision of research in accordance with the rule on use of dealing commission (COBS 11.6.3 R).(2) The prior disclosure should explain generally why the firm might find it necessary or desirable to use dealing commission to purchase goods or services, bearing in mind the practices
(1) A firm (other than a management company providing collective portfolio management services)1 which is authorised to execute orders on behalf of clients must implement procedures and arrangements which provide for the prompt, fair and expeditious execution of client orders, relative to other orders or the trading interests of the firm.[Note: paragraph 1 of article 22(1) of MiFID](2) These procedures or arrangements must allow for the execution of otherwise comparable orders
A firm must satisfy the following conditions when carrying out client orders:(1) it must ensure that orders executed on behalf of clients are promptly and accurately recorded and allocated;(2) it must carry out otherwise comparable orders sequentially and promptly unless the characteristics of the order or prevailing market conditions make this impracticable, or the interests of the client require otherwise; and(3) it must inform a retail client about any material difficulty relevant
Where a firm is responsible for overseeing or arranging the settlement of an executed order or executes the order itself in the course of providing collective portfolio management services,1 it must take all reasonable steps to ensure that any clientfinancial instruments or client funds received in settlement of that executed order are promptly and correctly delivered to the account of the appropriate client. [Note: article 47(2) of the MiFID implementing Directive,1 article 19(1)
A firm must not misuse information relating to pending client orders, and shall take all reasonable steps to prevent the misuse of such information by any of its relevant persons. [Note: article 47(3) of the MiFID implementing Directive,1 article 19(1) of MiFID and article 27(2) of the UCITS implementing Directive]1
A firm is not permitted to carry out a client order or a transaction for own account in aggregation with another client order unless the following conditions are met:(1) it must be unlikely that the aggregation of orders and transactions will work overall to the disadvantage of any client whose order is to be aggregated;(2) it must be disclosed to each client whose order is to be aggregated that the effect of aggregation may work to its disadvantage in relation to a particular
If a firm aggregates a client order with one or more other orders and the aggregated order is partially executed, it must allocate the related trades in accordance with its order allocation policy. [Note: article 48(2) of the MiFID implementing Directive,1 article 19(1) of MiFID and article 28(2) of the UCITS implementing Directive]1
A firm which has aggregated transactions for own account with one or more client orders must not allocate the related trades in a way which is detrimental to a client.[Note: article 49(1) of the MiFID implementing Directive,1 article 19(1) of MiFID and article 28(3) of the UCITS implementing Directive]1
(1) If a firm aggregates a client order with a transaction for own account and the aggregated order is partially executed, it must allocate the related trades to the client in priority to the firm.(2) However, if the firm is able to demonstrate on reasonable grounds that without the combination it would not have been able to carry out the order on such advantageous terms, or at all, it may allocate the transaction for own account proportionally, in accordance with its order allocation
A firm must, as part of its order allocation policy, put in place procedures to prevent the reallocation, in a way that is detrimental to the client, of transactions for own account which are executed in combination with client orders. [Note: article 49(3) of the MiFID implementing Directive and article 19(1) of MiFID]
In this section, carrying out client orders includes:(1) the execution of orders on behalf of clients;(2) the placing of orders with other entities for execution that result from decisions to deal in financial instruments on behalf of clients when providing the service of portfolio management or collective portfolio management;1(3) the transmission of client orders to other entities for execution when providing the service of reception and transmission of orders.
Where6COBSrules specified in the table in COBS 18.5.2 R apply to a firm carrying on scheme management activities or, for an AIFM, AIFM investment management functions, the following modifications apply:666(1) subject to (2), references to customer or client are to be construed as references to any fund6 in respect of which the firm6 is acting or intends to act, and with or for the benefit of which the relevant activity is to be carried on;66(2) in the case of a small authorised
The best execution provisions applying to a small authorised UK AIFM of an unauthorised AIF or a residual CIS operator6 do not apply in relation to a fund6 whose fund6 documents include a statement that best execution does not apply in relation to the fund6 and in which:6666(1) no investor6 is a retail client; or6(2) no current investor in the fund6 was a retail client when it invested in the fund.666
7Only COBS 11.6.1 G to COBS 11.6.11 G apply to a full-scope UK AIFM that is an internally managed AIF and references to an investment manager in COBS 11.6 are to be read as including an internally managed AIF which manages designated investments on its own account and references to a customer order as a decision by an internally managed AIF to execute a transaction for these purposes.
The fund documents of an unauthorised fund managed by a small authorised UK AIFM or a residual CIS operator (if those fund documents6 exist) should make it clear that if an investor6 is reclassified as a retail client, this reclassification will not affect certain activities of the firm6. In particular, despite such a reclassification, the firm6 will not be required to comply with the best execution provisions. It should be noted that there is no requirement that fund6 documents
Where the fund is an unauthorised fund managed by a small authorised UK AIFM or a residual CIS operator6 and no current investor6 in the fund6 was a retail client when it invested in the fund6, the fund6 documents must include a statement that:66666(1) explains that if an investor6 is reclassified as a retail client subsequent to investing in the fund6, then the firm6 may continue to treat all investors in the fund6 as though they were not retail clients; 6666(2) explains that
Unless a client expressly instructs otherwise, a firm must, in the case of a clientlimit order in respect of shares admitted to trading on a regulated market which is not immediately executed under prevailing market conditions, take measures to facilitate the earliest possible execution of that order by making public immediately that clientlimit order in a manner which is easily accessible to other market participants. [Note: article 22(2) of MiFID]
An investment firm shall be considered to disclose clientlimit orders that are not immediately executable if it transmits the order to a regulated market or MTF that operates an order book trading system, or ensures that the order is made public and can be easily executed as soon as market conditions allow. [Note: article 31 of MiFID Regulation]
(1) If a firm has carried out an order in the course of its designated investment business on behalf of a client, it must:(a) promptly provide the client, in a durable medium, with the essential information concerning the execution of the order;(b) in the case of a retail client, send the client a notice in a durable medium confirming the execution of the order and such of the trade confirmation information (COBS 16 Annex 1R) 2as is applicable: (i) as soon as possible and no later
For the purposes of calculating the unit price in the trade confirmation information, where the order is executed in tranches, the firm may supply the client with information about the price of each tranche or the average price. If the average price is provided, the firm must supply the retail client with information about the price of each tranche upon request. [Note: article 40(4) of the MiFID implementing Directive]
Where a firm executes an order in tranches, the firm may, where appropriate, indicate the trading time and the execution venue in a way that is consistent with this, such as, "multiple". In accordance with the client's best interests rule, a firm should provide additional information at the client's request.
In relation to business that is not MiFID or equivalent third country business, a firm need not despatch a confirmation if:(1) the firm has agreed with the client (in the case of a retail client, in writing and with the client's informed consent) that confirmations need not be supplied, either generally or in specified circumstances; or(2) the designated investment is a life policy, stakeholder pension scheme3 or a personal pension scheme (other than a SIPP); or(3) the designated
1The duty to provide best execution does not apply where:(1) the firm has agreed with a professional client that it does not owe a duty of best execution to him; or(2) the firm relies on another person to whom it passes a customer order for execution to provide best execution, but only if it has taken reasonable care to ensure that he will do so.
1To provide best execution, a firm must:(1) take reasonable care to ascertain the price which is the best available for the customer order in the relevant market at the time for transactions of the kind and size concerned; and (2) execute the customer order at a price which is no less advantageous to the customer, unless the firm has taken reasonable steps to ensure that it would be in the customer's best interests not to do so.
(1) 1In order to take reasonable care to ascertain the price which is the best available, a firm:(a) should disregard any charges and commission made by it or its agents that are disclosed to the customer under COBS 6.1.9 R (Information about costs and associated charges);(b) need not have access to competing exchanges, or to all, or a minimum number of, available price sources; but if a firm can access prices displayed by different exchanges and trading platforms and make a direct
(1) In the case of a retail client, the periodic statement must be provided once every six months, except in the following cases:(a) if the retail client so requests, the periodic statement must be provided every three months;(b) if the retail client elects to receive information about executed transactions on a transaction-by-transaction basis (COBS 16.3.3 R) and there are no transactions in derivatives or other securities giving the right to acquire or sell a transferable security
(1) If the client elects to receive information about executed transactions on a transaction-by-transaction basis, a firmmanaging investments must provide promptly to the client, on the execution of a transaction, the essential information concerning that transaction in a durable medium.(2) If the client is a retail client, the firm must send him a notice confirming the transaction and containing such of the information identified in column (1) of the table in COBS 16 Annex 1R
For the purposes of calculating the unit price in the trade confirmation information or periodic information, where the order is executed in tranches, the firm may supply the client with information about the price of each tranche or the average price. If the average price is provided, the firm must supply the retail client with information about the price of each tranche upon request. [Note: article 40(4) of the MiFID implementing Directive]
3The section on best execution (COBS 11.2) does not apply to a firm when:(1) executing orders: or(2) placing orders with other entities for execution: or(3) transmitting orders to other entities for execution;in relation to a spread-bet which is not a financial instrument, where the firm has not made a personal recommendation in relation to that spread-bet.
An investment firm shall, in relation to every order received from a client, and in relation to every decision to deal taken in providing the service of portfolio management, immediately make a record of the following details, to the extent they are applicable to the order or decision to deal in question:(1) the name or other designation of the client;(2) the name or other designation of any relevant person acting on behalf of the client;(3) the details specified in point 4, 6,
Immediately after executing a client order, or, in the case of investment firms that transmit orders to another person for execution, immediately after receiving confirmation that an order has been executed, investment firms shall record the following details of the transaction in question:(1) the name or other designation of the client;(2) the details specified in points 2, 3, 4, 6, and in points 16 to 21, of Table 1 of Annex I;(3) the total price, being the product of the unit
If an investment firm transmits an order to another person for execution, the investment firm shall immediately record the following details after making the transmission:(1) the name or other designation of the client whose order has been transmitted;(2) the name or other designation of the person to whom the order was transmitted;(3) the terms of the order transmitted;(4) the date and exact time of transmission. [Note: article 8(2) of MiFID Regulation]
Points 2, 3, 4, 6, 16 - 21 of Table 1 of Annex 1 of the MiFID Regulation
2. |
Trading day |
The trading day on which the transaction was executed. |
3. |
Trading time |
The time at which the transaction was executed, reported in the local time of the competent authority to which the transaction will be reported, and the basis in which the transaction is reported expressed as Co-ordinated Universal Time (UTC) +/- hours. |
4. |
Buy/sell indicator |
Identifies whether the transaction was a buy or sell from the perspective of the reporting investment firm or, in the case of a report to a client, of the client. |
6. |
Instrument identification |
This shall consist of:
|
16. |
Unit price |
The price per security or derivative contract excluding commission and (where relevant) accrued interest. In the case of a debt instrument, the price may be expressed either in terms of currency or as a percentage. |
17. |
Price notation |
The currency in which the price is expressed. If, in the case of a bond or other form of securitised debt, the price is expressed as a percentage, that percentage shall be included. |
18. |
Quantity |
The number of units of the financial instruments, the nominal value of bonds, or the number of derivative contracts included in the transaction. |
19. |
Quantity notation |
An indication as to whether the quantity is the number of units of financial instruments, the nominal value of bonds or the number of derivative contracts. |
20. |
Counterparty |
Identification of the counterparty to the transaction. That identification shall consist of:
|
21. |
Venue identification |
Identification of the venue where the transaction was executed. That identification shall consist in:
|
1This section applies to a firm:(1) which carries out any of the following activities:(a) receiving client orders;(b) executing client orders;(c) arranging for client orders to be executed;(d) carrying out transactions on behalf of the firm, or another person in the firm's group, and which are part of the firm's trading activities or the trading activities of another person in the firm's group;(e) executing orders that result from decisions by the firm to deal on behalf of its
Where successive personal transactions are carried out on behalf of a person in accordance with prior instructions given by that person, the obligations under this section do not apply:(1) separately to each successive transaction if those instructions remain in force and unchanged; or(2) to the termination or withdrawal of such instructions, provided that any financial instruments which had previously been acquired pursuant to the instructions are not disposed of at the same
1If a client requests a firm (F) to transfer the title to a retail investment product which is held by F directly, or indirectly through a third party, on that client's behalf to another person (P), and F may lawfully transfer the title to that retail investment product to P, F must execute the client's request within a reasonable time and in an efficient manner.