Policies

Order Execution Policy

  1. Introduction

Our order execution policy is applicable to all clients and categories of business conducted by Alpha Portfolio Management, a trading name of R C Brown Investment Management PLC (RCBIM).

We manage 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.

  1. Scope

Our Order Execution Policy applies to the execution of client orders 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.

We 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.

  1. 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.

  1. Execution Factors

When executing trades on behalf of its clients and the Funds it manages, we place 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, we 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.

  1. 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.

We 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, we 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

  1. 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.

We undertake an annual review of all brokers utilised. 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. The current top 5 Brokers we use are:

Numis

Winterflood

Peel Hunt

Investec

Jeffries

In order to minimise the risk of potential conflicts of interests, we do 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.

  1. 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.

  1. Order Management and Aggregation

We 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, we 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. We will aggregate order when we consider 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 we may do so in certain circumstances, we do 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 our 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 our Trade Aggregation and Allocation policy.

  1. Review of our Execution Policy

We review 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, Fixed Income & Exchange Traded Funds (ETF’s)

In order to meet these distinct needs of each order, we consider the following factors:

  1. 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
  2. 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.
  3. c) Size and nature of the order
  4. 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).
  5. 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
  6. f) For orders in Investment Trusts the execution factors are as follows below.

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 trade 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.

Managing Conflicts of Interest

We have an obligation to operate and maintain effective organisational and administrative arrangements with a view to taking all reasonable steps to prevent conflicts of interest from causing a material risk of damage to the interests of its customers.

Conflicts of interest may arise between ourselves and our clients, or between different clients. Within the scope of the business carried out by us a conflict of interest may be broadly described as a circumstance where a person:

a) is likely to make a financial gain or avoid a financial loss at the expense of a client;
b) has an interest in the outcome of the service or transaction carried out for a client which is different from the client’s own interest;
c) has a financial or other incentive to favour the interests of one client over another;
d) receives an inducement other than the standard remuneration for a service provided to the
client, which potentially rewards behaviour which is harmful to the client.

We maintain a record of all the conflicts, both actual and potential, which we have identified in the day to day course of business activities. This record is reviewed quarterly within our Compliance Monitoring Programme. Wherever possible specific arrangements are put in place to manage these conflicts and prevent any damage from occurring. In the rare event that we cannot manage a particular conflict effectively we will inform you of the nature of the conflict so that you can decide how to proceed.

The subject of Conflicts of Interest is included in our annual Risk Assessment and its ongoing programme for Treating Customers Fairly. It is the opinion of our senior management that the risk of actual damage to our customers interests is low, and that all current conflicts of interest within the firm, both actual and potential, are managed successfully.

Risk Warnings

Past performance is not a guide to future returns. The price of shares and the income from them can go down as well as up and you might get back less than you invest. Exchange rates may also affect performance.

Capital on deposit with a bank or building society is generally regarded as secure and is immediately accessible.

The favourable tax treatment currently applicable to ISAs may not be maintained in the future. There is a potential for loss of income or growth, following a rise in the markets, whilst an ISA transfer remains pending.

The tax treatment of investments may change at any time in accordance with the relevant legislation and will also depend on clients individual circumstances.

If clients invest in small companies, these are likely to be less liquid than larger companies, which means that fluctuations in price may be greater than for larger companies.

Many unit trusts, like shares, are subject to a spread between the bid and offer prices, whereas OEICs are single-priced. In most cases, unit trusts and OEICs can only be dealt once each business day, though some may be dealt less frequently. Unit trusts and OEICs are dealt on a forward pricing basis and, as a result, neither client nor we will know in advance the price at which an order will be executed.

We may enter into transactions on clients behalf in illiquid, non-readily realisable investments. These are investments in which there is a restricted market and it may therefore be difficult to deal in them or obtain reliable information about their value.

We may deal for clients in investments that have been the subject of stabilisation. Stabilisation enables the market price of a security to be maintained artificially during the period when a new issue of securities is sold to the public. Stabilisation may affect not only the price of the new issue but also the price of other securities relating to it. The Financial Conduct Authority (FCA) allows stabilisation in order to help counter the fact that, when a new issue comes onto the market for the first time, the price can sometimes drop for a time before buyers are found. Stabilisation is carried out by a “stabilisation manager” (normally the firm chiefly responsible for bringing a new issue to market). As long as the stabilising manager follows a strict set of rules, he is entitled to buy back securities that were previously sold to investors or allotted to institutions which have decided not to keep them. The effect of this may be to keep the price at a higher level than it would otherwise be during the period of stabilisation.

Derivatives may be entered into, to hedge against various risks such as adverse currency and market fluctuations, but will not be used for speculative purposes. As a result, in a rising market there is a possibility that potential gains may be restricted.

Some portfolios may include investment funds (including hedge funds and funds of hedge funds) that use gearing as part of their investment strategy. Such investment funds may be subject to sudden and large falls in value and clients may get back nothing on this part of their portfolio if the fall in value is sufficiently large.

The investments and services offered by us may not be suitable for all investors. If clients have any doubts as to the merits of an investment, they should seek advice from an appropriately qualified financial adviser who is authorised by the Financial Conduct Authority to advise on such investments.

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