Order Execution Policy

Best Execution 

  1. Introduction 

This Order Execution Policy (Policy) sets out the Order Execution in respect of Multrees Investor Services Limited (Multrees) as required by the European Union Markets in Financial Instruments Directive 2014/65/EU (MiFID) and the rules and guidance of the Financial Conduct Authority (FCA). 

Multrees provides safe custody (including ISA plan manager services) and related investment administration services to its clients (Managers) and their underlying customers (Customers).  

The Order Execution Policy (the Policy) sets out Multrees’ approach for obtaining the best possible results when executing orders on behalf of Managers and their Customers, in accordance with section 11.2A of the FCA’s Conduct of Business Rules (COBS). Multrees owes best execution obligations to its Managers and Customers; Managers in turn need to discharge their own best execution obligations to their Customers. 

In line with COBS 11.2A.2R(1), when Multrees executes orders, it takes all sufficient steps to obtain the best possible result for its clients, taking into account the Execution Factors. According to COBS 11.2A.2R(2), the Execution Factors include the price, costs, speed, likelihood of execution and settlement, size, nature or any other consideration relevant to the execution of an order.   

When executing an order, Multrees will take into account the following criteria for determining the relative importance of the Execution Factors noted above:1 

  • The characteristics of the client. This will always be orders received by Managers on behalf of their Customers. 

  • 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. 

The Policy sets out in more detail Multrees’ approach for obtaining the best possible results when executing orders on behalf of Managers and their Customers. 

Multrees recommends that all Managers reading this Policy familiarise themselves with the relevant FCA Rules and the duties they have to their Customers in this context. 

For the avoidance of doubt, Multrees owes best execution obligations to its Managers and Customers; Managers in turn need to discharge their own best execution obligations to their Customers. 

Scope 

This Policy applies to Multrees’ Customers, and to certain types of transactions in financial instruments executed by Multrees on behalf of the Managers, including: 

 

  • Exchange traded assets (e.g. Equities, Investment Trusts and Exchange Traded Funds) 

  • Fixed Income (e.g. Corporate Bonds and Gilts) 

  • Derivatives (e.g. Forward Foreign Exchange). 

 

Multrees owes Best Execution to the Customers where there is legitimate reliance on the firm to protect the interests regarding the price as well as other elements of the transaction (see the Execution Factors above). 

 

Regarding collective Investment Scheme transactions (e.g. OEICS, Unit Trusts and Private Equity funds) they are usually executed directly with a platform or fund provider. Multrees will transmit these trades to the relevant counterparty in order to meet the next available valuation point. Other aspects of this Policy are not relevant to these transactions, as Multrees has no discretion over how to carry out these transactions.  

  1. Forward Foreign Exchange 

For Forward Foreign Exchange (FFX) trades, Multrees trades on a “Matched Principal basis”, meaning that the Customer transacts with Multrees, and Multrees place an identical order at the same time with its Market Counterparty. A full list of current market counterparties is available upon request. 

As Multrees trades on a “Matched Principal basis”, it is considered that it is dealing on own account when executing orders. Such activities are regarded as acting as principal and hence are subject to the requirements of COBS 11.2A in relation to execution of orders on behalf clients.2 

FFX deals are traded Over the Counter (OTC), i.e. the execution of customer orders is conducted outside of organised markets or trading facilities. Prices for the relevant order are checked with our available market counterparties using a real time order routing and execution service, and the order is traded with the one offering the best price. Depending on the size and nature of the order, Multrees cannot guarantee that it will be able to access more than a single market counterparty for FFX transactions. 

The predominant Execution Factors which Multrees will consider when deciding how best to effect a FFX transaction are (i) the overall pricing and (ii) the availability of the relevant currency. For example, whilst Multrees will aim to execute orders as soon as possible and in the order they are received, it may group orders together to obtain a more advantageous result for Customers. Multrees may also consider counterparty risk when deciding which market counterparty to be used for a specific transaction. 

The decision to add a market counterparty is based on several commercial aspects in addition to best execution requirements; these may include creditworthiness, fee structure and other commercial terms. The decision as to which market counterparty to use for a particular transaction will only be made based on the Execution Factors set out in this policy. When executing orders, the market counterparties will also follow their own Order Execution Policies. 

Best execution for trades executed by the selected market counterparties will be monitored and reviewed on a regular basis to ensure appropriate customer outcomes. 

  

  1. Other Financial Instruments 

Multrees is not a member of any market or other trading venue, and it does not directly execute Customer orders. Instead, these orders are transmitted automatically to selected market counterparties for execution, and Multrees in turn monitors the market counterparty for best execution factors which are listed in the appendix to this document. The decision as to which market counterparty to use for a particular transaction will only be made based on the Execution Factors set out in this policy.  In consideration of these factors, the Execution Team may route orders to the counterparty manually, rather than automatically, so that the client orders can be dealt in such a way to limit the market impact.  The execution team will simply take account of the prevailing average trade size for that day in comparison to the order size ordered by the client; as such, this does not require the exercise of significant amounts of discretion or judgement. 

The selected market counterparty will execute the trade on market, on an OTC basis, cross the trade internally with another third party, or be the counterparty to the trade itself. The market counterparty will make this decision at its own discretion and may decide to split a trade into multiple tranches which may execute in different ways; however, it will only do so if it believes the end result would be more advantageous for the Customer than if the trade was executed on a market. The selected market counterparty will execute orders in the sequence in which they are received, unless the characteristics of the order make this impossible, for example due to limited liquidity, or it believes a better outcome will be achieved for all customers by batching orders together. 

When fulfilling an order, the market counterparty will give regard to the Execution Factors listed in the Appendix of this Policy. In normal circumstances the primary factor will be price, although others may be given priority if it is regarded as being in the Customer’s best interests.  

The selected market counterparty will also comply with its own Order Execution Policy when carrying out orders on behalf of Multrees’ Customers.  

Best execution for trades executed by the selected market counterparties will be monitored and reviewed on a regular basis to ensure appropriate customer outcomes. 

  1. Assessing entities for best execution 

Multrees, as it transmits and places orders with counterparties for execution, ensures that these counterparties have execution arrangements that enable them to comply with the best execution obligation.3 (COBS 11.2A.34UK) 

  

  1. BEST EXECUTION OVERSIGHT COMMITTEE (BEOC) 

A BEOC has been established as a sub-committee of the Risk Committee and will meet on a quarterly basis and will receive and discuss detailed management information on execution quality and performance against best execution benchmarks and other key performance indicators for each sub-asset class of MiFID. 

The BEOC will ensure that monitoring processes against pre-defined controls are sufficiently robust and will identify failings or remedial actions to be taken to prevent client detriment. The BEOC will also be responsible for reviewing the overall performance of a firm’s chosen execution venues, assessing on a regular basis whether execution arrangements were sufficiently optimal to enable best execution to be evidenced (this does not have to be done trade-by-trade). 

The BEOC will review Transaction Cost Analysis tools as relevant to its business model. Trades can be reviewed on an exception basis against predefined execution benchmarks and the reasons for any such exceptions are reviewed. 

  1. Review of this Policy 

This Policy is reviewed by Multrees at least annually (or more frequently as required). Multrees will notify Managers of any material change to Multrees’ execution arrangements by providing each of our Managers with an updated version of this Policy by email. Updated versions of this Policy will also be made available on the Multrees website 

  1. Consent 

Failure to consent to this Policy would limit Multrees’ ability to obtain best execution for its Customers. Under the terms of the Multrees Custody Agreement, Managers can consent to Policies on Customers’ behalf – therefore, by opening an account with Multrees, Customers will be deemed to have consented to the application of this Policy. 


 

Appendix – Execution Factors

Multrees will have regard to the following Execution Factors when executing an order on behalf of a Manager/Customer in accordance with this Policy. As detailed above, the nature of each order – as well as any specific Manager instructions – will have a bearing on which Execution Factors are considered in priority to others.

Execution Factor

Commentary

Manager Instructions

Multrees’ best execution obligation is subject to the nature and specificity of the relevant orders. If a Manager provides Multrees with any specific instructions regarding the execution of a particular order, then such instructions will take precedence over the default factors referred to in this Policy.

Where a Manager gives specific instructions to only part of an order, the rest of the order will be carried out based on this Policy.

Cost

Any and all relevant charges will be agreed with the Manager under the terms of the relevant Fees Letter.

Counterparty Risk

To mitigate counterparty risk to both investment managers and itself, Multrees may spread trades across different counterparties

Instruments

Different Execution Factors will be relevant to different instruments depending on their nature, characteristics and how they are traded.

Market Impact

The obligation for Multrees to consider any impact that the order may have on the relevant market(s).

Nature of the Order

The size of the order, the types of instruments being traded, the settlement mechanics and any other order characteristics relevant to determining how the order should be executed. All orders will be executed on a prompt, fair and expeditious basis.

Consideration will need to be given to the liquidity of the instrument at the relevant time.

Price

Price will be determined in terms of the total consideration, representing the price of the financial instrument and the costs related to execution, which includes all expenses incurred by the Customer which are directly related to the execution of the order.  Total consideration will include[2]:

     The price of the financial instrument.

     The costs related to execution, including all expenses incurred by the Customer that 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.

Quality of Execution

This includes the speed and likelihood of execution, and the availability and incidence of price improvement.

Size

As per the nature of the order, the size of the order in relation to the liquidity of the stock may also have significant influence on the best execution process.


When assessing the entities in its policy, a firm like Multrees should also take account of the guidance from the FCA, that the best execution requirements should not necessitate a duplication of effort as to best execution between a firm that transmits or places orders with other entities for execution and any firm to which that firm transmits its orders for execution (COBS 11.2A.35G).

The FCA suggests that the other execution factors (that is, speed, likelihood of execution and settlement, the size and nature of the order, and market impact) and any other implicit transaction costs may be given precedence over the immediate price and cost consideration only insofar as they are instrumental in delivering the best possible result in terms of the total consideration to the Customer.