This disclosure statement summarises Lion Global Investors’ best execution policy and is provided by Lion Global Investors (the “Manager”) to its clients so that they are made aware of and receive key information on how the Manager seeks to achieve best execution. The Manager may update this disclosure statement from time to time.
1. Best Execution Policy
The Manager provides discretionary investment management to its clients, during the course of which it will execute orders on behalf of clients when dealing in the client’s investments.
The Manager has a fiduciary duty to seek best execution when effecting transactions on behalf of its clients and also require that any counterparty, with whom it places an order, provides clients with best execution. To fulfill this obligation, the Manager will not only seek for each transaction the most favorable commission costs or price under the circumstances, but also the best qualitative execution, subject to any limitations placed by the client. The Manager will consider a number of factors, described below, in choosing and evaluating executing counterparty in light of its best execution obligations.
Capital Markets Products In-Scope
The Manager’s best execution policy applies to capital markets products for which it trades, including but are not limited to:
- Equities, e.g. shares in companies, typically listed on an exchange
- Fixed income securities, e.g. government and corporate bonds
- Money market instruments, e.g. cash deposits or other cash like instruments
- Foreign exchange; and
- Financial derivative instruments, including over-the-counter derivative products
Order Handling
Where the Manager executes client’s orders, it will ensure that orders are:
- Executed promptly
- Accurately recorded and allocated; and
- Comparable customer orders are placed and executed in accordance with the time of receipt of such orders, unless the characteristics of the order or prevailing market conditions make this impracticable, or it is not in the best interest of the client to do so.
Execution Factors
The considerations for best execution may include but are not limited to the following factors:
- Price: this is the price a capital markets product is traded at
- Costs: this includes all fees and costs related to order execution, including implicit costs such as possible market impact, and explicit costs such as broker commission
- Speed: this is the time it takes to execute a transaction
- Likelihood of execution or settlement: this is the likelihood that the execution counterparty is able to complete the transaction and settle the trade
- Size of order: this is the size of the transaction
- Nature of order: this is how the particular characteristics of a transaction can affect best execution
- Execution Capabilities: this refers to the ability of the counterparty to achieve best possible results
a. The objectives, investments policy and risks specific to the fund
b. The characteristics of the order
c. The characteristics of the financial instruments
d. The characteristics of the execution venues to which the order is forwarded
The Manager will use its market knowledge and experience, together with an assessment of current market conditions, to assess each execution criteria for each client order. The objective being the best possible execution result for each client order.
Execution Venues
Client orders will ordinarily be carried out via placement of the order with an executing broker or counterparty and thereafter will be executed by the broker or counterparty selecting an appropriate execution venue.
The Manager’s executing brokers or counterparties may choose one or more of the following venue types when executing orders such as regulated market/exchange, electronic trading facility, or internally, either by crossing with their other customers’ orders or using their own capital.
For some capital markets products, there may be only one possible execution venue. The Manager takes the view that the executing broker or counterparty has provided the best possible result in respect of venue for these types of products.
When placing an order with a broker or counterparty for execution, the Manager will consider the execution factors outlined and the broker’s or counterparty’s ability to fulfill best execution for the order. The Manager assesses the quality of the broker’s or counterparty’s execution based on overall cost, speed and likelihood of execution, among other factors.
Specific Instruction
Where a client provides specific instruction, e.g. limit orders, either in relation to an order, or any particular aspect or part of that order, including direction to execute on a particular venue, the Manager will ensure execution of the order in accordance with those instructions. In following instructions, the Manager will be deemed to have taken all reasonable steps to provide the best possible result in respect of the order or aspect of the order covered by the specific instructions.
Order Aggregation and Allocation
When the Manager deems the purchase or sale of the same security to be in the interest of two or more of its portfolios, it may, aggregate to the extent permitted by applicable law and regulations the securities to be purchased or sold in order to seek more favourable prices or more efficient execution, or to take steps to ensure fairness across its clients. The Manager only aggregates orders where it considers that such aggregation should work overall to the benefit of all clients whose orders are to be aggregated. The executed orders are allocated to the clients fairly and equitably.
Cross Trades
A crossed trade occurs when a buy order from one account and a sell order from another account are matched at a particular price. This is only applicable to Equities and Fixed Income instruments. Crossed trades are only allowed between clients’ accounts and it must be executed through an external counterparty or broker. Cross trades between staff personal account and client’s account and cross trades between LGI’s proprietary account and client’s account are prohibited. As there is no market impact and in most equity trades a lower commission or fee is incurred, cross trades would achieve the purpose of best execution. Cross trades can only be effected where:-
a. The sales and purchase decisions are in the best interest of both clients and fall within the investment objectives, guidelines and investment restrictions of both clients;
b. The reasons and basis for such trades are documented prior to execution and
c. The trades are executed on arm's length terms at current market price.
Counterparty Management
The Manager utilizes preferred brokers or counterparties who have the requisite skill set, resources and capabilities to provide best execution and conducts independent due diligence prior to any broker or counterparty being approved and added to the approved counterparty list. The approved brokers or counterparties are assessed on an ongoing basis to ensure they consistently offer the best results for clients.
All orders have to be placed with brokers or counterparties in the approved counterparty list. In addition, the Manager’s trading system permits the firm’s trading only with approved counterparties and are subject to exposure limits imposed on each broker or counterparty.
2. Monitoring and Reporting to Ensure Quality of Execution
The Manager has implemented monitoring procedures to ensure a high standard of execution is maintained:
Trade Surveillance
The Manager monitors best execution regularly by reviewing trades to check that the executed price appears reasonable given other trades in the market around the time of execution, competing quotes have been obtained where relevant and that exceptions are reviewed, for example where the best quotes have not been selected.
Any instances of non-compliance with best execution policy will be reported to Senior Management.