SMBC Nikko Securities Inc. Best Execution Policy

This best execution policy sets forth our policy and methods for executing orders from client under the best terms and conditions in accordance with Article 40-2 (1) of the Financial Instruments and Exchange Act. Upon acceptance of a client order for securities defined below, SMBC Nikko Securities Inc. (hereinafter called the "Company") will endeavor to execute that order under the best terms and conditions for the client in accordance with the following methods

1. Securities covered by the policy

  • (1)Listed stocks, Corporate bonds with warrant and other "listed stocks, etc.," as prescribed under Article 16-6 of the Order for Enforcement of the Financial Instruments and Exchange Act, which are listed on a financial instruments exchange market in Japan (hereinafter called the "Market").
  • (2)"Securities Handled" as defined in Article 67-18 (iv) of the Financial Instruments and Exchange Act.

2. Method of executing orders under the best terms and conditions

  • (1)Listed stocks, etc.
    • 1)Method of executing an order
      The Company will place a brokerage order of listed stocks, etc. received from a client on the Market in Japan without delay. Likewise, for those orders received from a client during off-market hours, the Company will place the order on the Market once the trading session on the Market reopens. This will allow the client's order to be executed in the floor-trading of the said Market. However, if a client requests methods other than described above (which should be limited to those acceptable to the Company, such as private trading system - PTS, off-exchange transactions, off-floor trading , negotiated transactions with the Company etc.), the client's order will be executed according to the method and condition agreed between the client and the Company.
    • 2)Markets to execute agency/brokerage orders
      • a.Where the relevant stock is listed on one Market (single listing), the order will be placed on the said Market.
      • b.Where the relevant stock is listed on more than one Market (multiple listing), the order will be placed on the Market selected by the following ways (hereinafter called the "Best Execution Market"). However, if a client requests execution on a specified Market, the Company will execute the order in the Market so requested.
        • (a)The order will be placed on the Market which provides the price information to be displayed faster than others on the screen of QUICK Corp. information terminal (available at the counter of the head office and branches of the Company) when entering the security code (code without designating market). Such market is the one determined by the calculation method prepared by Quick Corp., taking into consideration the trading volume for a certain period of time.
        • (b)Even in case of (a), when the issue is in the delisting post (sometimes called delisting issues) or QUICK Corp. is unable to provide data, the selection of the execution market will be made in accordance with the priority separately set by the Company.
  • (2)"Securities Handled" (OTC) (Green Sheet Issues and Phoenix Issues)
    In principle, the Company will not accept orders for "Securities Handled".
    However, if the Company receives an order from a client, the Company will place the order to a financial instruments broker that solicits investment in such issue (hereinafter called the "Handling Broker").
    If there is only one Handling Broker soliciting such issue, the Company will place the order to that Handling Broker. If there is more than one Handling Broker that solicit such issue, the order will be placed, according to the method agreed between the client and the Company, to the Handling Broker offering the indicative price most favorable to the client at the time.
    However, if a client requests methods other than described above, the client's order will be executed according to the method and condition agreed between the client and the Company.
    Please note that there may be some orders, depending on the issue, that the Company may not be able to accept.

3. Reasons for selecting the execution method specified in 2.

  • (1)Listed stocks, etc.
    With regard to listed stocks, etc., the Company believes the Market (floor-trading) will be most appropriate for the place of execution of a client order to ensure fairness and transparency of trade. In other words, because of its highly public nature, the Market has high concentration of demand from numbers of investors and it is believed to be most advantageous for clients in terms of liquidity, probability of transaction, trade execution speed and fairness.
    Furthermore, when the relevant issue is listed on multiple Markets, the Company will execute the trade on the Market that has the highest liquidity because it is believed to be most advantageous for clients.
    However, taken into account particular needs of a client's individual trade, such as putting emphasis on trade execution speed as against order volume, there may be cases which are thought to be more rational to execute the trade by using methods other than the Markets (floor-trading). In such cases, the Company may select other methods and conditions agreed with the client to execute the trade.
  • (2)"Securities Handled" OTC (Green Sheet Issues and Phoenix Issues)
    The Company believes that placing client orders to a Handling Broker where orders tend to be concentrated will secure more trade opportunities and increase the probability of realization (trade execution) of the client's orders.

4. Other

  • (1)Regardless the methods specified in 2. above, the Company will execute the following types of transactions as described below:
    • 1)Transactions in which a client has specified the method of execution (by specifying the Market or the execution hours, or by requesting the execution of basket orders, etc.):
      *Execution by the method agreed between the client and the Company (with respect to where no specific instruction has been received, the Company will follow the best execution policy.)
    • 2)Transactions under a discretionary investment management agreement, etc.:
      *Execution by a method of the Company's choice within the range of discretion granted by the client or the third party designated by the client in the relevant agreement and so forth.
    • 3)Cumulative stock investment, stock mini investment and other transactions for which the execution method is specified in the general terms and conditions or the like:
      *The execution method stated in the general terms and conditions or the like.
    • 4)Transactions of stocks less than a trading unit (excluding demand for repurchase to and demand for additional purchase to the issuing company):
      *Execution by placing the order to a financial instruments broker that deals in stocks less than a trading unit.
    • 5)Transactions related to execution of reverse trades on margin trading:
      *The method of executing reverse trades in the same Market where a margin position has been established (except for unavoidable cases such as delisting)
    • 6)Transactions related to execution of stocks which are covered by the best execution policy and that are also listed on a foreign financial instruments market:
      *The execution method agreed between the client and the Company.
  • (2)The Market where the Company will make the best execution is the one considered to be the Best Execution Market at a time when orders have been received from the client. Accordingly, please note that the Markets for the best execution may be different between the receipt of orders and the execution of orders.
  • (3)There may be cases, due to system failures and other circumstances, where the Company may have to execute an order using a method other than the method selected in accordance with the best execution policy. Even in such cases, the Company will endeavor to execute the order on the best terms possible at the time.

The duty of best execution not only relates to price but also involves the consideration of various factors including cost, speed and probability of execution. Accordingly, the mere fact that an execution appears not to have resulted in the best possible price afterwards will not necessarily constitute a contravention of such duty. Please note that the contents of this policy will be available on the Company's website, and will also be provided by contacting the Company's head office and branches.