Best Execution Policy

This Best Execution Policy sets forth our policy and other matters to execute transactions on the best terms and conditions for our customers in accordance with the provisions of Article 40-2, paragraph (1) of the Financial Instruments and Exchange Act.
When we accept an order from a customer for any of the securities specified below, we will endeavor to execute the order on the best trading terms and conditions for the customer in accordance with the following methods and policies.

1. Applicable securities

  • (1)Listed share certificates, etc. : Stocks, corporate bonds with stock acquisition rights, ETFs, REITs, and other securities listed on financial instruments exchanges in Japan, which are "Listed Share Certificates, etc." as defined in Article 16-6, paragraph (1), item (i) (a) of the Order for Enforcement of the Financial Instruments and Exchange Act.
  • (2)Tradable securities: Phoenix issues, bonds with stock acquisition rights and other “Tradable Securities” defined in Article 67-18, item (iv) of the Financial Instruments and Exchange Act.

2. Methods to execute on the best trading terms

  • (1)Listed stocks and equivalents:
    Until the introduction of SOR (Smart Order Routing) described below, we will execute brokerage orders for listed stocks received from customers promptly on a financial instruments exchange in Japan, unless otherwise specified, considering primarily matters that are in the best interests of our customers (e.g., existence of a highly stable and secure trading system) in addition to execution at the most favorable price as the best terms and conditions for the trade. In this case, the brokerage of an order to the financial instruments exchange will be conducted as follows:
    Brokerage orders received before or after the trading hours of a financial instruments exchange will be executed after the acceptance of orders for the next trading session of the financial instruments exchange has started.
    • (i)For issues listed on only one financial instruments exchange (single exchange), we will execute orders on that exchange. However, orders placed via online trading (“Nikko EZ Trade”) or telephone trading (“Tere Tore”) will not be brokered on the Fukuoka Stock Exchange or the Sapporo Stock Exchange.
    • (ii)For issues listed on more than one financial instruments exchange, we will execute orders on the primary market as determined by us from the liquidity standpoint. For inquiries about the primary market selected by SMBC Nikko Securities Inc. (“SMBC Nikko”) for each issue, contact our head office or branch office.

    If there are any specific instructions from the customer regarding the method of execution, we will follow such instructions (but limited to a method that SMBC Nikko can apply.)

    Smart Order Routing (SOR), a trading execution mechanism that compares the best quotes from multiple financial instrument exchanges or PTS (Proprietary Trading Systems) and gives more weight to prices, will be the best method for customers in the future. We are currently considering a highly stable and secure system that can serve the best interests of our customers at a reasonable cost. However, it will take time to develop such a system. We aim to introduce the system in fiscal 2025. We will inform customers as soon as we are ready to do so. For the time being, we continue to execute our customers' orders as described above, using a system with a proven track record.

  • (2)Tradable securities (Phoenix issues)
    SMBC Nikko, in principle, does not accept orders for tradable securities (Phoenix issues). As an exception, provided there is a financial instruments business operator which can execute an order for such a security is available, SMBC Nikko will accept the order and act as a broker.

3. Reasons to choose these methods

Investor demand is primarily concentrated on financial instruments exchanges due to their public nature. Until we introduce SOR, for the issues specified in 2.(1)(i) above, we believe that executing orders on financial instruments exchanges is most appropriate to ensure the transparency and fairness of transactions due to the superiority of public exchanges in terms of liquidity, execution probability and speed. We also believe that choosing the financial instruments exchange with the highest liquidity, execution probability and speed, and fairness of the transactions among the multiple financial instruments exchanges on which the securities are listed is the most reasonable method to execute orders for our customers.

Until we introduce SOR, for the issues specified in 2.(1)(ii) above, we believe that it is most reasonable for our customers to execute orders on the financial instruments exchange with the highest liquidity among the multiple financial instruments exchanges on which the securities are listed.

4. Others

  • (1)SMBC Nikko cannot use the methods specified in 2 above for the following types of trading. Accordingly, we use the following methods for these types of trading.
    • (i)Trading under a discretionary investment contract or equivalent
      A method that SMBC Nikko selects from the options designated by the customer or a third party designated by the customer under the contract
    • (ii)Trading for which the execution method is specified in the terms of transactions, such as stock cumulative investment plans
      The execution method specified in the terms of transactions
    • (iii)Trading of shares less than one trading unit (excluding trading to respond to requests for selling such shares to the issuing company and requests for purchasing additional shares to reach a whole trading unit)
      Brokerage to a financial instruments business operator that handles trading in shares of less than one trading unit
    • (iv)Trading to execute the reversing (settlement) of margin trading
      Reversing (settling) the transaction on the same market where the position is set up (excluding cases where trading is necessary due to delisting of the issuer or other unavoidable reasons)
    • (v)Trading to execute a sale or purchase where the securities subject to this Best Execution Policy are listed on a foreign financial instruments market in addition to an exchange in Japan
      The execution method agreed upon between the customer and SMBC Nikko
  • (2)In the event of a problem with financial instruments exchanges, telecommunications line operators, or our system, SMBC Nikko may execute orders by a method different from the method that would normally be chosen in accordance with this Best Execution Policy.

Best execution is an obligation to execute orders with the best terms and conditions, not only in terms of price but also considering various other factors such as cost, speed, and executability. Therefore, if a trading order is executed under terms that focus not only on price and the result of the transaction is not the best price, it does not necessarily constitute a breach of the obligation of best execution.

Revised on January 1, 2024

This policy is made in Japanese and translated into English. The Japanese text is the original and the English text is for reference purposes.

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