This document sets forth the Best Execution policy of SMBC Nikko Securities (Singapore) Pte. Ltd (“the Company”) as required under the MAS Notice on Execution of Customers’ Orders (SFA 04-N16) and related Guidelines (SFA 04-G10). Under such rules, NKSG is required to establish and implement Best Execution policies and procedures which cover all capital markets products and all capacities in which it is acting in (i.e. whether as agent or principal).
Pursuant to this policy the Company endeavours to obtain the best possible results for client orders, subject to and taking into account a range of factors, amongst others, the price, costs, the size and nature of the orders, speed, likelihood of execution and settlement, any specific instructions, the nature of the markets and the products concerned.
SCOPE AND APPLICATION OF THE BEST EXECUTION POLICY
This policy only applies to Accredited and Expert Investors (Client(s)) who are dealing in capital market products and where the Company executes orders on behalf of Clients who place legitimate reliance on the Company to protect their interests in relation to pricing and other elements of the transaction.
Best execution is not accorded to Clients who are not placing legitimate reliance on the Company to protect their interests. The Company will determine if Clients are placing legitimate reliance on the Company by taking into consideration the following 4 Factors for each Client:
- a.Initiation of the Transaction
Where the Client initiates the transaction, it is less likely that the Client is placing legitimate reliance on the Company. In circumstances where the Company may communicate trade ideas, market communications or indicative processes as part of our general business, we regard these communications as purely for informational purposes and such communications shall not be deemed to have initiated the transaction.
- b.Market practice and the existence of a convention to ‘shop around’
If the market practice, custom or convention of the Client is to shop around for the best deal or in the case of a particular product if the Client already has ready access to different providers who may provide quotes and where the Client has the ability to shop around, it is less likely that the Client will be placing legitimate reliance on the Company.
- c.Relative levels of Pricing transparency within a market
If the pricing information is readily available and transparent within a market and it is reasonable that the Client would have access to such information, it is less likely that the Client will be placing legitimate reliance on the Company.
- d.Disclosure made to Client
Where the arrangements and agreements with a Client state that Company will provide Best Execution, it is more likely that the Client will be placing reliance on the Company and the Company will be obliged to provide best execution.
These considerations have been adapted by the Company from the UK Financial Conduct Authority’s Four-Fold legitimate reliance test. Where the consideration of the above factors concludes that there is no legitimate reliance on us, then Best Execution will not apply.
Where a duty to achieve Best Execution is indeed assessed to be owed, the Company will consider the following pertinent factors when executing a transaction on behalf of the Client:
- ・Price - The price will depend upon the method of receipt of the order and characteristics of the order, and, may also be affected by any specific instructions given by the Client.
- ・Additional costs relevant to the execution - Any additional costs that are related to the execution of the transaction such as execution venue fees, clearing and settlement fees and any other fees paid to third parties.
- ・Size of order - Orders are executed in the manner that is suitable to the size requested and does not have any impact on the market.
- ・Speed and likelihood of execution - The time and likelihood of execution of an order will depend on the price volatility and liquidity of the market.
- ・Likelihood of settlement – The success of settlement being carried out successfully will depend on parties adhering to their obligations, credit facilities, clearing & settlement services being in place to guarantee the settlement
All of the factors listed above would be considered critical when executing an order for a Client. Nonetheless there are certain situations in which the relative importance of these factors will change in response to the instructions from the Client. These include but are not limited to:
- ・Type of order (For example: Off market orders, Private Trading System (PTS), off-exchange transactions, off-floor trading, negotiated transactions with the Company)
- ・Type of product
- ・Client specific instruction of the order
- ・Nature of order
- ・General prevailing conditions in the market at the time of the order
- ・Any other consideration that the Company considers relevant to the execution of the transaction
For instance, when the market volatility of the financial instrument in question is greater than normal, there may be a reduction in the liquidity in the marketplace as well as the availability of prices.
Where specific instructions are given by the Client regarding the execution of an order or a part of the order, the Company will ensure execution in accordance with those instructions. In such circumstances, the Company will consider itself as having satisfied its Best Execution obligations with respect to the part of the Client order to which the instruction relates, when those instructions have been correctly carried out. In circumstances where specific instructions are given, these instructions may result in an execution that is less satisfactory than what may have been achieved in the absence of the instruction.
Where the Client provides specific instructions covering only part of an order, the Company will not consider itself released from its Best Execution obligations for the parts of the order which are not covered by the instructions. In this case the Company will comply with this Best Execution policy to that part of the trade which is not covered by specific instructions.
Where specific instructions given by the Client cannot be followed, the Company will inform the Client of the reasons before executing such orders. There may be some orders, depending on the circumstances which the Company may not be able to accept.
- ・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 (and with respect to where no specific instruction has been received, the Company will follow the Best Execution policy.)
- ・Transactions under a discretionary investment management agreement:
*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 mandate.
- ・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.
The Company has a list of execution venues and brokers to execute transactions which are made known to the Client and which the Company has determined as the most beneficial in providing best execution to the Client on the basis that amongst other factors the time and costs in assessing more than one execution venue or broker will outweigh any benefit gained in the quality of the execution of the Client’s order.
The Company views its Best Execution obligations seriously. The Company shall on a periodic basis review its compliance with and the effectiveness of its Best Execution policy and procedures. This policy would also be reviewed on a periodic basis to ensure that its principles remain relevant.
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 endeavour 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 amongst others cost, speed and probability of execution. Accordingly, the mere fact that an execution appears not to have resulted in the best possible price in retrospect will not necessarily constitute a contravention of such duty.
The contents of this policy will be available on the Company's website and will also be provided by at the time of account opening.