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Best Execution Policy (BEP) Version dated 06/2017 2 General part 2.1 Scope of validity The following BEP applies for the execution, acceptance or forwarding of orders which are done on behalf of the client by the Bank for the purpose of buying and selling financial instruments. Furthermore, it applies if the Bank buys or sells financial instruments in fulfilment of its obligations arising from an asset management mandate with the client for the client’s account. When executing orders, the Bank will adhere to the laws and regulations applicable for the respective place of execution. If a provision of the following BEP is contrary to these laws or regulations, then the corresponding law or regulation shall apply. 2.2 Fixed price transactions The best execution provisions set out in this document in regard to price do not apply if the Bank concludes a purchase contract with the client in respect of financial instruments at a fixed or definable price (fixed price transaction). When the Bank acts as a purchaser, it shall take delivery of the financial instruments from the client and the client acting as a vendor shall receive the agreed purchase price from the Bank. When the Bank is a vendor, it shall deliver the financial instruments to the client, and the client acting as a purchaser shall pay the Bank the agreed purchase price. 2.3 Primary market transactions The BEP does not apply to primary market transactions. 2.4 Express instructions of the client If the client expressly instructs the Bank in respect of the execution of an order, the Bank will execute the order in accordance with these express instructions. The client’s attention is expressly drawn to the fact that his instructions may exempt the Bank from taking the steps that it implements as standard in its execution policy to obtain the best possible result for the execution of those orders. 2.6 Market orders When the client gives an instruction to complete the order at market, the order shall be executed at the next available price. With a market order the client instructs the Bank to execute a trade of a certain size as promptly as possible at the prevailing market price. Discretion may be taken by the trader to change the client’s order to a limit order where it can reasonably be assumed under the given market conditions that this will result in a better price. Nevertheless, it is possible that this might be disadvantageous to the client in connection with a specific order. 2.7 Limit orders on equity and equity-like instruments If a client limit order in respect to equity and equity-like instruments admitted to trading on a regulated market or a trading venue is not immediately executed on account of current market conditions, the Bank is obliged to make such orders public to other market participants except where the client explicitly states that he does not want his order to be made public. This duty is regarded as having been fulfilled when such a limit order is transmitted to a Regulated Market (RM) or Multilateral Trading Facility (MTF). In case of especially large orders, the Bank reserves the right to decide whether the limit order should be made public. 3 Application of the policy based on class of financial instrument and type of service 3.1 Securities and exchange traded derivatives (ETD) a Securities and exchange traded derivatives include the following financial instruments: equities, exchange traded funds (ETF), bonds, exchange traded options & futures as well as structured products. b Trading services and activities that are provided regarding the above instruments: – Reception and transmission of orders (RTO) – Execution of orders on behalf of clients – Dealing against own book c Relative importance of execution factors When executing orders from clients, the Bank will normally give weight to the factors of price and cost only. This means that the Bank’s execution criteria focus on the total consideration paid or received for order as well as the costs incurred by executing the order (including clearing and settlement fees, plus any other fees). The Bank may, however, on occasion also consider other factors such as speed, transaction volume, and the likelihood of execution and/or settlement where it considers this appropriate or necessary. NET The highlighted terms are explained in the section “Definitions” at the end of this document. 2.5 Pooling of client orders The Bank shall be entitled to aggregate client orders with own orders or with orders of any other clients. Orders will only be aggregated where it is unlikely that the aggregation will be detrimental to the client. Notwithstanding this, it is possible that the effect of aggregation may work to the client’s disadvantage in relation to a particular order. FL 5231 en C 02062017 9999 Page 1 of 3 12.05.2017 13:15:19 1 Introduction Based on the European Financial Markets Regulation, particularly, Directive 2014/65 (MiFID II) and Regulation 600/2014 (MiFIR), banks are obliged to take all sufficient steps to obtain the best possible result for their clients when executing orders in financial instruments or commissioning a broker to execute them. This document sets out the order execution policies of LGT Bank Ltd. (hereinafter referred to as the “Bank”) which shall achieve the best possible result for clients upon the execution of buy and sell orders for financial instruments. The information on the order execution policy is customised depending on the class of financial instrument. A list of the execution venues and brokers on which the Bank places significant reliance in respect of each class of financial instrument can be found at www.lgt.com/en/publications/downloads/. This list is not exhaustive and may be changed at any time. Trades executed outside a trading venue always bear a counterparty risk. This risk may result in a loss for the client if the counterparty is not able to fulfil its contractual obligations. d Transmitting orders for execution to brokers Where the Bank transmits an order to a broker for execution, the Bank will act in the client’s best interests. Thus the Bank will select an entity or entities most likely to deliver the best possible result for its clients. In particular, the Bank prefers entities offering Smart Order Routing (SOR). The selected entities must have execution arrangements that enable the Bank to comply with its BEP. 3.2 OTC derivatives and Systematic Internalisation (SI) A list of OTC derivatives and financial instruments on which the Bank acts as Systematic Internalisation (SI) can be found at www.lgt.com/en/publications/downloads/. This list is not exhaustive and may change at any time. a Fixed price transactions When the Bank acts as SI or deals in OTC derivatives, such transactions shall be considered to be fixed price transactions. The Bank checks the fairness of the price proposed to the client by gathering market data used in the estimation of the price of such product and, when possible, by comparing the price with that of similar or comparable products. b Request for quote As SI, the Bank provides its clients a quote on request. Such quotes are only firm for a short moment and for a marketable amount. The period of time and the marketable amount depend on market volatility and the market liquidity of each financial instrument. Depending on those factors, the Bank may need to adjust the quotation. c Limit order The Bank will make every reasonable effort to execute the order promptly once the limit is touched. However, there is no guarantee of fixed price execution, in particular in the event of an unusual situation or extreme price/rate movement. 4. Monitoring and review The best execution policy is reviewed annually as well as whenever a material change arises that has a detrimental effect on the Bank’s ability to continue consistently achieving the best possible result when executing its client orders at the place of execution defined in its best execution policy. The Bank will inform its clients of any material changes in its arrangements or its BEP by issuing an update on the Bank’s website www.lgt.com/en/publications/downloads/. Where the Bank uses third-party brokers (including affiliates) to execute transactions, the Bank complies with this obligation by undertaking periodic reviews of the execution quality of its third-party brokers. 5.2 Cancellations If the account is credited with an amount subject to payments actually being received, the Bank may subsequently reverse credit on the account, irrespective of the period of time that has passed since the booking was made to the account/custody account. The same also applies for custody account assets that are booked into the client’s custody account subject to the securities actually being delivered as well as for account and custody account bookings that were mistakenly or incorrectly made. The client acknowledges that the Bank may make such correction bookings without consulting the client in advance. The Bank is under no obligation to execute orders for which there is no coverage/credit limit or which concern balances and custody assets that have been credited subject to payment/securities actually being received and where such a payment/securities delivery is still outstanding. 5.3 Unforeseen circumstances Best execution is a process and not an outcome. This means that, when the Bank is executing an order for its client, the Bank will execute it in accordance with this BEP. However, the Bank cannot guarantee that the best possible result will be obtained in all circumstances and in every event. The relative importance of the different execution factors may lead to a different result in a particular transaction. 5.4 Controller A controller is any person who in fact, either directly or indirectly, at his own discretion, makes decisions or gives directives with respect to transactions entered into under this BEP, either by virtue of a power of attorney or otherwise. The client is obliged to inform the Bank who is (are) the controller(s) with respect to transactions concluded under this BEP. In addition, the client undertakes to inform the Bank immediately, at the latest on the following bank working day, if such information is no longer correct and true. Without such notification, the Bank assumes that the respective transaction initiator(s) is (are) also the sole controller(s). Authorised persons acting as a corporate body or employees of the client or the controller cannot themselves be considered to be controllers. 6. Definitions Financial instruments – as defined in Annex I, Section C of the EU Directive 2014/65/EU. Fixed price transaction – is when the Bank concludes a purchase contract with the client in respect of financial instruments at a fixed or definable price. Primary market – is the part of the capital market that deals with issuing new securities. In particular but not limited to the new issue of bonds, shares and structured products as well as the subscription and redemption of funds. Trading venue – is an RM, MTF or OTF. OTC – means the execution of financial instruments outside a trading venue. NET For financial instruments executed on a trading venue with a request for quote system (RFQ) or outside a trading venue, the Bank will endeavour where possible to obtain competing quotes from several of its approved counterparties in order to deal on the best price. It should be noted that with less liquid instruments there might be only one liquidity provider and therefore only one available price to deal on. In volatile non-transparent markets, it may be necessary to accept the first price offered without the opportunity to obtain or request other prices. 5. Concluding remarks 5.1. Disturbances in the market or trading system In the event of disturbances in the market or the Bank’s own systems e.g. due to outages or deficient access in technical systems, in the Bank’s opinion it may be impossible or inappropriate to execute orders in any of the ways stated in this BEP. The Bank will thereupon take all reasonable measures in order to otherwise achieve the best possible result for the client. FL 5231 en C 02062017 9999 Page 2 of 3 12.05.2017 13:15:19 In particular, the Bank will rely on information provided by SIX Financial Information when choosing the best Trading Venue. The Bank may execute the order on a RM, MTF, Organized Trading Facility (OTF) or outside a trading venue (OTC). Multilateral trading facility (MTF) – means a multilateral system, operated by an investment firm or a market operator, which brings together multiple third-party buying and selling interests in financial instruments – in the system and in accordance with non-discretionary rules – in a way that results in a contract in accordance with Title II of Directive 2014/65/EU. Limit order – means an order to buy or sell a financial instrument within its specified price limit or better, and for a specified size. Regulated market (RM) – means a multilateral system operated and/or managed by a market operator, which brings together or facilitates the bringing together of multiple third-party buying and selling interests in financial instruments – in the system and in accordance with its nondiscretionary rules – in a way that results in a contract in respect of the financial instruments admitted to trading under its rules and/or systems, and which is authorised and functions regularly and in accordance with Title III of Directive 2014/65/EU. Organised trading facility (OTF) – means a multilateral system which is not a regulated market or an MTF and in which multiple third-party buying and selling interests in bonds, structured finance products, emission allowances or derivatives are able to interact in the system in a way that results in a contract in accordance with Title II of Directive 2014/65/EU. Systematic internaliser (SI) – means an investment firm which, on an organised, frequent, systematic and substantial basis, deals on own account when executing client orders outside a regulated market, an MTF or an OTF without operating a multilateral system. Smart Order Routing (SOR) – means technologies taking into consideration the best possible market prices of different trading venues and systematic internalisers at the point of the execution of the order. When an order is executed via SOR, the respective trading venue is labelled as multi-market-capable on the Bank’s list of the execution venues and brokers. FL 5231 en C 02062017 9999 Page 3 of 3 12.05.2017 13:15:19 NET Request for quote system (RFQ) – A trading system where one or more quotes are provided in response to a request for quote submitted by one or more members or participants. The quote is executable exclusively by the requesting member or participant. The requesting member or participant may conclude a transaction by accepting the quote or quotes provided to it on request.