1. INTRODUCTION
a. Under MAS Notice SFA 04-N16 on Execution of Customers' Orders and Guidelines to MAS Notice SFA 04-N16 on Execution of Customer's Orders, in relation to the purchase or sale of any capital markets products, CapBridge Pte Ltd ("CapBridge" or "we") is required to establish and implement written policies and procedures ("the Execution Policy") to place or execute, or both, customers' orders on the best available terms, and comparable customers' orders in accordance with the time of receipt of such orders.
b. This document sets out the Execution Policy of CapBridge and our approach to providing best execution.
2. SCOPE OF APPLICATION OF BEST EXECUTION
a. This document applies to our customers, other than customers classified as institutional investors on whose behalf, or with whom, we deal or will deal in capital markets products.
b. Best execution is generally owed when we accept an order to execute a transaction on the customer's behalf, or place the customer's order with, or pass the customer's order to others or an execution venue for execution or in other circumstances where we have otherwise expressly agreed to accept such best execution obligation.
c. The best execution obligation is also applicable when we are acting in a principal capacity and the customer is placing legitimate reliance on us to protect their interest in relation to the execution of a transaction. If the customer is an accredited or expert investor, in order to determine whether they are placing legitimate reliance on us, we will take into account the Markets in Financial Instruments Directive's four-fold cumulative test:
• Which party initiated the transaction - Where the customer initiates the transaction, it is less likely that they are placing legitimate reliance on us. In circumstances where we may communicate trade ideas, market communications or indicative prices as part of our general business, we regard these communications as purely for information purposes and do not believe that such communications will be deemed to have initiated the transaction.
• Questions of market practice and the existence of a convention for customers to "shop around" - Where market practice for a particular asset class or product suggests that the customer will have ready access to various providers who may provide quotes and the customer has the ability to shop around, it is less likely that the customer will be placing legitimate reliance on us. For example, in the bond markets, buyers conventionally "shop around" by approaching several dealers for a quote and, in these circumstances, there is no expectation between the parties that the dealer chosen by the customer will owe best execution.
• The relative levels of transparency within a market - In circumstances where pricing information is transparent and it is reasonable that the customer has access to such information, it is less likely that the customer will be placing legitimate reliance on us.
• The information provided by the customer and any agreement reached - Where any agreements or arrangements with the customer do not indicate or suggest that an understanding has been reached that the customer will place any legitimate reliance on us or we have agreed to provide best execution.
Where the consideration of the above factors concludes that there is no legitimate reliance on us, Best Execution will not apply.
3. SPECIFIC INSTRUCTIONS
a. Where the customer gives us a specific instruction in relation to an order, we will follow that instruction so far as is reasonably possible when executing the trade. By following the customer's specific instruction, we will have satisfied the obligation to provide the customer with best execution in relation to that transaction. Examples of such instructions may include, but are not limited to, requests to execute on a particular venue or to execute an order over a particular timeframe.
b. In circumstances where the customer gives us a specific instruction which covers one part or aspect of an order, we will have satisfied the obligation to provide the customer with best execution in relation to the relevant part of the transaction to which the specific instruction applied. The remaining portion of that order not covered by such specific instruction may still be applicable for best execution in accordance with the criteria set out in our Guide.
c. Any specific instructions from the customer may prevent us from taking the steps that we have designed and implemented in this document to obtain the best possible result for the execution of those customers' orders in respect of the elements covered by those instructions.
4. APPLICATION OF EXECUTION FACTORS
a. When executing orders on the customer's behalf, we will give consideration to a range of execution factors when determining how to obtain the best possible result for the customer. Some of the below factors are considered to be more important than others; however, there are situations where the relative importance of these factors may change in accordance with instructions that the customer provides or broader market conditions.
b. The execution factors which we consider are:
i. Price - This is the price at which the order is executed;
ii. Costs1 - This includes implicit costs such as the possible market impact, explicit costs, e.g. exchange or clearing fees or spread;
iii. Size and nature - This may affect the price of execution;
iv. Speed - The time it takes to execute the customer's order;
v. Likelihood of execution and settlement - The likelihood that we will be able to complete the customer's order; and
vi. Any other considerations relevant to the placement and/or execution of the order -This may include, for example, the particular characteristics of the customer's order which can affect how best execution is received.
The above execution factors indicate the importance of being able to exercise the appropriate judgment in the best interests of the customer given the differing needs and requirements of each customer transaction and the broader market.
c. When determining the relative importance of each execution factor, we will take into account the following in the context of market:
1. the type of customers, whether retail customers2 or otherwise;
2. the types of capital market products;
3. the characteristics of the execution venues or brokers to which the order can be directed; and4. the characteristics of the customer's orders.
Generally, we consider that the most important execution factor for our customers is the price at which the transaction in the relevant capital market product is executed. However, there may be circumstances where the primary execution factors may vary and price is no longer the dominant execution factor; for example, for transactions in illiquid securities, the likelihood of execution and settlement become more important. During the process when applying consideration to each execution factor, we will use our experience and expertise to achieve the best balance across the full range of factors. This may mean that we do not always achieve the best price for every customer transaction, but the best result that can be reasonably expected given the information available during the execution process. It should, however, be noted that when undertaking a transaction, any specific execution factors specified by the customer will always be paramount in ensuring best execution is provided.
d. Our commitment to provide the customer with best execution does not mean that we owe the customer any fiduciary or other duties over and above the specific regulatory obligations placed upon us.
5. EXECUTION VENUES
In selecting an execution venue to place or execute the customer's order, we will take into account the execution factors listed above, including (without limitation) information published by execution venues on their execution quality in order to obtain on a consistent basis the best possible result. We may use one or more of the following venue types to clear our own market risk when acting as principal or when executing the customer's order:
1. Exchanges, including overseas exchanges
2. Electronic trading platforms
3. Third party financial institutions, such as market makers, liquidity providers, fund providers
4. Third party brokers
6. MONITORING AND REVIEW
We will monitor the effectiveness of our Execution Policy and arrangements to identify and, where appropriate, correct any deficiencies.We will carry out the reviews and assessments of our Execution Policy and arrangements regularly or whenever a material change occurs that affects our ability to obtain the best available terms for the execution of our customers' orders on a consistent basis using the various execution venues. We will notify our customers of any material changes to our Execution Policy.
1 The ‘costs’ factor may include research cost, as research cost has not been required to be unbundled from execution cost. The expectation for fund management companies regarding soft dollars from brokers is that it is allowed only if the following conditions are met: (i) soft dollars received can reasonably be expected to assist in the fund management company’s provision of investment advice or related services for the customer; and (ii) the fund management company does not enter into unnecessary trades in order to achieve a sufficient volume of transactions to qualify for soft dollars.
2 “Retail customer” means a customer who is not an accredited investor, an institutional investor or an expert investor (as defined in section 4A of the SFA).
