BEST EXECUTION POLICY
1. BEST EXECUTION
Best execution refers to the duty of an investment services firm
executing orders on behalf of customers to ensure the best execution possible for
their customers’ orders.
2. BEST EXECUTION POLICY
This policy provides an overview of how Valmon Securities Limited (Valmon)
executes orders on behalf of clients, the factors that can affect the timing of
execution and the way in which market volatility plays a part in handling orders
when buying or selling a financial instrument. The policy applies to Valmon’s
execution of orders on behalf of retail clients.
Upon acceptance of a client order and when there is no specific client instruction
regarding the execution method, Valmon will execute an order in accordance with
this policy.
3. FINANCIAL INSTRUMENTS TO WHICH THIS POLICY APPLIES
This policy applies to the following financial instruments and products, namely,
Stocks and Bonds
4. VALMON’S APPROACH TO BEST EXE-CUTION
4.1 When executing orders Valmon will take all reasonable steps to obtain the best
possible result under the circumstances for the client taking into account price,
costs, speed, likely-hood of execution and settlement, size, nature or any other
consideration relevant to the execution of the order (“Best Execution”).When considering the best executing factors, Valmon takes into account:
- the characteristics of the client order;
- the characteristics of the financial instruments that are subject to that
order.
4.2 Whenever there is a specific instruction from or on behalf of a client, Valmon
will – to the extent possible – execute the order in accordance with the specific
instruction. A specific instruction from a client may prevent Valmon from taking the
steps that it has described in this policy to obtain the best possible result for the
execution of orders. Trading rules for specific markets may prevent Valmon from
following certain of the client’s instructions. To the extent that a client instruction
is not complete, Valmon will determine any non-specified components of the
execution in accordance with this policy.
5. ELEMENTS OF BEST EXECUTION
The procedure for routing determinations is mainly based on four criteria and is
regularly reviewed by Valmon Hence to determine the best way to execute an order
for a client Valmon takes into consideration:
5.1 Speed and Likelihood of the Execution
Due to the levels of volatility affecting both price and volume, Valmon seeks to pro
vide client orders with the fastest execution reasonably possible although delays
may occur.
5.2 Price Improvement and Overall Consideration of Costs
Orders are routed to market makers and/or market centers where opportunities
for price improvement exist. The criteria to be used by other market-makers and/or
market centers include:• automatically matching incoming market and limit orders to pending
limit orders
- crossing transactions where price improvement can be offered to one
or both sides of the trade.
Price improvement is the opportunity, but not the guarantee, that an order will be
executed at a better price than what is currently quoted publicly.
5.2 Size Improvement
In routing orders, Valmon seeks markets that provide the greatest liquidity and
thus potential for execution of large orders.
5.3 Overall Execution Quality
When determining how and where to route or execute an order, Valmon’s traders
draw on extensive day-to-day experience with various markets and market makers,
focusing on prompt and reliable execution.
6. EXECUTION OF CLIENT ORDERS
Valmon uses automated systems to route and execute client orders. When a client
order is received by Valmon, it may be kept in house for products which trades
against its own proprietary desk.
7. EFFECTS ON ORDER EXECUTION
7.1 Clients should be aware of the following risks associated with volatile markets,
especially at or near the open or close of the trading session:
- execution at a substantially different price from the quoted bid or offer or
the last reported sale price at the time of order entry, as well as partial
executions or execution of large orders in several transactions at different
prices. • opening prices that may differ substantially from the previous day’s close.
- locked (the bid equals the offer) and crossed (the bid is higher than the offer)
markets, which prevent the execution of client trades.
- price volatility is one factor that can affect order execution. When clients
place a high volume of orders with brokers, order imbalances and back logs
can occur. This implies that more time is needed to execute the pending
orders. Such delays are usually caused by the occurrence of different factors:
(i) the number and size of orders to be processed, (ii) the speed at which
current quotations (or last-sale information) are provided to Valmon.
7.2 Clients should be aware of the Compliance Order Filters which exchanges install
to prevent market errors caused by unintended or erroneous trades. The
Compliance Order Filters are defined at the exchange’s discretion or by Valmon
at the exchange’s demand.
8. TYPES OF ORDERS
8.1 Given the risks that arise when trading in the volatile market, the client may
want to consider using different types of orders to limit risk and manage
investment strategies. (It should be noted that the following descriptions of order
types may apply only to some and not all types of financial instruments)
8.2 Market order: With a market order the client instructs a financial institution or
trading counterparty to execute a trade of a certain size as promptly as possible at
the prevailing market price. Brokers are required to execute market orders without
regard to price changes. Therefore, if the market price moves significantly during
the time it takes to fill a client’s order, the order will most likely be exposed to the
risk of execution at a price substantially different from the price when the order
was entered.
8.3 Limit order: With a limit order, the client sets the maximum purchase price, or
minimum sale price, at which the trade is to be executed. As a limit order may be
entered away from the current market price, it may not be executed immediately.
A client that leaves a limit order must be aware that he/she is giving up the certainty of immediate execution in exchange for the expectation of getting an improved
price in the future.
8.4 Stop order: Different from a limit order, a stop order allows selling below the
current market price or buying above the current market price if the stop price is
reached or breached. A stop order is therefore a “sleeping” order until the stop
price is reached or breached.
8.4.1 Trailing stop order: The trailing stop order is a stop order as described in
Section 8.4 but the trailing stop price moves according to parameters set by the
client. This way the trailing stop can be used to sell if the price drops more than a
specified distance from the highest price traded or to buy if the price trades above
a set level from the lowest traded price.
8.4.2 Stop Limit Order: A stop limit order is a variation of a stop order as described
in Section 8.4 with a lower (higher) limit price to suspend trading if the price falls
(rises) too far before the order is filled restricting trading to a predefined price
range.
8.4.3 Spread Filters: In order to ensure that the client’s Stop Orders is not filled at
unreliable prices during short termed periods with ab-normally wide bid/ask
spreads caused by for instance release of key economic figures Valmon has
implemented spread filters preventing order execution when spreads exceed
certain levels. Having the spread filters in place will in general benefit the client,
but can in rare instances be in the disfavor of the client.
Algorithmic order: An Algorithmic Order is an order executed by an automated
strategy according to specific parameters or conditions. Algorithmic Orders are
intended to minimize the market impact created from placing larger orders or
achieving a recognized trading benchmark such as VWAP etc. The orders can also
be used to follow a volume participation or in general to achieve a better overall
execution.
9. REGULAR REVIEW OF EXECUTION QUALITY AND OF EXECUTION VENUES
9.1 Valmon will review this policy annually and whenever a material change occurs
that affects Valmon’s ability to obtain the best possible result for the execution of
client orders.
9.2 Valmon regularly reviews the overall quality of its order executions and its order
routing practices, including its order routing vendors and the available exchanges.
Valmon will amend this policy on the basis of such reviews if it considers it to be
necessary. Any new policy will be made available on Valmon’s websites and will be
in force as from publication.