Lead Capital Markets Limited (‘LCM’), is committed to treating our clients honestly, transacting with the Client in a professional and transparent manner, and to act in the Client’s best interests when buying or selling financial instruments on the Client’s behalf through the Client’s trading account.
More specifically, when we receive and transmit orders for the Client i.e. we buy or sell an instrument on the Client’s behalf through the Client’s Trading Account, we have a duty to provide the Client with ‘Best Execution’. Best Execution means that we must take all reasonable steps to obtain the best possible result for the Client when executing an order with the Client or on the Client’s behalf, considering various ‘Execution Criteria’.
This document provides a summary of our Best Execution Policy (the ‘Policy’) which applies to LCM’s execution of orders in all types of financial instruments on behalf of retail and professional clients. This policy is issued pursuant to, and in compliance with the EU Directive 2004/39/EC of 21 April 2004 on Markets in Financial Instruments (‘MiFID’) and all Cyprus legislation (the ‘Rules’) that apply to LCM.
This disclosure statement forms part of our terms of business. Therefore, by agreeing to the terms of the applicable Client Agreement, the Client are also providing consent to the terms of our Order Execution Policy, as summarised in this document.
This Policy applies to LCM execution of orders on behalf of retail clients and professional clients as defined by the Rules. Upon acceptance of a client order and when there is no specific client instruction regarding the execution method, LCM will execute an order in accordance with this Policy.
In our dealings with the Client, we have a general duty to act honestly, fairly and professionally, considering the Client best interest. In relation to order execution, LCM is required to take all reasonable steps to obtain the best possible result when executing client orders or when placing orders with, or transmitting orders to, other entities to execute. The definition of best possible result will vary and LCM must consider a range of execution factors and determine their relative importance based on the characteristics of its clients, the orders that we receive and the markets in which we operate. These factors are further described in this Policy.
3. Our Approach to Best Execution
3.1 When executing orders, LCM will take all reasonable steps to obtain the best possible result under the circumstances for the client considering price, costs, speed, likelihood of execution and settlement, size, nature or any other consideration relevant to the execution of the order.
3.2 When considering the best executing factors, LCM considers:
- the characteristics of the client order;
- the characteristics of the financial instruments that are subject to that order (in particular in relation to Over-the-Counter “OTC” financial instruments);
- the characteristics of the execution venues to which that order can be directed; and
- the prevailing level of liquidity at the time of execution.
3.3 When LCM executes orders on behalf of retail clients, Best Execution is determined on the basis of the total consideration paid by the client, unless the objective of execution of the order dictates otherwise. Total consideration is the price of the financial instrument and the costs related to execution, including all expenses incurred by the client which are directly related to the execution of the order such as venue execution fees, clearing and settlement fees and any other fees paid to third parties involved in the execution of the order.
Whenever there is a specific instruction from or on behalf of a client, LCM will to the extent possible execute the order in accordance with the specific instruction. A specific instruction from a client may prevent LCM 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 LCM from following certain client's instructions. To the extent that a client instruction is not complete, LCM will determine any non-specified components of the execution in accordance with this Policy.
3.4 LCM’s commitment to provide best execution does not mean that it owes the client any fiduciary or other responsibilities over and above the specific regulatory obligations placed upon LCM or as may be otherwise contracted between the client and LCM.
4. Elements of Best Execution
To determine the best way to execute an order for a client LCM takes into consideration the following matters:
4.1 Speed and Likelihood of the Execution: due to the levels of volatility affecting both price and volume, LCM seeks to provide client orders with the fastest execution reasonably possible, although delays may occur.
4.2 Price Improvement and Overall Consideration of Costs: when orders are routed to market makers where opportunities for price improvement exist. The criteria used by other market makers 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.
4.3 Size Improvement: In routing orders, LCM seeks markets that provide the greatest liquidity and thus potential for execution of large orders. LCM also seeks opportunities for client orders to benefit from order-size commitments offered by third parties.
4.4 Overall Execution Quality: When determining how and where to route or execute an order, LCM draws on extensive day-to-day experience with various markets, focusing on prompt, sequential, high quality and reliable execution.
4.5 If the Client are a Retail Client, the best possible result will be determined in terms of the total consideration, which is determined by the price of the Financial Instrument and the costs related to execution incurred by the Client. Speed, likelihood of execution and settlement, the size and nature of the order, market impact and any other considerations will be given precedence over the immediate price and cost consideration only insofar as they are instrumental in delivering the best possible result in terms of the total consideration to the Client.
4.6 If the Client are a Professional Client, price will ordinarily merit a high relative importance in obtaining the best possible result. However, in some circumstances, for some clients, Orders, Financial Instruments or markets, we may appropriately determine that other execution factors are more important than price in obtaining the best possible execution result.
5. Ranking of Execution Factors
5.1 The relative ranking of the different execution factors will be dependent upon, for example, the nature of the asset class traded, the liquidity of the relevant market and the time of the trade. This ranking reflects the nuances and differences between markets and exchanges, notably when looking at trading on exchange versus OTC products.
5.2 The ranking of execution factors is as follows:
- Expected impact of execution;
- Likelihood of execution and settlement;
- Size and nature of the order;
- Order size & type;
- Speed; and
- Other factors.
5.3 We have determined, that the order of importance of the execution factors is the same across all products and markets; therefore, for all retail clients the best possible result will be determined in terms of the total consideration, representing the price of the financial instrument and the costs related to execution.
In determining the importance given to the other factors (Speed, Likelihood of execution and settlement, the size and nature of the order) we will exercise our discretion in assessing the criteria that we need to consider to provide clients with the best result. The relative importance of these criteria will be judged in line with our commercial experience and regarding market conditions including the need for timely execution, availability of price improvement, the liquidity of the market and size of the Client’s order (which may make it difficult to execute an order) and the potential impact on total consideration. In certain circumstances, therefore, we may determine that the speed, and likelihood of execution and settlement for example may take precedence over immediate price and cost factors if they are instrumental in delivering the best possible result. This may be the case for example for large client orders or when a stop has been triggered.
5.4 In relation to Contracts for Differences we seek to ensure that the Client obtain best execution by ensuring that in the calculation of our bid/offer prices, we pay due regard to the market price for the underlying reference product to which the Client’s Contract for Difference relates to. We have access to a different data sources in order to ascertain the market price, which is our objective view of the bids and offers available in the market.
6. Execution Venues
6.1 We act as agent in respect of the Client’s orders, we assess the execution venues available to us and upon which we place significant reliance to obtain on a consistent basis the best possible result for the execution of the Client’s orders. These venues are subject to change as we see fit and shall include amongst others regulated markets, multilateral trading facilities, market makers and other liquidity providers.
Considerations in determining the execution venue for Client orders in respect of a particular financial instrument include:
- general prices available;
- depth of liquidity;
- relative volatility in the market;
- speed of execution;
- cost of execution;
- creditworthiness of the counterparty; and
- quality, cost and likelihood of clearing and settlement.
Factors might vary between the choices of venue. In some markets price volatility may mean that timeliness of execution is a priority. In other markets that have low liquidity, the fact of execution may itself constitute best execution. In other cases, our choice of venue may be limited because of the nature of the order. For example, when investment products are more illiquid, there may be little or no choice of venue.
In meeting its obligation to take all reasonable steps to obtain on a consistent basis the best possible result for the execution on your orders, LCM may use one or more of the following venue types when executing orders on your behalf:
- Regulated Markets;
- Other exchanges that are not Regulated Markets;
- Multilateral Trading Facilities (MTF);
Third party investment firms and or other affiliates acting as Market Maker or other liquidity providers; and or non EU entities performing similar functions.
We will regularly assess the execution venues available for any financial instruments that we trade to identify those that will enable us, consistently, to obtain the best possible results. We may add or remove execution venues from the list following such assessment. We will not notify you specifically of any changes to the list of execution venues but a current list is available on request and can be found below.
7. Monitoring & Review
We monitor the effectiveness of our order execution policy on an ongoing basis. We assess on a regular basis whether the price feeds and hedging venues relied on in pricing our products allow us to achieve best execution on a consistent basis or whether we need to make changes to our execution arrangements. We shall also review our order execution arrangements and order execution policies regularly whenever a material change occurs either in respect of one of our chosen pricing venues or otherwise that affects our ability to continue to achieve best execution. Should there be any material changes to our order execution arrangements or order execution policy, we will notify the Client of such change.
8. Client Consent
8.1 When establishing a business relationship with the Client we are required to obtain the Client’s prior consent to this Policy. We are also required to obtain the Client’s consent before we execute or transmit the Client’s orders for execution outside a regulated market or a Multilateral Trading Facility.