Quality of Execution Report 2019
A. An Overview
Brewin Dolphin (‘the firm’) as a MIFID Investment Firm has an obligation to take all sufficient steps to obtain the best possible result when transmitting, placing and executing orders on behalf of its clients on a consistent basis (‘Best Execution’). The firm has established an Order Execution Policy (‘the Policy’) that sets out the steps that the firm will take to achieve Best Execution for its clients. The Policy can be accessed on the following link on the firm’s website here.
Section 4 of the Policy sets out the Execution Factors and the relative importance of those factors the firm takes into account when assessing whether or not it has achieved Best Execution for its clients. In general, the firm assess Best Execution from a “total consideration” (price and relevant costs) perspective. However, there may be instances where other criteria, such as a specific client instruction, the type of order, the type of financial instrument and the execution venues available will also be considered in conjunction with those two criteria in order to obtain the best possible result.
Under MiFID II[1], the firm is required to publish annually, for each class of financial instrument, the top five execution venues in terms of trading volume together with a summary of the quality of execution obtained on those execution venues.
The purpose of this document is to provide our clients with sufficient information to effectively allow for comparison between different firms and also to enable comparison of performance over time.
For the aim of achieving Best Execution, the firm treats all clients (Retail and Professional) as Retail. This means that the firm undertakes to provide the highest protection to its clients regardless of client classification.
B. Monitoring Approach
The firm monitors its execution activities to ensure the effectiveness of its order execution arrangements. Those monitoring activities are set out below.
- Daily monitoring of transactions;
- Due diligence of counterparties;
- Annual review (or more frequent, if there is any material change) of the Policy and related client disclosures in respect of Best Execution;
- Annual assessment of the firm’s order execution arrangements.
To assist with the daily monitoring of transactions the firm uses an industry leading third-party vendor (LiquidMetrix), which is an independent provider of transaction cost and best execution analysis, to benchmark[2] the firm’s execution performance against the other available execution venues. The firm has set a tolerance versus the relevant benchmark for the trades it executes and any transaction that achieves a price that is outside the tolerance set, will be investigated.
Not all trades have a benchmark and this could be for various reasons including the lack of continuous trading or insufficient volume on a venue, for example.
Additionally, execution venues, market makers and systematic internalisers that the firm deals with are required to publish daily trading data on a quarterly basis. The firm sources this information from LiquidMetrix and analyses that data to ensure that venues are achieving best execution on a consistent basis.
There may be circumstances, when trading in foreign issuers for example, where we do not have direct access to the relevant market or where for larger trades we believe a better result could be achieved due to a third party having access to a wider selection of trading venues. In these instances, we will transmit the order to a third party for execution.
The results of the monitoring performed are presented to the Order Execution Policy Committee (OEPC), which meets on a monthly basis and is the governance forum that oversees the order execution arrangements of the firm.
C. Summary of the 2019 Monitoring results
All of the firm’s transactions during the period 1 January to 31 December 2019 have been monitored to ensure that Best Execution was achieved versus the relevant benchmark. Overall, 99.9993% of trades achieved Best Execution in 2019 compared to 99.9970% in 2018. All transactions that did not achieve best execution when compared to their benchmark have been reviewed and corrected in accordance with the firm’s procedures. The firm achieved higher results in 2019 mainly due to improvements in processes when executing trades.
D. Relationships with Counterparties and Venues
The firm does not have any close links, conflicts of interests or common ownerships with respect to any counterparties used to execute orders and the firm does not receive any payments or non-monetary benefits for directing trades to a specific venue. The firm does not permit arrangements with any execution venues/counterparties for payments made or received, discounts, rebates or any non‐monetary benefits received other than those allowed by the firm’s Gifts and Hospitality Policy.
In addition, the firm has policies and procedures in place to ensure that any potential conflict of interest is managed appropriately. During the period 1 January 2019 to 31 December 2019, nothing has come to the attention of the firm that would indicate the existence of any conflicts of interest pertaining to the firm’s counterparties/execution venues.
E. Execution Venues
To ensure the best possible coverage in the asset classes in which the firm transacts clients’ business, a comprehensive list of Execution Venues is maintained. This can be viewed alongside our Order Execution Policy. During 2019, there were limited changes to our Execution Venue list. The following counterparties were removed as one ceased trading in our required markets and the other after a review of the business transacted. There were no new counterparties added during the year. Please see details below and the list of Execution Venues here: Appendix A
The following counterparties have been removed:
| Counterparties Removed | Market and Asset Coverage |
|---|---|
| Convergex | Overseas – Equities |
| Fidante | London – UK Equities |
The number of trades that have been processed through the counterparties highlighted above, did not have an impact on the Top 5 execution venues reported in 2019.
[1] The Markets in Financial Instruments Directive (MiFID) II is a set of regulations which aims to improve the way firms comply with regulations in order to strengthen protection of investors.
[2] Benchmark means comparing the firm’s transactions, particularly the price achieved on each of the trades, against the prices that would have been achieved in other execution venues.