COBS: Dealing and Managing

Question 1

who do best execution rules apply to

Answer 1

retail and professional clients

Question 2

what is the purpose of the best execution rule

Answer 2

a firm must take all sufficient steps to obtain the best possible result for its customers, taking into account the execution factors

Question 3

what are the four best execution criteria

Answer 3

customer categorisation
type of order
type of financial instrument being traded
characteristics of execution venues

Question 4

what is unique about the price execution factor for retail clients

Answer 4

must take into account the total consideration including:

price of financial instrument
costs related to execution, e.g. execution fees

Question 5

what do the best execution criteria show

Answer 5

will show the firms assessment of the relative importance of the execution factors

Question 6

who does the order execution policy apply to

Answer 6

retail and professional clients

Question 7

what is the purpose of the order execution policy

Answer 7

to ensure that a firm obtains the best possible result for the customer

Question 8

when is an order execution policy provided

Answer 8

before services

Question 9

what two things are prescribed information in an order execution policy

Answer 9

a list of execution venues
factors that will affect the firms choice of venues

Question 10

order execution policy is a what agreement

Answer 10

written two-way agreement

Question 11

how often myst order execution policy be reviewed

Answer 11

monitored and reviewed annually

Question 12

what must a firm notify customers for regarding the order execution policy

Answer 12

notify customers of any material changes

Question 13

what happens if a firm received specific customer instruction about order execution

Answer 13

firm must execute order as instructed even if alternative means of executing would give a better result

Question 14

a firm must be able to demonstrate on request that it has followed the order execution policy. true or false

Answer 14

true

Question 15

a firm can gain prior consent in a general agreement to execute trades outside of a regulated market or MTF, true or false

Answer 15

true

Question 16

a firm must monitor the effectiveness of order execution policy on a transaction by transaction basis, true or false

Answer 16

false, must be done regularly and policy as a whole reviewed annually

Question 17

the clients of the firm must consent to the order execution policy before the firm can deal for them, true of false

Answer 17

true

Question 18

to who do client order handling rules apply

Answer 18

retail and professional clients

Question 19

purpose of client order handling rule

Answer 19

prompt, fair and expeditious execution of customer orders

Question 20

in general, orders should be what regarding client order handling rule

Answer 20

promptly recorded and allocated
carried out sequentially

Question 21

exemptions to client order handling (i.e. when do you need to notify retail client)

Answer 21

interests of the customer
any material difficulty

Question 22

who does aggregation apply to

Answer 22

retail and professional customers

Question 23

when is aggregation permitted (2 reasons)

Answer 23

aggregation is unlikely to operate to the disadvantage of customers

disclose (oral or written) that on some occasions it may operate to the disadvantage of customers

Question 24

what policy is in place when aggregating orders

Answer 24

order allocation policy

Question 25

who does allocation apply to

Answer 25

retail and professional clients

Question 26

what are the two allocation rules

Answer 26

timely allocation - promptly and in accordance with the order allocation policy

fair allocation - allocate to customers first unless firm has reasonable grounds to allocate proportionally

Question 27

what would be considered reasonable grounds to allocate proportionally

Answer 27

if the firm has evidence to show the customer’s order materially benefited from the aggregation with the firms order

Question 28

who do limit order rules apply to

Answer 28

retail and professional clients

Question 29

what is the limit order rule

Answer 29

limit orders not executed immediately must be made public

Question 30

what are the two exceptions to the limit order rule

Answer 30

customer expressly instructs otherwise (i.e. dont make order public)

the limit order is greater than normal market size

Question 31

transmitting an order to a regulated market or MTF / OTF iis considered making the order public, true or false?

Answer 31

true