COBS: Dealing and Managing Flashcards
who do best execution rules apply to
retail and professional clients
what is the purpose of the best execution rule
a firm must take all sufficient steps to obtain the best possible result for its customers, taking into account the execution factors
what are the four best execution criteria
customer categorisation
type of order
type of financial instrument being traded
characteristics of execution venues
what is unique about the price execution factor for retail clients
must take into account the total consideration including:
price of financial instrument
costs related to execution, e.g. execution fees
what do the best execution criteria show
will show the firms assessment of the relative importance of the execution factors
who does the order execution policy apply to
retail and professional clients
what is the purpose of the order execution policy
to ensure that a firm obtains the best possible result for the customer
when is an order execution policy provided
before services
what two things are prescribed information in an order execution policy
a list of execution venues
factors that will affect the firms choice of venues
order execution policy is a what agreement
written two-way agreement
how often myst order execution policy be reviewed
monitored and reviewed annually
what must a firm notify customers for regarding the order execution policy
notify customers of any material changes
what happens if a firm received specific customer instruction about order execution
firm must execute order as instructed even if alternative means of executing would give a better result
a firm must be able to demonstrate on request that it has followed the order execution policy. true or false
true
a firm can gain prior consent in a general agreement to execute trades outside of a regulated market or MTF, true or false
true
a firm must monitor the effectiveness of order execution policy on a transaction by transaction basis, true or false
false, must be done regularly and policy as a whole reviewed annually
the clients of the firm must consent to the order execution policy before the firm can deal for them, true of false
true
to who do client order handling rules apply
retail and professional clients
purpose of client order handling rule
prompt, fair and expeditious execution of customer orders
in general, orders should be what regarding client order handling rule
promptly recorded and allocated
carried out sequentially
exemptions to client order handling (i.e. when do you need to notify retail client)
interests of the customer
any material difficulty
who does aggregation apply to
retail and professional customers
when is aggregation permitted (2 reasons)
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
what policy is in place when aggregating orders
order allocation policy
who does allocation apply to
retail and professional clients
what are the two allocation rules
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
what would be considered reasonable grounds to allocate proportionally
if the firm has evidence to show the customer’s order materially benefited from the aggregation with the firms order
who do limit order rules apply to
retail and professional clients
what is the limit order rule
limit orders not executed immediately must be made public
what are the two exceptions to the limit order rule
customer expressly instructs otherwise (i.e. dont make order public)
the limit order is greater than normal market size
transmitting an order to a regulated market or MTF / OTF iis considered making the order public, true or false?
true
