Section 7

Question 1

What is the purpose of best execution?

Answer 1

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

Question 2

Best execution - Execution factors (4)

Answer 2

Price, costs, speed, likelihood of execution and settlement or any other consideration

Question 3

Best execution - Best execution criteria (4)

Answer 3

• Client categorisation
• Type of order
• Type of financial instrument being traded
• Characteristics of execution venues

Question 4

What is the purpose of order execution policy?

Answer 4

To ensure that a firm obtains the best possible result for the client.
To be provided before providing services.

Question 5

Order execution policy - Prescribed information for retail clients

Answer 5

• A list of execution venues. On an annual basis, a report is required for the client by the firm on the top 5 execution venues where it has executed client orders.
• Factors that will affect the firm’s choice of venues

Question 6

Order execution policy - Written two-way agreement (all clients)

Answer 6

Monitored and reviewed annually

Notify clients of any material changes

Question 7

Order execution policy - Specific client instructions

Answer 7

When acting on specific client instructions a firm is deemed to have obtained ‘the best possible result’.

Question 8

What is the purpose of client order handling?

Answer 8

Prompt, fair, expeditious execution of client orders.

Question 9

Client order handling - orders should be:

Answer 9

• Promptly recorded and allocated
• Carried out sequentially
  Exceptions:
• Interests of client
• Material difficulty

Question 10

Client order handling - orders should be:

Answer 10

• Promptly recorded and allocated
• Carried out sequentially
  Exceptions:
• Interests of client
• Material difficulty

Question 11

Aggregation is permitted if:

Answer 11

• Aggregation is unlikely to operate to the disadvantage of clients
• Disclose (oral or written) that on some occasions it may operate to the disadvantage
  of clients
  Order allocation policy is in place

Question 12

Allocation must:

Answer 12

• Be prompt and in accordance with the order allocation policy
• Allocate to clients first
  Unless the firm has reasonable grounds to allocate proportionally.

Question 13

Limit orders not executed immediately must be made public unless:

Answer 13

• Client expressly instructs otherwise

- The limit order is greater than normal market size