1. Purpose of the Policy
Under the Markets in Financial Instruments Directive II (MiFID), we are required to have in place an order execution policy and to take all sufficient steps to obtain the best possible result (best execution) on behalf of our Clients. This Order Execution Policy sets out the means by which we will meet our best execution obligations when executing orders for you. This policy does not impose any fiduciary responsibilities or duties over and above the specific regulatory obligations placed upon us or as may be otherwise contracted between us.
Our Order Execution Policy applies when we execute orders from Clients to trade in any of the Financial Instruments offered by us, which include (but are not limited to) Contract for difference on Currency pairs (Forex), Indices, Commodities, Futures, Shares, Fractions of Shares (a proportion of a share),cash settled Equities and Exchange Traded Funds.
Subject to any specific instructions that may be given by you, we will take all sufficient steps to obtain the best possible result for our Clients, taking into account the Execution Factors listed below. The application of best execution, where the Company engages with the Client on a request for quote basis, will depend on whether the Client “legitimately relies” on the Company to protect his or her interests in relation to the pricing and other elements of the transaction, such as speed or likelihood of execution and settlement, that may be affected by the choice made by the Company when executing the order. What constitutes best execution will vary with the circumstances of the order and the preferences of the client.
We will determine the relative importance of the Execution Factors by using our commercial judgment and experience in light of the market information available to us and taking into account the Execution Factors described below.
2. Execution Factors
The Execution factors that will be taken into account are: price; costs; speed; likelihood of execution and settlement; size; nature or any other consideration relevant to the execution of the order.
Price: For all financial instruments the Company offers, we quote two prices: the higher price (ASK), at which the Client can buy the instrument (go long), and the lower price (BID), at which the Client can sell it (go short). The Company’s price for all financial instruments is a reference to the price of the relevant underlying asset. The Company obtains the price from third-party external reference sources. The Company’s prices can be found on the Company’s trading platform. The prices are updated as frequently as the limitations of technology and communications links allow. The Company reviews its third-party external reference sources from day to day to ensure that the data obtained is still competitive. When the price reaches an order set by you, for example: Stop Loss, Take Profit, Trailing Stop, Market Order, Limit Order, these orders are executed immediately. However, under certain trading conditions there is a possibility that these orders (Stop loss, Take Profit, Trailing Stop, Market Order, Limit) cannot be executed at the Client's requested price. When this happens, the Company has the right to execute the order at the first available price. This may occur, for example, at times of rapid price fluctuations if the price rises or falls in one trading session to such an extent that, under the rules of the relevant exchange, trading is suspended or restricted. This may also occur during thin liquidity conditions, which may occur at the beginning or closing of a trading session. If a trade is executed outside of a regulated trading venue (e.g. for fractional shares) the order will be filled at no worse a price than that of the reference price on the reference exchange. The facility to trade fractional shares will only be offered in stocks with sufficient liquidity on this exchange to ensure that the bid/offer spread is comparable to or better than that of the primary listing exchange.
Costs: Our charges may be incorporated as a mark-up or mark-down (the difference between the price at which we take a principal position and the transaction execution price with you). The Company’s price quote in many markets already includes our spread and there will be no additional fees or commissions due from you. The Company may alternatively agree to charge a commission or a combination of commission and mark-up or mark-down. The Company’s charges are not taken into account in determining the best execution prices. The Client may be required to pay commission, the amount of which is disclosed on the Company's website. Commissions may be charged either in the form of a percentage of the overall value of the trade or as a fixed amount. For your open positions, the Company will credit or debit your account on a daily basis with an interest swap. For transparency of pricing, in executing Client orders Trading 212 UK Limited does not receive any remuneration, discount or non-monetary benefit for routing Client orders to a particular Trading or Execution Venue which would infringe any conflicts of interest or inducement requirements under MiFID II. However, and in cases where the Company receives such inducements, such amounts may be received, if and only if the inducement is designed to enhance the quality of the relevant service to the Client, and does not impair compliance with the Company’s duty to act honestly, fairly and professionally in accordance with the best interest of its Clients.
Speed of Execution: The Company places significant importance on the high speed of execution of Clients’ orders at all times, within the limitations of technology and communications links. The speed of execution can be affected by factors such as a poor Internet connection, or any other link to the Company’s servers and platform which may affect the execution of the Clients’ orders. Orders, executed off exchange, will be filled using proprietary software on Trading 212 Group’s servers. This, avoids transmitting the order to a third party for execution and will consequently be faster.
Likelihood of Execution: The Company places significant importance on this when executing Clients’ Orders. However, in some cases it may not be possible to execute an order, for example (but not limited to), the following cases: during news, at the start of trading sessions, in periods of high volatility, when prices may move significantly up or down and away from quoted prices, when there is rapid price movement, when there is insufficient liquidity for the execution of the specific volume at the quoted price. In such cases, the Company reserves the right to decline an order of any type or to offer Clients a new price for their orders. Orders filled outside of a regulated trading venue will only be routed if guaranteed to be executed, or if the size of trade is outside the parameters accepted by our executing broker. Settlement risk is higher than trading whole shares on exchange, but counterparty risk is part and parcel of fractional shares. Trading 212 UK conducts due diligence on its sister company annually, and has insight into their capital, as a fellow Group member. The Company is therefore well informed as to the possibility of default.
Likelihood of Settlement: Upon the execution of an order, the Company shall proceed to the immediate settlement of such an order.
Size of Order: The minimum size of an order for each Financial Instrument is published on our website. The Company reserves the right to change the margin requirements when the equity of an account is above a certain level, which is specified on our website.
Market Impact: Economic data and rumours can rapidly affect the price of the underlying instruments/products from which the Company’s quoted price is derived. The Company will take all sufficient steps to obtain the best possible result for its Clients.
For retail clients, the best possible result for you will be based upon the total consideration payable (excluding our charges), representing the price of the financial instrument and the costs related to the execution. If we don’t treat you as a retail client, we may determine that other execution factors are more important than price in obtaining the best possible execution result.
Our charges may be incorporated as a mark‐up or mark‐down (the difference between the price at which we take a principal position and the transaction execution price with you). Our price quote in many markets already includes our spread and there will be no additional fees or commissions due from you. We may alternatively agree to charge a commission or a combination of commission and mark‐up or mark‐down. Our charges are not taken into account in determining best execution prices.
3. Execution Criteria
The Execution Criteria that will be taken into account are the characteristics of:
- the Client (and the Client’s categorisation);
- the order;
- the Financial Instruments that are the subject of that order; and
- the Execution Venues to which that order can be directed.
For completeness, the company has chosen to offer best execution to all its client irrespective of whether they are Retail or Professional client.
4. Execution Venues
Execution Venues are the entities with which the orders are placed and executed. For the purpose of order execution for CFDs, the Company acts as principal. Therefore, the Company is the sole Execution Venue for the execution of all Clients’ orders. Moreover, when the Company executes Clients’ orders, it may in turn route its own orders to regulated third-party EU financial institutions. For the purpose of order execution for Equities, the Company has identified brokers that it relies on for best execution. Trading 212 UK Limited will always inform clients where the transaction has been executed as a part of its post-trade notification process. Trading 212 UK Limited is required to publish annually the top five execution venues that we use and the summary of the analysis of the quality of execution obtained on the execution venues.
Where the Company transmits an order it receives from a client for execution to another entity in the group or an external entity, such as a broker, the Company will continue to act in accordance with the client’s best interests by taking into account all relevant execution factors and criteria specified for best execution. The company will only transmit to brokers which have execution arrangements that enable the Company to satisfy its execution obligations to clients when transmitting orders.
Trading in fractional shares will be executed outside of a regulated market venue (as stated in Section 5), because of the specific nature of the instrument. The Company nonetheless ensures best execution criteria are met.The Firm will regularly consider the choice of brokers to ensure that the quality of execution allows the Company to comply with its order execution responsibilities.
In our due diligence assessment of execution venues we utilise, we will consider:
- Availability of best pricing for a specific Financial Instrument and liquidity of the Execution Venue or broker;
- Cost of clearing and settlement;
- Speed and likelihood of execution (e.g. fill rates);
- Reliability of the Execution Venue and broker in terms of reputation and good standing (e.g. creditworthiness, sanctions from regulators, etc.);
- Quality of execution and service, both historical and current, based on the review performed;
- Transparency of price formation process (pre-trade);
- Ability to provide transaction cost analysis;
- Continuity of trading;
- Technological infrastructure and capabilities of the Execution Venue and broker;
- Circuit breakers;
- Quality of any related clearing and settlement facilities;
- Access to alternative markets;
- Responsiveness to any requests/complaints and willingness to correct such errors;
- Financial solvency of the entity; and
- Any other relevant factor.
5. Trading outside of a Regulated Market or a Multilateral Trading Facility (MTF) or Organised Trading Facility (OTF)
Under the FCA and FSC rules, where an instrument is admitted to trading on a Regulated Market, MTF or OTF, we are required to obtain your prior express consent before we arrange for an order in such instruments to be executed at an alternative venue. By trading on our platform, you express your consent to us arranging for your orders to be executed outside a Regulated Market, MTF or OTF. Our Conflicts of Interest policy covers any issues that might arise in such a situation.
Orders executed outside a Regulated Market, MTF or OTF will conform to our Best Execution policy, and should not disadvantage clients. Execution of market orders is always instant and the likelihood will be close if not equal to 100%.
Trades executed off exchange will be filled at a price no worse than the prevailing best Bid / Offer on the reference exchange. Only the most heavily traded and liquid shares will be offered to ensure the market spread is competitive.
For transactions executed outside a Trading Venue, there are certain transparency requirements and specific information has to be made public. The information will be published via an Approved Publication Arrangement.
6. Specific Client instructions
Where you give us a specific instruction as to the execution of an order we will execute the order in accordance with those specific instructions. Where your instructions relate to only part of the order, we will continue to apply our Order Execution Policy to those aspects of the order not covered by your specific instructions.
You should be aware that providing specific instructions to us in relation to the execution of a particular order may prevent us from taking the steps set out in our Order Execution Policy to obtain the best possible result in respect of the elements covered by those instructions.
The Company will not aggregate a client order with another client order unless the following conditions are met:
- It is likely that the aggregation will not work to the overall disadvantage of any client whose order is to be aggregated;
- It has been disclosed to each client whose order is to be aggregated that the effect of aggregation may work to its disadvantage in relation to a particular order (as disclosed in the Firm’s Terms of Business); and
- the order will be aggregated in accordance with this Policy, which is designed to achieve a fair allocation of aggregated orders and transactions, including how the volume and price of orders determines allocations and the treatment of partial executions.
8. Allocation Policy
In accordance with the obligations under MiFID II, the Company will endeavour to provide Clients with prompt, fair and expeditious execution of Client orders placed with the Company, relative to other orders from its clients. In so doing, the Company:
- promptly and accurately records and allocates orders executed on behalf of Clients;
- carries out comparable Client orders sequentially and promptly unless the characteristics of the order or prevailing market conditions make this impracticable, or the interests of the Client require otherwise; and
- informs Retail Clients about any material difficulty relevant to the proper carrying out of orders promptly upon becoming aware of the difficulty.
We will monitor the effectiveness of our order execution arrangements and this Order Execution Policy to identify and, where appropriate, correct any deficiencies.
We will assess whether the execution venues included in this Order Execution Policy provide the best possible result for our clients or whether we need to make changes to our execution arrangements. We will review our order execution arrangements and this Order Execution Policy at least annually or whenever a material change occurs that affects our ability to obtain the best result for the execution of orders on a consistent basis using the venues included in this Order Execution Policy. For the purpose of this Policy, a material change shall be a significant event that could impact parameters of best execution such as, cost, price, speed, likelihood of execution and settlement, size, nature or any other consideration relevant to the execution of the order.
Such material changes will include, amongst others, consideration of the following:
- the addition or removal of Execution Venues or brokers;
- changes in products (financial instruments) or services offered by the Company;
- changes in the relative importance of best execution factors and criteria;
- material market impact;
- material change in the level of costs resulting from connection to a venue;
- development of significant new execution procedures or a change in the market model of an existing venue;
- major change to existing arrangements, such as a material change in the human or technical resources that the Company relies on to provide best execution;
- complaints in relation to a major issue noted by a Client (in such case, this would not necessarily trigger review of the entire Policy).
The Clients with whom the Company has an ongoing relationship, will be notified of any material changes or amendments to this Policy or order execution arrangements, which may be made from time to time. The latest version of the Policy will also be available on the Company’s website.
11. Fractional Shares
A fractional share is a term used to describe the purchase by an investor of a proportion of a share. An investor may accrue multiple fractions to own more than one share in aggregate. Trading Fractional Shares with Trading 212, therefore, encompasses fractions of a share and trading in low numbers -typically one or two- of shares.
Fractions of shares are not listed on an exchange. Similarly, single share orders in shares may often be prohibited by some execution venues, leading to uncertainty of execution. Orders in these small sizes may therefore be executed outside of a trading venue. Our Conflicts of Interest policy covers any issues that might arise in such a situation.
The orders will be executed at no worse a price than that of the reference price on the reference exchange – the exchange price feed used. The facility to trade fractional shares will only be offered in stocks with sufficient liquidity on this exchange to ensure that the bid/offer spread is comparable to or better than that of the primary listing exchange.
Orders will be filled using proprietary software on Trading 212 Group’s servers. Fractional Orders will be held throughout the day and aggregated at a set point each Business Day or as soon as reasonably practicable thereafter and processed in accordance with our Best execution policy. Orders received after the agreed aggregation point will be held until the aggregation point the following Business Day.
Given the factors above, the Board of Trading 212 UK Limited considers that it can offer Best Execution for fractional shares with this arrangement. It has been determined that the firm will receive orders faster than a venue outside Trading 212 Group’s architecture, thereby lessening the possibility of rejection for price movement. Price and counterparty risk are the predominant considerations which may result in a loss for a Client if the counterparty is not able to fulfil its contractual obligations and this will be monitored by the Compliance Officer to ensure client outcomes are the best the Firm can achieve. Trading 212 UK conducts due diligence on its sister company annually, and has insight into their capital, as a fellow Group member. The Firm will therefore be well informed as to the possibility of default risk.
Where Trading 212 UK Limited is executing Client orders with a connected party (e.g. entity within the same group) it will remain responsible for delivering best execution to its Clients. Trading 212 UK Limited ensures that any such arrangements with a connected party:
- are made on an arm’s-length basis, such that the connected party is considered alongside other third party venues and is selected because it allows the firm to deliver the best possible result to its Clients on a consistent basis;
- allow the Company to have sufficient, independent oversight of its execution arrangements (i.e. that oversight is not performed by the connected party);
- ensure sufficient and free access to information to ensure the Company can effectively monitor and challenge execution prices provided by the counterparty; and
- where a connected party is selected on the basis that it offers reduced execution costs, the Company will ensure that this would result in a benefit to the Client.
We are required to obtain your prior consent to our Order Execution Policy. You will be deemed to provide such prior consent when you give us an order.
13. Status of this Policy
This policy forms part of the Trading 212 UK Ltd. Client Agreement.
Execution Venue means a Regulated Market, an MTF, an OTF, a Systematic Internaliser, or a market maker or other liquidity provider or an entity that performs a similar function in a third country to the function performed by any of the foregoing.
Multilateral Trading Facility (MTF) means a multilateral system, operated by an investment firm or a market operator, which brings together multiple third-party buying and selling interests in Financial Instruments – in the system and in accordance with non-discretionary rules in a way that results in a contract in accordance with the provisions of MiFID II.
Regulated Market means a multilateral system operated and/or managed by a market operator which brings together or facilitates the bringing together of multiple third party buying and selling interests in Financial Instruments – in the system and in accordance with its non-discretionary rules – in a way that results in a contract, in respect of the Financial Instruments admitted to trading under its rules and/or systems, and which is authorised and functions regularly and in accordance with the provisions of MiFID II.
Systematic Internaliser means an investment firm which, on an organised, frequent and systematic basis, deals on own account by executing client orders outside a regulated market or an MTF.
Organised Trading Facility (OTF) means a multilateral system which is not a regulated market or an MTF and in which multiple third-party buying and selling interests in bonds, structured finance products, emissions allowances or derivatives are able to interact in the system in a way that results in a contract in accordance with the provisions of MIFID II.