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Best Execution Policy
BEST EXECUTION POLICY
I. GENERAL
United Bulgarian Bank (hereinafter “The Bank”) takes all reasonable steps in order to obtain the best possible result for its clients, either when receiving and transmitting clients´ orders to third parties or when executing orders in financial instruments on behalf of clients.
The Bank has established the current policy which defines the principles of execution quality when receiving/ transmitting or executing orders on behalf of clients. The Bank monitors the implementation of the policy and evaluates its effectiveness on a systematic basis. The Bank ascertains with this policy, when required, that it takes all reasonable steps in order to achieve best execution orders.
This policy is applied, in compliance with the current regulatory requirements, at all transactions with clients categorized as “Retail” and “Professional”. The principles described in this policy do not apply to clients categorized as “Eligible Counterparties”.
This policy applies to all countries within the European Economic Area (EEA), where the Bank provides investment services in relation to one or more financial instruments as described in Appendix A.
II. BEST EXECUTION CRITERIA AND DEFINITIONS
Best Execution is a set of arrangements and procedures implemented by the Bank so as to ensure the best possible result for its clients, when receiving and transmitting to third parties or executing orders in financial instruments on behalf of its clients.
In order to achieve the best possible result for its clients the Bank takes into account the following factors:
- the price of the financial instrument;
- transaction costs related with the execution of order (commissions, arrangement and clearing relevant fees) which are applied to clients;
- the speed of execution that the Bank can achieve;
- the likelihood of execution completeness and settlement; and
- the size and nature of orders as well as any other consideration relevant to the execution of the order.\
III. EVALUATION CRITERIA OF BEST EXECUTION FACTORS
The importance of the above – mentioned factors differs depending on clients’ categorization or asset classes in scope and it’s assessed by considering the following criteria:
- The characteristics of the client, including client’s categorization as a “Retail” or “Professional”;
- The characteristics of the client’s order including:
- market or limit order; and
- size of the order and likely market impact of the order.
- The characteristics of the financial instruments that are the subject of that order:
- domestic/foreign shares;
- derivatives exchange traded/ Over the Counter traded;
- structured financial instruments; and
- liquid / illiquid;
- The characteristics of the execution venues to which that order can be directed:
- execution quality as well as ability to provide best results on an ongoing basis; and
- liquidity on the execution venue.
IV. EVALUATION OF BEST EXECUTION FACTORS
The relevant importance of each execution factor differs according to the above – mentioned criteria and is configured through the following criteria:
1. Client characteristics
1. A. Retail Clients:
The Bank considers as a very important factor the total consideration of order execution and defines the best possible result in terms of this factor which represents the price of the financial instrument and all fees related to the execution on each execution venue, including all transaction expenses directly related to the execution of order, such as execution venue fees, clearing and settlement fees and any other fees paid to third parties.
When a financial instrument is traded in more than one venue and each venue ensures the best result based on total consideration factor, the Bank takes into account the remaining execution factors apart from total consideration, in order to achieve the best possible result for its clients.
1. B. Professional Clients:
When dealing with Professional Clients the Bank considers as most important execution factors the price and relevant fees as well as the speed and completeness of the execution.
2. The characteristics of the order
The Bank takes into account the characteristics of orders, in order to define the relevant importance of the execution factors.
Large (compared with normal market size) scale transactions, that have high impact or exceed the available liquidity of the market, the likelihood of partial or total execution and settlement of an order constitute the most important factors.
3. The characteristics of the financial instrument
The Bank takes into account the type of the financial instrument, in order to define the relevant importance of the execution factors.
With respect to shares and listed securities traded on a regulated markets and where there is liquidity available on the market, as well as publicly available prices the Bank considers as most important execution factors the price and costs related with the execution of the order.
Regarding products traded outside regulated markets or Multilateral Trading Facilities (MTFs), (e.g. future contracts, options etc.) for which there are not publicly available prices on the market, the Bank considers the likelihood of execution and settlement of the transaction to be the most significant factors.
Regarding products developed by the Bank on clients’ behalf, and which incorporate unique characteristics (e.g. structured products) and for which it acts as counterparty, the Bank provides, on client’s request, information regarding the price construction.
Regarding products acquired by the Bank on clients behalf and for which the Bank acts as counterparty, the Bank provides, on client’s request, all relevant information available by the originator of the products.
4. The characteristics of the venues
The execution of an order may vary depending on the execution venues. The selection of an execution venue may affect the way an order is executed. Through this policy, the Bank defines the characteristics of the execution venues where the best possible result can be achieved on a continuous basis.
It is not anticipated that under normal market conditions the characteristics of the execution venues will affect significantly factors related with order execution.
V. RECEPTION/TRANSMISSION AND EXECUTION OF ORDERS
The Bank executes clients’ orders in accordance with the following arrangements:
- directly on regulated markets on which the Bank is member
- via third parties with whom the Bank has came into a written agreement;
- against its own Book, acting as an execution venue
- outside regulated market or Multilateral Trading Facility (MTF), acting as counterparty (Over the Counter).
When a financial instrument is admitted for trade only into one venue, the Bank considers that it meets the best execution obligation with respect to its clients, by routing the order to that venue.
When execution factors other than total consideration are considered to be most important with respect to a specific order, then this order is executed considering the underlying factor.
When the Bank transmits the orders for execution to third parties, including intermediaries within the Group, it takes all reasonable steps in order to ensure the best execution of clients’ orders.
To this extent, the Bank examines the best execution policy implemented by the third parties.
The Bank monitors on an on going basis the best execution policies of the third parties, and takes all reasonable steps so as to ensure that the selected third parties for the transmission of an order have in place and implement a formal execution policy of similar standards.
The Bank structures its commissions in such a way as to not discriminate unfairly among various execution venues or third parties.
VI. CLIENT INSTRUCTIONS FOR ORDER EXECUTION
In those cases where the client provides specific instructions in relation to the execution of an order, the Bank considers itself compliant with the obligation to take all reasonable steps in order to achieve the best possible result for the client, by executing the order or a part of the order in line with client’s specific instructions concerning the order or a particular part of it.
Where the Bank provides direct market access through an electronic interface, the client is responsible for achieving best execution, since the selection of the timing and price and other execution factors is not part of the service that the Bank provides to the client.
VII. MONITORING OF BEST EXECUTION POLICY
The Bank has established adequate controls and procedures to monitor the implementation of the best execution policy, when receiving/transmitting and executing clients’ orders, and identifies any deviations.
All Business Units of the Bank maintain the necessary records concerning clients’ transactions that document the execution approach.
The Bank reviews its best execution policy and its execution arrangements annually or more frequently, in case of material changes that might affect its ability to continue to obtain the best possible result for its clients on an ongoing basis.
VIII. TRANSACTIONS EXECUTED OUTSIDE A REGULATED MARKET OR A MULTILATERAL TRADING FACILITY (MTF)
In certain circumstances the Bank may execute a client’s order outside a Regulated Market or a MFT.
All Business Units involved in reception/transmission and execution of clients’ orders ensure that they have obtained an explicit written consent of the client before executing orders outside a Regulated Market or a Multilateral Trading Facility (MTF).
This Policy is approved by UBB Executive Directors on 26.09.2009 and approved by UBB BoD on 10.03.2010.
APPENDIX A – FINANCIAL INSTRUMENTS
The best execution policy, concerns only the following financial instruments:
- Transferable securities, i.e.:
- Shares in companies and other securities equivalent to shares in companies, partnership or other entities, and depositary receipts in respect of shares.
- Bonds or other forms of securitised debt, including depositary receipts in respect of such securities.
- Any other securities giving the right to acquire or sell any such transferable securities or giving rise to a cash settlement determined by reference to transferable securities, currencies, interest rates or yields, commodities or other indices or measures.
- Money market instruments;
- Units in collective investment undertakings;
- Options, futures, swaps, forward rate agreements and any other derivative contracts relating to securities, currencies, interest rates or yields, or other derivatives instruments, financial indices or financial measures
- Options, futures, swaps, forward rate agreements and any other derivative contracts relating to commodities that are settled in cash
- Options, futures, swaps, and any other derivative contract relating to commodities that can be physically settled provided that they are traded on a regulated market
- Derivative instruments for the transfer of credit risk;
- Financial contracts for differences; and
- Derivatives relating to climatic variables, freight rates, emission allowances or inflation rates or other official economic statistics that must be settled in cash or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event).
APPENDIX B: EXECUTION VENUES ON WHICH THE BANK PLACES SIGNIFICANT RELIANCE
1. For fixed income securities tradable on a regulated market, the Bank operates on the following venues and third parties:
Markets where the Bank has direct access as a member
- Bulgarian Stock Exchange - Sofia, Sofia
Other:
- Dealing against its own book
2. For shares admitted for trading on a regulated market:
Markets where the Bank has direct access as a member
- Bulgarian Stock Exchange - Sofia, Sofia
Other:
- Dealing against its own book
3. For derivatives traded outside regulated markets or MTFs (Over the Counter) the Bank conducts transactions acting as counterparty against the client.