MiFID II Execution Reports 2018
Kleinwort Hambros 2018 Annual Report about Execution
This report represents the annual publication of information on the identity of execution venues and on the quality of execution by SG Kleinwort Hambros Bank Limited and SG Kleinwort Hambros Bank (Gibraltar) Limited (together referred to as “Kleinwort Hambros”) for the calendar year 2018. Kleinwort Hambros is part of the wealth management arm of the Société Générale Group, Société Générale Private Banking.
Under the amended Markets in Financial Instruments Directive (“MiFID II”), investment firms are required to publish information about the top five execution venues for each class of financial instrument. Kleinwort Hambros operates a single execution policy for the UK and Gibraltar firms, and this commentary applies to both firms. Separate data tables are provided for SG Kleinwort Hambros Bank (Gibraltar) Limited and for the UK bank, SG Kleinwort Hambros Bank Limited. The UK bank data tables are split into two sections to provide greater transparency for clients, since different operational processes apply to the execution of orders a) for those clients to whom investment services were provided by SG Kleinwort Hambros Bank Limited immediately prior to 6 November 2017 (“SGKH Clients”) and b) for those clients whose services were provided by Kleinwort Benson Bank Limited prior to that date and which are now also provided by SG Kleinwort Hambros Bank Limited (“Kleinwort Benson Legacy Clients”).
For most classes of financial instrument, Kleinwort Hambros acts as an order transmitter for SGKH Client orders and places their orders for execution with Société Générale Bank & Trust (“SGBT”), which is an exchange member within the Société Générale Group and provides best execution services to Kleinwort Hambros. For Kleinwort Benson Legacy Clients, Kleinwort Hambros selects external exchange members/counterparties to execute client orders for most classes of financial instruments, as its systems are not linked to SGBT. Please refer to the Summary Information about Kleinwort Hambros’s Order Execution Policy for further detail.
The ‘best execution’ principle applies to all retail and professional clients, and Kleinwort Hambros operates a single order handling and execution policy for all its clients, whether retail or professional.
Summary arising from the monitoring of the quality of execution
Kleinwort Hambros has selected exchange members/counterparties that take all reasonable steps to obtain, when executing client orders, the best possible result taking into account the following factors, in order of priority:
- Total Cost – total cost means the price of the financial instrument plus the costs related to execution, including commissions, execution venue fees, clearing and settlements fees and any other fees paid to thirds parties involved in execution of the order. Kleinwort Hambros’ commissions are structured so as not to discriminate unfairly in the selection of potential exchange members/ counterparties;
- Speed – the greater the standardisation of the product and the more liquid the market, the faster the execution will be;
- The likelihood of execution and the size of the order – for non-standard transactions, particularly those that are significantly larger than are normally traded on the relevant regulated market; Kleinwort Hambros may employ an execution strategy for large orders;
- The likelihood of settlement – on some foreign exchanges, secure settlement may take priority in order to ensure the proper execution and settlement of the transaction.
Kleinwort Hambros has established procedures to analyse and monitor the quality of execution of client orders that are independent of the dealing desks. Kleinwort Hambros undertakes a regular sample monitoring of transactions to review the quality of execution obtained on the execution venues against the above factors. The order of importance of these factors is normally as above but may change under certain circumstances: Kleinwort Hambros may choose another order of priority from the above list according to market conditions, the type of order and in compliance with its obligation to obtain the best possible result for its clients. Kleinwort Hambros has not used any data published under 27(10)(a) or Article 65 of MiFID II.
As part of the monthly sample monitoring that Kleinwort Hambros conducted, there were no unjustified exceptions to the Execution Policy identified in 2018.
Kleinwort Hambros have no specific arrangements with any execution venues regarding payments that are made or received. This includes discounts, rebates or non-monetary benefits.
There were no changes to the exchange members/counterparties selected during the course of 2018. For Kleinwort Benson Legacy Clients, the use of a MTF for executing bonds as described in the Order Execution Policy only came into effect at the start of 2018, as the Bloomberg platform was not classified as a MTF before MiFID II.
Kleinwort Hambros has close links with SGBT, which provides best execution of SGKH Client orders which are transmitted to it, as noted above. Kleinwort Hambros pays a fee for this service which is not passed on to clients as broker commission. As detailed in the Order Execution Policy, in the context of transactions executed on a principal basis with clients (foreign exchange and OTC derivative transactions, for example), Kleinwort Hambros may act as the counterparty. Kleinwort Hambros will only use a single trading venue to execute client orders in a given class of financial instrument where we are able to demonstrate that such a choice enables us to consistently obtain best results for our clients (and that the prices obtained are better or no worse than the equivalent of the price we would obtain from alternative venues).
Below is a summary of the Brokers used for all client orders, this has been broken down into individual assets and then by client categorisation (retail and professional), as required by applicable regulations. As noted above, it is also broken down by legal entity and (for the UK bank) into SGKH Clients and Kleinwort Benson Legacy Clients due to the fact that client orders are executed by different channels for these two groups of clients.