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Order Execution Policy Summary Information

Summary Information about Kleinwort Hambros’ Order Execution Policy

  1. Introduction

This document summarises how ‘best execution’ is provided under relevant regulations by SG Kleinwort Hambros Bank Limited, SG Kleinwort Hambros Bank (Gibraltar) Limited and SG Kleinwort Hambros Bank (CI) Limited (together referred to as “Kleinwort Hambros”). Kleinwort Hambros is part of the wealth management arm of the Societe Generale Group, Societe Generale Private Banking.

SG Kleinwort Hambros Bank Limited and SG Kleinwort Hambros Bank (Gibraltar) Limited are required to take all sufficient steps to obtain the best possible results for clients when executing orders or when placing orders with other entities for execution. SG Kleinwort Hambros Bank (CI) Limited is required to take reasonable care to ascertain the price which is best available at the time for transactions of the kind and size concerned and then, unless circumstances require it to do otherwise in the client's interests, deal at a price no less advantageous to the client. Kleinwort Hambros operates a single policy, as summarised below, based on the UK and Gibraltar standards that also ensures that the Channel Islands standards are met. Since the UK and Gibraltar take into account the costs of dealing as well as the instrument’s price so as to obtain the best overall result for clients, there may be occasions where it is in a client’s best interests to deal at a less advantageous instrument price as the total cost is the same or lower. 

Best-execution obligations are applicable to all financial instruments but, as these instruments may differ substantially in terms of standardisation, liquidity and number of possible execution venues, the application of the best execution principle is adapted to each financial instrument and the type of transaction that the client proposes to effect.

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.

For each individual transaction, this obligation is to be considered as an obligation of means and not of outcome. Nevertheless, Kleinwort Hambros will, at the client’s reasonable and proportionate request, provide all necessary information showing that it has complied with its “best execution” obligation.

Further information about our policy or about the execution venues or entities where orders are transmitted or placed for execution are available upon reasonable request.

Specific Client Instructions

When clients give us a specific instruction as to the execution of an order we will execute the order in accordance with those specific instructions. When instructions relate to only part of the order, we will continue to apply our best execution policy to those aspects of the order not covered by specific instructions.

Warning:  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 execution policy to obtain the best possible result with respect of the elements covered by those instructions.

  1. Description of the order execution process

In order to satisfy its clients’ needs, Kleinwort Hambros offers a full range of services and executes orders involving a wide variety of financial instruments.

As a result, Kleinwort Hambros may act as:

  • an intermediary receiving and transmitting orders for execution by a third-party, including other entities in the Societe Generale Group
  • a direct counterparty in highly specific cases (forward currency transactions, swaps, and bespoke financial instruments etc).

As detailed in Kleinwort Hambros’ Terms of Business, instructions may be communicated to us between the hours of 9.00 a.m. and 5.00 p.m. on Business Days (i.e. days that are not a Saturday, Sunday or a public holiday in the country of the relevant office). Instructions received outside these hours will be deemed to have been received on the next Business Day and will be executed as soon as possible on the next Business Day.

2.1 Kleinwort Hambros as a receiver/transmitter of orders

Order execution terms may vary according to financial instruments and their specific characteristics, even when Kleinwort Hambros is acting simply as an intermediary.

As part of its “best execution” obligations towards its clients, Kleinwort Hambros transmits client orders swiftly and in order of arrival unless otherwise instructed by the client, or the nature of the order or market conditions make it impracticable to do so or the interests of the clients require a different course of action. Client orders may be aggregated with orders of other clients, but we will not combine them with Kleinwort Hambros’ own orders. We will only combine your orders with those of other clients where it is unlikely that the aggregation will work overall to the disadvantage of any client. In individual cases, aggregation may result in you obtaining a less favourable price in relation to a particular order.

Kleinwort Hambros will act with due competence, care and diligence in selecting and appointing the exchange members/counterparties that will execute the transactions. In particular, it will assess the market expertise and reputation of the exchange member/counterparty in question, be it internal or external to the Societe Generale  Group, as well as their capacity to ensure the best execution of transmitted orders. Kleinwort Hambros sets a minimum standard of credit risk for any trading counterparty that may be used and has daily monitoring by counterparty of failed settlements.  

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 settlement fees and any other fees paid to third parties involved in the 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 as detailed in section 3.1 below. In this specific case, the client order may not be executed as if it were in the order book of the relevant exchange;
  • 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 reserves the right to cease transmitting or executing client orders or have them executed on any market or execution venue or by any exchange member/counterparty presenting recurring problems with settlement and delivery;

This order of priority 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. Indeed, total cost is not necessarily the most important factor. In some cases, the likelihood of execution is the key factor in the processing of the order, as in the case of a security that is listed on a regulated exchange but is mostly traded over the counter.

Where we place reliance on brokers to execute transactions, we will take reasonable steps to ensure that the dealing arrangements of the brokers we use are sufficient to provide appropriate execution quality, having regard to our execution policy. Kleinwort Hambros places significant reliance for execution on Societe Generale Bank & Trust (“SGBT”), which is an exchange member within the Societe Generale Group.

Where Kleinwort Hambros transmits orders to other investment firms for execution, Kleinwort Hambros does not publish a list of execution venues on which it places significant reliance, as it does not itself select the execution venues. However, we will summarise and make public on an annual basis for each class of financial instrument, the top five investment firms (brokers) in terms of trading volumes where we transmitted or placed client orders.

2.2 Kleinwort Hambros executing client orders as agent

Kleinwort Hambros may execute some client orders itself, acting as agent, on execution venues such as Multilateral Trading Facilities (MTFs) or Over-the-Counter (OTC). This is relevant to bonds (debt securities) in particular. When executing orders as agent, Kleinwort Hambros undertakes to take all sufficient steps to deliver the best possible result for the client based on the same criteria as set out in section 2.1 above.

2.3 Kleinwort Hambros trading as principal to execute client orders

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 of the order received from its client. Where we act as counterparty, this will be disclosed in contract notes or portfolio valuations.

When executing orders, Kleinwort Hambros undertakes to take all sufficient steps to deliver the best possible result for the client based on the following criteria:

  • Price of the financial instrument – Kleinwort Hambros undertakes to provide a fair price, taking into account precise market parameters and market conditions prevailing at the time the order is transmitted.;
  • Speed of execution;
  • The likelihood of execution and the size of the order.

The execution of transactions within this context is also subject to the considerations detailed in section 4 below.

  1. Application of the execution policy to different classes of financial instrument

3.1 Kleinwort Hambros clients (as at 5 November 2017 or new after that date)

This section applies to clients of SG Kleinwort Hambros Bank (Gibraltar) Limited and clients to whom investment services were provided by SG Kleinwort Hambros Bank Limited or SG Kleinwort Hambros Bank (CI) Limited immediately prior to 6 November 2017 (the “Effective Date”) and which following the Effective Date continue to be provided by that firm, or which opened a new account  with Kleinwort Hambros after that date.

  • Listed equities and similar instruments

Kleinwort Hambros will act as an order transmitter, and appoint SGBT’s dealing team to obtain best execution. 

SGBT’s preferred execution venues for listed equities and similar instruments are the regulated markets or an MTF, based on the principle of the most liquid exchange. In the case of orders to sell equities, the execution venue shall, for reasons linked to the cost of execution, be determined mainly by the place in which the securities in question are deposited.

  • Collective Investment Schemes / UCITS

Kleinwort Hambros will normally act as an order transmitter, and appoint SGBT’s Global Fund Trading unit to obtain best execution, but in some cases Kleinwort Hambros will itself execute the order as agent directly with the fund manager. 

SGBT’s preferred execution venues for Collective Investment Undertakings are the relevant fund managers or their respective distribution channels. The rapidity of execution of such orders is dependent on the calculation of the NAV as provided for in the prospectus. SGBT reserves the right to use the regulated markets or an MTF for any limit order concerning a Collective Investment Undertaking.

Orders concerning  the subscription, redemption or conversion of units of collective investment undertakings executed on behalf of Kleinwort Hambros clients directly with the fund manager or indirectly via a clearing agency shall be deemed to satisfy best execution criteria.

  • Bonds (Debt Securities)

Kleinwort Hambros will act as an order transmitter, and appoint SGBT to obtain best execution. 

SGBT’s preferred execution venues for bonds are MTFs, systematic internalisers or equivalent  non-EEA venues. However, SGBT reserves the right to execute bond orders Over-the-Counter (OTC) provided that does not constitute a disadvantage to the client. The execution of bond orders may depend on the liquidity of the market.

  • Exchange Traded Funds (ETFs)

Kleinwort Hambros will act as an order transmitter, and appoint SGBT to obtain best execution. 

The execution of an order for a vehicle such as an ETF or for similar instruments may be subject to market liquidity. Accordingly, SGBT can execute client orders either in a regulated market or via an MTF platform (or an equivalent non-EEA venue), while applying the equity orders execution policy described above, or it can execute client orders with a systematic internaliser, provided it does not put the client at a disadvantage.

  • Structured Products

Structured products are executed on an OTC basis with the product provider concerned, rather than on a centralised market exchange. Your attention is drawn to the risks related to OTC transactions which is summarised in Section 4.

The best execution principle has to be adapted to each financial instrument. Best execution requirements may be more complex to achieve for orders relating to structured products and non-listed financial instruments in general.

For structured products issued through Kleinwort Hambros’ structured products desk, we transmit client orders to SGBT or Societe Generale SA for execution. For primary issuance, they will instigate a tender process which will consider terms, price and credit rating of the issuer and, where possible, by comparing with similar or comparable products. For secondary market transactions the fairness of the price is checked by reviewing market data to compare the price proposed by the issuer.

Other structured products (not issued through Kleinwort Hambros’ structured products desk) may be executed for clients upon their request directly with the issuer or product provider concerned, but in such cases there is a single price quoted and (except where Kleinwort Hambros is acting as discretionary portfolio manager) the client is solely responsible for accepting the terms offered by the product provider and we cannot accept these terms on your behalf.

  • Exchange traded Derivatives

Kleinwort Hambros will act as an order transmitter, and appoint SGBT to obtain best execution. 

Total consideration and speed of execution will normally be the primary factors considered in achieving the best overall result for the client.

  • Over the Counter (OTC) Derivatives

Kleinwort Hambros will act as an order transmitter, and appoint SGBT to obtain best execution in relation to OTC derivatives (other than Foreign Exchange (FX) products)

Total consideration will normally be the primary factors considered in delivering best execution for OTC derivatives. However there will be occasions when the nature of the transaction is so complex and/or proprietary that, taking into account the whole nature of the transaction, Kleinwort Hambros believes that it would be appropriate to involve only one or two counterparties.

In normal circumstances our execution will be outside of a regulated market or MTF, which clients have expressly consented to in our Terms of Business. Section 4 below details the main consequences of dealing outside of a trading venue.

  • Foreign Exchange (FX) Products

Kleinwort Hambros will act as principal when executing Foreign Exchange (FX) products.  For FX Forwards and other FX derivatives, the total consideration, representing the price of the product and the costs related to execution, will normally be the primary factor considered in delivering best execution. We review market data used in the estimation of the price of such products and, where possible, compare with similar or comparable products to ensure best execution. However where the order is of such a size or nature that the Dealing Department believes that its immediate execution would lead to a poorer total consideration for the client due to market impact and in the absence of other instructions from the client, then the Dealing Department will use their discretion to seek to manage the order in such a way as to deliver the best total consideration for the client. The speed of execution will then be a lesser factor in the execution decision. This may require us to execute orders over the course of a day, or a number of days. As spot FX is not an investment, it is out of scope of this execution policy, however, we will disclose the margin applied.

In normal circumstances our execution will be outside of a regulated market or MTF, which clients have expressly consented to in our Terms of Business. Section 4 below details the main consequences of dealing outside of a trading venue.

3.2 Kleinwort Benson Legacy clients

This section applies to clients to whom investment services were provided by Kleinwort Benson Bank Limited, Kleinwort Benson (Channel Islands) Ltd. or Kleinwort Benson (Channel Islands) Investment Management Ltd immediately prior to 6 November 2017 (the “Effective Date”) and which following the Effective Date are now provided by SG Kleinwort Hambros Bank Limited or SG Kleinwort Hambros Bank (CI) Limited.

  • UK Equities including UK listed Exchange Traded Funds and Investment Trusts

For the majority of orders our in house dealing team will identify the best available terms by comparing the prices offered by those brokers on our approved counterparty list either directly or through the Retail Service Provider (RSP) network.

For large or illiquid orders we may transmit orders to one of our approved brokers and request that they work an order on our behalf. Commission may be payable to our approved brokers, although some trades, such as investment trusts, may not be subject to commission.  Execution of UK equity orders may occur on an MTF or with a systematic internaliser (i.e. directly with another market participant and not via an exchange).

The total consideration, representing the price of the financial instrument and the costs related to execution, will normally be the primary factor considered in delivering best execution. However where the order is of such a size or nature that the Dealing Department believes that its immediate execution would lead to a poorer total consideration for the client due to market impact and in the absence of other instructions from the client, then the Dealing Department will use their discretion to seek to manage the order in such a way as to deliver the best total consideration for the client. The speed of execution will then be a lesser factor in the execution decision. This may require us to execute orders over the course of a day, or a number of days.

  • International Equities

Kleinwort Hambros will transmit orders to a broker on our approved counterparty list to seek best execution in the appropriate international market. Commissions are payable and within each market, e.g. US, France, Japan, Hong Kong, a similar rate of commission will be paid. Total consideration will normally be the primary factor considered in achieving the best overall result for the client.

Where the order is of such a size or nature that the Dealing Department believes that its immediate execution would lead to a poorer total consideration for the client due to market impact and in the absence of other instructions from the client, then the Dealing Department will use their discretion to seek to manage the order in such a way as to deliver the best total consideration for the client. The speed of execution will then be a lesser factor in the execution decision. This may require us to execute orders over the course of a day, or a number of days.

  • Collective Investment Schemes / UCITS

Kleinwort Hambros executes orders in collective investment schemes / UCITS with the fund manager either directly or via their respective agent or a clearing agency, such as Clearstream. The speed of execution of such orders is dependent on the dealing points, cut off times and calculation of the NAV and as provided for in the prospectus.

Orders concerning  the subscription, redemption or conversion of units of collective investment undertakings that we execute on behalf of clients directly or indirectly with the fund manager shall be deemed to satisfy best execution criteria.

  • Bonds (Debt Securities)

Kleinwort Hambros will seek to obtain a quote from at least three Approved Counterparties and will normally use the Bloomberg MTF to execute client orders. When selecting which quote to accept total consideration will normally be the primary factor considered in delivering best execution. There may be occasions when we are unable to obtain three quotes and therefore have to deal on a single price.

  • Structured Products, Exchange Traded Derivatives, OTC Derivatives and FX Products

Client orders in these products follow the same order execution process respectively as set out in sections 3.1.5, 3.1.6, 3.17 and 3.1.8 above.

  1. Execution of orders outside of a trading venue

As noted above in relation to bonds, OTC derivatives, structured products and FX products, client orders may be executed outside a trading venue where we believe this will obtain the best possible result for the client. In such cases, the transaction does not benefit from any clearing mechanism and the client is exposed to the credit risk of the counterparty selected for the transaction. If the counterparty becomes insolvent between the time of execution and of settlement, the client will not have the benefit of any protections provided by an exchange or central clearing system, and may suffer a loss of the entire value of the transaction. Such loss may not be covered by the UK Financial Services Compensation Scheme nor the Gibraltar Investor Compensation Scheme. Additional information about the consequences of executing outside a trading venue are available upon request.

  1. Monitoring of execution quality

Kleinwort Hambros has established procedures to analyse and monitor the quality of execution of client orders that are independent of the dealing desks. The Operations and Risk Management undertakes regular sample monitoring of transactions to monitor the effectiveness of its order execution policy and correct any deficiencies identified. This includes reviewing the price obtained, the total cost, the timeliness of execution and the market impact, as appropriate for the instrument concerned. The performance, dealing costs and credit standing of brokers used by Kleinwort Hambros are regularly assessed. The results of these monitoring activities are periodically reviewed in accordance with Kleinwort Hambros’ governance arrangements.

Kleinwort Hambros reviews its Order Execution Policy at least annually. This includes assessing whether the execution venues and/or brokers used by Kleinwort Hambros provide the best possible results for clients, taking account of published data, or whether changes to Kleinwort Hambros’ execution arrangements are required. A review is also carried out whenever a material change occurs that affects Kleinwort Hambros’ ability to continue to obtain the best possible results for clients. Clients will be notified of any material changes to the Execution Policy b<input class="c-inputButton" title="Save document" name="_savedok" src="https://webadmin.societegenerale.com/typo3/clear.gif" type="image" />y means of updates on our website at: www.kleinworthambros.com/en/important-information/order-execution-policy-summary-information.

From 30 April 2018, the most recent execution quality data, including top five execution venues/brokers, published by Kleinwort Hambros in accordance with applicable regulations is also available at: www.kleinworthambros.com/en/important-information/order-execution-policy-summary-information.