Citibank Europe plc Hungarian Branch Office BEST EXECUTION POLICY

Transcription

1 Citibank Europe plc Hungarian Branch Office BEST EXECUTION POLICY 20 May,

2 BEST EXECUTION POLICY This best execution policy (hereinafter: Best Execution Policy ) contains the general rules based on which CITIBANK EUROPE PLC HUNGARIAN BRANCH OFFICE (registered office: 1051 Budapest, Szabadság tér 7; court of registration and company registration number: Metropolitan Court acting as Company Registration Court, ) (hereinafter: Citibank or we ) acting for and on behalf of the Irish-registered CITIBANK EUROPE PLC (registered office: 1 North Wall Quay, Dublin 1; place and number of registration: Companies Registration Office, no ) ensures the implementation of the principle of best execution as required in accordance with Directive 2004/39/EC of the European Parliament and of the Council on markets in financial instruments (Markets in Financial Instruments Directive hereinafter: MiFID ) and Act CXXXVI on Investment Firms and Commodity Dealers, and on the Regulations Governing their Activities (hereinafter: Investment Services Act ). The Best Execution Policy is divided into the following seven sections: Effect and purpose Achieving best execution Compliance with client orders The execution venue Allocation rules Special terms Changes of business policy (revision of the best execution policy) Citibank follows this best execution policy in the course of providing its investment services. The guiding principles set out here are applicable to both consumer banking and corporate clients. The customer is entitled to request information any time about his/her transaction from Citibank, so regarding its execution also. Citibank executes the customer request. I. Effect and purpose What is the purpose of the Best Execution Policy? Citibank values its relationship with all its clients, yourself included, which is why in all cases it makes an effort to conduct fairly and consistently in dealings with all its clients. Beyond that, whenever acting on behalf of its clients, pursuant to the provisions of the MiFID and the Investment Services Act, Citibank must comply with the principles and business policy set forth in this Best Execution Policy relating to the best execution of orders. The purpose of the Best Execution Policy is to concisely and comprehensibly determine the rules on best execution. When submitting orders, you as a client, acknowledge and accept the Best Execution Policy. 2

3 When should the Best Execution Policy be applied? The Best Execution Policy must be applied with respect to orders given by you in relation to financial instruments that are subject to the MiFID regulations. This takes place when: we act on behalf of you as a client, and we agree on the achievement of the best market price or other condition. The Best Execution Policy is not applicable in the cases specified in the Investment Services Act. Such cases include when we conclude a transaction with you on our own account; when you as client transact with us on the basis of a publicly announced price or request for offers; when we follow your explicit instructions to execute the order in a certain way; if Citibank classifies you as an Eligible Counterparty on the basis of the MiFID requirements. (We will notify you in writing of your client classification.) The effect of MiFID extends to most financial instruments, except the following: spot FX transactions II. Achieving best execution What does best execution mean? In the interest of achieving best execution: we have drawn up this Best Execution Policy, which is intended to ensure achievement of the best execution outcome (taking into account all the relevant factors discussed below) in the case of all client orders relating to products that are subject to the MiFID regulations, and which are executed by Citibank for its clients. we are committed to complying with the Best Execution Policy. we annually review the Best Execution Policy and amend it where necessary. Demonstrating best execution does not necessarily involve a transaction-bytransaction analysis, but is more likely to entail the assessment of aggregated transaction data for a given period, to show that the best result was achieved when executing orders on behalf of the client at the venues and in the manner described in the Best Execution Policy. What factors are taken into account in order to achieve best execution? In the interest of achieving best execution we take numerous factors into account (unless we receive explicit instructions from you in respect of the factors below; see further down for more details). These are the following: likelihood of execution and performance (liquidity), size, price/exchange rate, cost, frequency, 3

4 nature of the financial instrument/transaction, type and characteristics of the financial instrument, characteristics of the possible execution venues, and all other factors that are relevant with respect to execution of the given order. Although in general price could be one of the most important factors, the overall value of a given transaction can also be strongly influenced by the other factors mentioned above. The relative importance of the individual named factors depends on the following: the characteristics of your order, the characteristics of the financial instrument to which your order relates, the characteristics of the execution venues (if there are more than one) where we can execute the order. What is Citibank s responsibility when it makes a commitment to achieve the best weighted price? Sometimes we act on your behalf by concluding an agreement relating to the achievement of the best weighted average price when executing the order. In this case we endeavour to execute a transaction, or a series of transactions, in the course of which we achieve the best or the best weighted average price overall, taking into consideration the volume of the order, the liquidity of the given product or products, the period of time that we have in which to execute the order, and the execution venues that are available during that period of time. When you submit an order to us, you acknowledge that there are several ways in which it may be executed, and unless you give us special instructions we will make our own assessment regarding which of these is the most favourable for you. Besides that, you accept that the outcome of the execution also depends on the nature and type of the order. What does Citibank commit to when accepting a limit order? Where limit orders are concerned, Citibank makes a commitment to attempt to buy the given financial instrument for a price that is equal to or less than, or to sell it for a price that is equal to or more than, the limit price specified by the client. Limit orders are valid for the period of time specified in the contract. What is Citibank s responsibility when your order is executed for it by a third party? In certain cases we may pass your order on to another Citibank entity or other third party (and possibly a broker) for execution. We may pass on orders to other members of the Citigroup if the Citigroup member with which you have a direct relationship is not capable of executing the order. In these cases, we have standard procedures and integrated systems available for the forwarding of the orders. If our affiliate is located outside the territory of the European Economic Area (the members state of the European Union as well as Iceland, Liechtenstein and Norway; hereinafter: EEA ) and there is no Citigroup member that can execute the order within the EEA, the non-eea service provider may not necessarily be obliged to comply with the principle of best execution under the MiFID regulations. Nevertheless, we will execute the order through it unless (i) the circumstances dictate otherwise, or (ii) you have given explicit instructions to do 4

5 otherwise, and following your instructions we are able to use an alternative execution venue. If we are unable to follow your instructions, we cannot accept the order. In certain cases we may also forward your order to another third party (broker) for execution. With respect to these cases, from time to time we conduct a review, taking all relevant factors into consideration, to determine whether these partners ensure the best execution for our clients. In a few cases we do this by reviewing the best execution policy of the given broker. What is Citibank s responsibility if it executes my order from its own books? In certain cases we may internalise your order, and thus it may be executed partially or fully from our own books (this is not the same as when, rather than taking an order from you, we conclude a sale and purchase contract with you for the sale or purchase on our own account, of the financial instrument that you wish to sell or buy. The Best Execution Policy does not, in any event, apply to transactions concluded on our own account.) For transactions relating to securities that are covered by the rules of MiFID on systematic internalisation, we shall apply these rules in the event of systematic internalisation. In all other cases we will treat our own book as an independent execution venue, in respect of which we shall apply our Best Execution Policy. In other words, a transaction will only be internalised if, taking into consideration the factors that are relevant with respect to selection of the execution venue, there are grounds for assuming that the internalisation of the order will result in the best execution. In what cases are client orders paired? In certain cases we may pair your order with an order given by another of our clients. We will only pair client orders in this way in cases where we receive an order from another client for a transaction, in the opposite direction, involving the same financial instrument. How is the Best Execution Policy applied in the case of structured and OTC transactions? When we execute structured transactions, such as futures, options or other derivative transactions in a regulated market or via a multilateral trading platform on your behalf, we apply the same guiding principles in the interest of achieving the most favourable outcome as we do when executing transactions with other financial instruments on your behalf at these same execution venues. If we execute a structured transaction in a non-regulated, over the counter (OTC) market on your behalf, then with respect to the pricing we have to rely on our own models, which conform to our own internal requirements. It may be the case, however, that when executing a structured transaction we are not acting on behalf of you as a client, but as a partner concluding a transaction with us on our own account. In the latter case the Best Execution Policy is not applied. 5

6 III. Compliance with client orders What happens if I give a specific instruction regarding how Citibank should execute my order? When we accept your instructions regarding the execution of the order, we will follow them insofar as it is possible for us. However, please bear in mind that if with regard to the execution of your order you have given an explicit instruction relating to any of the execution factors listed in Section II above, then this may prevent us from executing the order in the manner most favourable for you, since in respect of these factors the Best Execution Policy will not be applied. For example: if you give a specific instruction regarding the execution venue, we cannot take responsibility for the choice of the (most favourable) venue, if you designate a specific time or time period for execution of the order, we will attempt to execute the order for you, without regard to this factor, in the most favourable manner possible at the time or during the period designated by you; but we are not responsible for the timing or for any other consequences, relating to this or any other factor, that is due to the timing of the execution. IV. Selection of the execution venue What execution venues does Citibank use? MiFID defines the following as execution venues: regulated markets (stock exchanges) within the EEA, multilateral trading systems, market makers, systematic internalisers, or other persons or organisations established to ensure liquidity, or persons or organisations outside the EEA who perform a similar function. Unless agreed otherwise with you, we use a few regularly reviewed venues. Sometimes there is only one suitable venue, in which case we only use that one venue. If your order is to be executed at a venue where a Citigroup member holds a membership right, the order will be executed by the Citigroup member with a membership right in the given stock exchange or trading system. In such cases, if the entity performing the execution is not the same as the one of which you are a client, the executing party will act on behalf of the service provider of which you are a client, unless we agree otherwise with you. Citibank s Consumer Banking Division executes its client s orders at the following execution venues: Hungarian government bonds Foreign government bonds, corporate bonds* The execution of foreign government and corporate bonds usually takes place in the OTC (over the counter) market, where the service provider (UBS AG) executes the client order Citibank s own account UBS AG 6

7 at a venue assessed and selected on the basis of the best execution factors. If the best execution can be achieved in a regulated market, execution of the order will take place at this venue (SMART order routing principle). A regulated market is defined as a stock exchange registered either in the EU or outside the EU. Foreign-currency structured notes In the course of executing orders relating to foreign-currency structured bonds, Citibank deals directly with the issuer of the product in question, forwarding every order to the issuer by the end of the subscription period. The range of foreign-currency structured bonds for which Citibank accepts client orders is restricted to the primary market issuers. The Secondary Market's trading place of Structured Notes is Over the Counter (OTC). Mutual funds When executing orders relating to investment funds, Citibank deals directly with the fund manager of the investment fund in question. The orders are forwarded within the shortest possible time, taking into account the time of receipt of the client order, the bank working days and business hours, and the differences in time zone between the individual foreign markets. Citigroup Inc. BNP Arbitrage Issuance BV Credit Suisse AG Credit Suisse International Credit Agricole SA Royal Bank of Canada (London Branch) Societe Generale On the basis of the latest effective Prospectus of the investment fund concerned *The client may submit an order relating to foreign government and corporate bonds and shares at any Citibank branch, via the Citibank Online internet banking system, or via our telephone-based channel specified for this purpose. Citibank forwards the relevant client order without delay to the service provider, but when doing so, it takes into account the peculiarities of the channel used to submit the order, the bank working days and the deadlines for submitting the order. Furthermore, when executing the order, the service provider takes into account other factors including the working days and business/opening applicable to the execution venue, and the prevailing time difference. 7

8 Execution venues used by Citibank s Corporate Banking Division: Hungarian government bonds Foreign government bonds, corporate bonds Foreign currency derivatives Citibank s own account Budapest Stock Exchange Citibank s own account Citibank s own account If we execute your order through a broker, we regularly review the brokers engaged for the execution of orders, taking into account the factors that we describe below as decisive factors in the selection of the execution venue, in the interest of ensuring that the broker or brokers that we use ensure the most favourable execution, based on an assessment of all of the orders that have been executed during the period under review. When, in a particular case, it seems that a broker that we do not usually use can ensure a more favourable outcome, we will also use that broker on a one-off basis. However, we do not make a commitment to examine a wide range of brokers in the case of every single transaction. What factors does Citibank take into account when selecting the execution venue? The factors taken into account when selecting the execution venues of orders given by you in respect of specific financial instruments are as follows: the typically attainable price/exchange rate the depth of liquidity the relative volatility of the market the speed of performance the cost of performance the credibility of the venue s participants or the central participant the quality and cost of clearing and settlement What factors could differ between the individual execution venues? In some markets the volatility of prices could make the timing of execution a priority. In certain markets with low liquidity, however, the fact of the execution could in itself ensure achievement of the most favourable execution. In a few cases, the nature of your order or instructions could also narrow the range of possible execution venues. For example, if the liquidity of the given investment product decreases, the number of possible execution venues to choose from could be small (or even zero). How often does Citibank review its execution venues? The review of the possible execution venues takes place once a year. 8

9 On what basis does Citibank decide when a specific order can be executed at several venues? In certain cases, taking into consideration factors such as the cost and benefits of having access to multiple venues, we may have access to several venues that are suitable for execution of the given financial instrument. In this case, we based our decision on the factors to be taken into account when selecting the execution venue. V. Allocation rules How does Citibank proceed when combining client orders? We reserve the right, if the prevailing market circumstances or the interests of the client dictate, and where feasible, to combine the client orders with comparable orders sent to us by other clients in the same form, or with our orders executed on our own account at the same time. We only do this in cases where it is unlikely that the combining and/or allocation of orders will, overall, be detrimental to any client whose order is thus combined. It may be the case, however, that the combining of the orders has a negative impact on you in relation to a specific order. If the combining of orders only involved client orders and the orders were only partially executed, we perform allocation between the client s accounts on the basis of the chronological records in respect of clients of the Consumer Banking Division, and on the basis of proportionate distribution in respect of clients of the Corporate Banking Division. If we have combined your order with our own transactions but it has not been successful to execute the order in respect of the total combined amount, then we usually give priority to the transaction concluded on the basis of your order, over our own transaction. We may proceed differently, however, if your order would not have been executed at such favourable terms without being combined. In such cases we perform allocation to the client s account on the basis of proportionate distribution. VI. Special terms Citibank reserves the right, with respect to specified clients and services, to offer its services at terms that deviate from the general terms relating to the contract (especially: tenors, paid interest rates and costs), either on a permanent or temporary basis. The determination and amendment of these special terms is exclusively at Citibank s discretion. The client may not demand that Citibank provide it with a given service at terms that deviate from the general terms, nor may it demand that Citibank reimburse the client for the difference between the service provided at the general terms and any service provided at more favourable terms. VII. Revision of the Best Execution Policy How often is the Best Execution Policy reviewed? The review of the Best Execution Policy takes place regularly, taking into account the necessary changes and their timeliness, but at least once a year. 9

10 How can I obtain the latest version of the Best Execution Policy? The latest version of the Best Execution Policy is available via Citibank s website ( 10