Terms of Reference:
“Best Execution” means obtaining the most advantageous execution terms for a client order reasonably available under the circumstances.
“Best Execution Committee” is composed of the Head Trader and a senior representative of the Compliance Department (normally the CCO), and other trading or compliance representatives as needed depending on the matters under consideration.
1. Purpose and Obligation
“Best Execution” as defined in IIROC Rule 3300 and National Instrument 23-101 means obtaining the most advantageous execution terms for a client order reasonably available under the circumstances. ATB Capital Markets (ATBCM) is required to establish, maintain and ensure compliance with written policies and procedures reasonably designed to achieve best execution for clients.
2. Hours of Operation for Trading in Canadian Listed Securities
ATBCM trading staff will be available for order entry and execution between 9:30 a.m. ET and 4:00 p.m. ET (“Hours of Operation”), Monday through Friday, not including statutory holidays. Staff may be available outside the Hours of Operation, however, order taking and/or trade execution will be treated on a best-efforts basis.
An order received prior to the opening (9:30 a.m.) will be booked on the principal marketplace (TSX/V/CSE/NEO) for execution at the opening. At the specific client request, orders received during this time may be routed for execution to a marketplace that is open.
Post Market Open
Order received during Hours of Operation will be routed using the smart order router which will direct the order to the best available market at the time of receipt of the order. The best market is the market that displays the best bid price and best offer price, offering the best liquidity, and where the smart order router (SOR) has reasonably determined that the order has the best likelihood of execution.
An order resting on an alternative marketplace may be routed by ATBCM traders to the primary marketplace if they determine that such action will increase the likelihood of obtaining an execution.
After the Close – 4 p.m.
An order received after the close may be held in queue and entered the next business day in the preopening session on the principal marketplace, or may be entered on a marketplace that offers after-hours trading, according to client instructions.
3. Best Execution Practices
When executing orders in listed securities, ATBCM must:
- Disclose the order handling and order routing practices intended to achieve best execution
- Take into account order and trade information from all appropriate marketplaces
- Provide a reason for accessing or not a particular marketplace
- Identify circumstances when a trader will move an order entered on one
marketplace to another marketplace
4. Best Execution Factors Considered
ATBCM’s Best Execution policy aims to achieve the best outcome for the client. The following broad factors are considered for the purpose of achieving best execution for all client orders:
- Speed of execution
- Certainty or likelihood of execution
- Price improvement
- The overall cost of the transaction, when these costs are passed onto the client
- All types of secondary trading
The following specific considerations play an important role in achieving best execution:
- Reliability of quotes
- Routing strategies
- Market impact
- Opportunity – the missed opportunity when the order is not completed at the most advantageous time
- Considerations when not all marketplaces are open and available for trading
- Taking into account order and trade information from all appropriate marketplaces including unprotected marketplaces and foreign organized regulated markets (FORMs)
- Factors related to executing trades on unprotected marketplaces to ensure that we are not missing opportunities for price improvement
- Factors related to sending orders to a foreign intermediary for execution
- Circumstances that may warrant moving an order to another marketplace
ATBCM is also required to address the following ‘prevailing market conditions’ when manually handling a client order:
- The size of the order
- The direction of the market
- The market depth
- The last sale price and prices and volumes of previous trades
- The size of the spread
- The liquidity of the security
5. Specific Client Instructions and Client Preferences
Where our clients provide specific instructions, such as withholding an order from market until conditions are more favourable, using an algorithmic program to achieve VWAP, TWAP, percentage of volume, or any other special instructions, ATBCM will consider such instructions provided they do not contravene “regulatory requirements” as defined by UMIR. Further, best execution of a client order for any listed security is subject to compliance with Order Protection Rule (see below).
6. Prohibited Practices in Execution of Client Orders
ATBCM will not:
- Send client orders in listed securities in bulk to a foreign intermediary for execution outside of Canada, without taking into account the Canadian best bid or offer, if available.
- Purchase over-the-counter securities for its own account from a client or sell over-the-counter securities for its own account to a client except at an aggregate price (including mark-ups or mark-downs) that is fair and reasonable, without taking into consideration all relevant factors, including the fair market value of the securities at the time of the transaction, the expense involved in effecting the transactions, the fact that ATBCM is entitled to a profit and the total value of the transaction
- Purchase or sell over-the-counter securities as agent for a client for a commission in excess of a fair and reasonable amount, without taking into account relevant factors, including expense of execution, the value of the services rendered by ATBCM, and the amount of any other compensation received by ATBCM in connection with the transaction
7. Training Obligations
ATBCM will ensure that all employees involved in the execution of client orders know and understand the application of ATBCM’s written best execution policies and procedures.
8. Best Execution and the Order Protection Rule
Regardless of client instructions or consent, all client orders are subject to the Order Protection Rule which prohibits trading through any visible order on any Canadian protected marketplace, as shown in National Best Bid and Offer (NBBO) order book. Protected orders and marketplaces are as defined in National Instrument 23-101: Trading Rules.*** The OSC maintains the list of marketplaces, both protected and unprotected: https://www.osc.ca/en/industry/market-regulation/marketplaces
9. Review of Best Execution Policies and Procedures
ATBCM will maintain well-documented Best Execution Policies & Procedures. The Best Execution Committee will review such policies at least annually, or whenever there is any material change to smart order routing technology, a change in liquidity patterns, or a change in the Canadian trading environment, such as the entry of a new marketplace, or the closing of a current marketplace, a significant change in any of the marketplaces’ rules or introduction of new regulatory markers.
The compliance representative will document any changes in methodology or policy and retain evidence of such meetings. The compliance representative will also be responsible for updating the ATBCM website disclosures, and maintain evidence of such disclosure changes.
ATBCM will regularly test (sample) trade tickets for Best Execution to demonstrate that our Policies and Procedures are reasonably achieving the goals set out in our Best Execution Policy.
ATBCM will also review quarterly trading statistics published by IIROC on marketplace volumes and value traded, as well as other data available to us on order completion rate, best prices, and best liquidity values, and a survey of all of our traders to determine if we need to amend our Smart Order Router (SOR) market ranking as determined by our Best Execution Order Committee.
ATBCM uses foreign intermediaries (StoneX, GLP, Clearpool) which access FORMs in order to execute orders in foreign exchange traded securities.
Intermediaries may also be used for execution of orders for dually-listed securities, or for execution of certain algorithmic strategies.These intermediaries have their own Best Price Execution Policies & Procedures, and ATBCM can provide copies of each intermediary's policies and procedures on client request.
When deciding to route dually-listed securities to foreign organized regulated markets, factors such as demonstrated likelihood of liquidity/volume for the security, potential exposure to settlement risk, exposure to fluctuations in foreign currency exchange may be considered.
11. Fees, Payments and Commissions
ATBCM does not have any ownership interest in any Canadian or foreign stock exchange or marketplace
ATBCM may pay marketplace trading fees or receive marketplace rebates when routing client orders. The fee schedule is available on the website of each marketplace. Neither the costs nor the rebates are passed on to ATBCM clients. ATBCM’s routing strategies are not primarily based on fees or rebates, but which marketplaces are most likely to provide clients the best execution.
12. Smart Order Router (SOR)
ATBCM principally uses the Fidessa SOR to obtain best order execution of client orders. The SOR also prevents any violation of the Order Protection Rule. The Fidessa order Flag OPR is available for all marketplaces. The SOR scans a combination of protected and unprotected marketplaces and ATSs for the best bid or offer at the time of order entry, then directs the order to the marketplace with the best bid or offer for execution.
When using the SOR, ATBCM is committed to the following:
- Understanding how the SOR operated on its behalf
- Having the ability to adjust the SOR settings and provide input into the configuration and/or adjustment of SOR settings
- Establishing appropriate SOR strategies based on different classes of clients, such as retail vs. institutional, where appropriate
- Provide input into marketplace rankings, such as which marketplace an order is directed to first, when two or more marketplaces bids or offers are the same. Such rankings will consider parameters such as volume, value of total Canadian equity trading volume, experience with that marketplace, whether the order will be directed through an algorithm and what characteristics the marketplaces have that may be compatible with that algorithm or specific client trading instructions.
- Ensuring that the SOR makes routing decisions that take into account data displayed on orders on an unprotected marketplace, in situations where our Best Execution procedures require us to do so
- Reviewing the performance of the SOR as outlined in Review of Best Execution Policies and Procedures, above, to determine whether any adjustment to the SOR settings is required
- Respecting the client priority rule UMIR 5.3
ATBCM’s overall process is designed to achieve best execution and requires the traders to take into account the client’s instructions, subject to compliance with any regulatory requirements. Further, ATBCM must disclose material conflicts of interest that may arise when sending orders for execution and describe how such conflicts are managed.
Updated November 28, 2022