- The purpose of this Policy is to set out information on the arrangements in place for order execution based on the interpretation of the key provisions of the Conduct of Business Rulebook issued by the Malta Financial Services Authority (‘MFSA’).
Objectives of Best Execution
- Rizzo Farrugia shall take all sufficient steps to obtain, when executing orders, the best possible result for its clients taking into account the following best execution factors: Price; Costs; Speed; Likelihood of execution and settlement; Size; Nature; or Any other consideration relevant to the execution of the order.
- The above factors will be considered for both Retail and Professional clients as detailed further below but not for Eligible Counterparties (as defined by the MFSA Conduct of Business Rulebook).
- Rizzo Farrugia will determine the relative importance of the above-mentioned factors based on its experience and judgement in the light of available market information and taking into account the following execution criteria:
i.The characteristics of the Client, including the classification of the Client as a Retail or a Professional Client;
ii.The characteristics of the client order;
iii. The characteristics of the financial instruments subject to that order; and
iv.The characteristics of the execution venues to which that order can be directed.
- Owing to systems failures or other unavoidable reasons, Rizzo Farrugia may execute orders in a method that differs from the method selected pursuant to the Best Execution Policy. However, even in such circumstances, Rizzo Farrugia endeavours to execute orders on the best terms available at that point.
Financial Instrument type and Order type
- Rizzo Farrugia deals in securities listed on recognised stock exchanges, and primarily in equities, government bonds, corporate bonds and Exchange Traded Funds.
- Rizzo Farrugia executes orders on a non-advisory/execution only, advisory or portfolio management basis.
- This Best Execution Policy shall apply equally for each class of financial instrument, and for each order type. Rizzo Farrugia does not envisage any material differences in approach required for each financial instrument class or order type.
- Since the local stock market is considered to be illiquid compared to foreign stock markets, any client orders for local market trading should not be made “at market” or “at best”, but a price limit should always by instructed the client.
Retail and Professional Clients
- In general, when executing orders on behalf of Retail Clients, particularly when the scale of the order is comparable to, or smaller than, average market volumes in the specific security, Rizzo Farrugia will endeavour to achieve the best possible result which shall be determined in terms of the ‘total consideration’ which represents:
i. The price of the financial instrument; and
ii. The costs relating to the execution, which shall include all expenses incurred by the client which are directly relating to the execution of the order, including execution venue fees, clearing and settlement fees and any other fees paid to third parties involved in the execution of the order.
- However, in the case of the execution of orders comprising volumes that are higher than the market average in the specific security and particularly in the local market, Rizzo Farrugia shall not consider primarily price and costs as the determining factors for achieving best execution, but other factors, such as speed, likelihood of execution and settlement, size and market impact will also be considered determining factors by Rizzo Farrugia in the achievement of best execution for the Client.
- In the case of the execution of orders on behalf of Professional Clients, Rizzo Farrugia shall not consider primarily price and costs as the determining factors for achieving best execution, and other factors, such as speed, likelihood of execution and settlement, size and market impact will also be considered determining factors by Rizzo Farrugia in the achievement of best execution for the Client.
- When placing an order, Rizzo Farrugia will choose the execution venue that it considers the most appropriate to enable it, on a consistent basis, to obtain the best possible result for the client.
- Rizzo Farrugia is a member of the Malta Stock Exchange (MSE). Hence, trade orders in securities listed on the MSE will be executed by Rizzo Farrugia on the MSE.
- Rizzo Farrugia will execute orders for securities listed on an international stock exchange on one of the execution venues listed in the Client Agreement through a third party/parties with whom Rizzo Farrugia has entered into an agreement regarding the receipt and transmission of orders.
- Rizzo Farrugia ensures that such third parties with whom Rizzo Farrugia has an agreement in place are also subject to best execution requirements and as such Rizzo Farrugia places a degree of reliance on the third party in order to comply with such requirements. Nonetheless, Rizzo Farrugia shall periodically monitor the quality of the execution achieved by such third parties.
- Where the Client’s instructions cannot be executed on the Regulated Market where the security is listed, Rizzo Farrugia may satisfy the Client’s demands by selling/purchasing securities held on Rizzo Farrugia’s own account as applicable.
Specific Client Instructions
- Nevertheless, where Rizzo Farrugia receives specific instructions from a Client, Rizzo Farrugia will execute the client order in line with the specific client instructions.
- Clients must be aware that any specific instructions from a client may prevent Rizzo Farrugia from obtaining the best possible result for the execution of those orders as otherwise established by this policy.
Order handling and allocation
- Rizzo Farrugia shall execute client orders in a prompt, fair and expeditious manner. Rizzo Farrugia gives a date and time stamp to each order received from a client. All trades are executed individually and on a ‘first come, first served’ basis, even in the case of partial execution. All orders are promptly and accurately recorded and allocated.
- Rizzo Farrugia will execute comparable client orders sequentially in accordance with the time of their reception unless:
i.The characteristics of the client order or prevailing market conditions make it impracticable;
ii. The interest of the client requires otherwise, or
iii. Rizzo Farrugia receives other instructions from the client.
- In the case of Rizzo Farrugia’s PINS discretionary portfolio management service, where an order to trade that is made for more than one underlying client is only partially executed on a given trading day, the allocation of the executed portion across the underlying portfolios within the same investment strategy shall be done on a pro-rata basis, for each executed price. This policy shall be applied to the extent possible and subject to:
i. any applicable trading multiples, and any rounding differences on the pro-rata calculation; and
ii. considerations on the trading costs for the underlying portfolios, in line with this Order Execution Policy and its best execution objectives. This may mean that Rizzo Farrugia may decide, in the Clients’ best interests, to make no allocation to one or more underlying clients where their respective pro-rated executed amount would be considered to be too small relative to the corresponding costs attached to the specific trade.
- Any information held by Rizzo Farrugia in respect of executed or pending client orders will be treated as confidential and Rizzo Farrugia will take all reasonable steps to ensure that knowledge of any pending orders will not be misused.
- Rizzo Farrugia will inform Retail Clients of any material issues that would prevent it from carrying out the client’s order.
Ongoing review and monitoring
- Rizzo Farrugia will monitor the effectiveness of this policy and its order execution arrangements in order to identify and correct any deficiencies. It shall also assess, at least annually, whether the execution venues used provide for the best possible result for the client or whether it needs to make changes to its execution arrangements, including those with third parties.
- Rizzo Farrugia shall notify clients with whom it has an ongoing relationship of any material changes to its order execution arrangements or the Policy. The Policy shall be reviewed annually as and if necessary. Rizzo Farrugia shall also review its Policy in the event of material changes required to such Policy.
- The latest version of the Policy is also available on Rizzo Farrugia’s website rizzofarrugia.com.
- Under no circumstances shall any obligation towards a client under the Policy amount to a condition of any transaction and failure to comply with the Policy shall not entitle a client to cancel, terminate or rescind any transaction or order.
- By continuing to use Rizzo Farrugia’s services, Clients shall be deemed to have consented to the contents of the Best Execution Policy which is in force at the moment that the instructions are received by Rizzo Farrugia.