Order Execution Policy

Standard Accounts

1. Introduction including Consent

1.1 This document outlines our Order Execution Policy which details our obligation to You to obtain the best possible result (‘Best Execution’) when placing orders.

1.2 The following information is aimed at providing You with a general understanding of our typical dealing arrangements. These arrangements may vary for different categories of investment types and are described below.

1.3 In addition to the terms and conditions of the service we seek your consent for this policy and it will apply each time you place an order instruction.

2. Transmission and cut off times

2.1 Standard Accounts - We place all exchange traded orders (equities, investment trusts and exchange traded funds (ETFs) through Winterflood Business Services (WBS), they charge our Custodian for providing this service and they select the execution venues (from the factors detailed below) for where your orders are placed. The current venues for execution are detailed in Section 6.

2.1.1 For Unit Trusts and OEICs, they will generally be routed to the appropriate fund manager for execution at the next available valuation point for that particular fund.  Clients’ orders may be aggregated as described in section 6.

2.2 Orders are only placed with WBS or fund managers on Business Days shortly after 15.00

2.3 Orders must be placed on the APP no later than 13.00 to ensure same day execution, trades placed after 13.00 we will use our best endeavours to place the trade the same day however there are no guarantees that it will be placed.  Any orders not received before 13.00 will be placed with WBS or the fund manager on the next Business Day.

3. Best Execution Factors (Standard Accounts)

When executing orders, unless otherwise specifically instructed, WBS will use price as the primary measure for achieving Best Execution. The following execution factors will be considered, and how these may be considered as part of the decision-making process in the context of the details below (listed in order or priority for a typical trade). Their importance will vary depending on the characteristics of the order received from the client.

Execution factors:

Price - Price will be determined with reference to the execution venues to which WBS connects and on which the security is traded. WBS use automatic execution technology which will source the best price from a range of retail service providers and market makers (see Section 6). Where an electronic price is not available the order will be dealt manually by WBS's dealing team.

Cost – for orders where brokerage or exchange fees are applicable, WBS will not seek to pass these on to you.

Likelihood of Execution and Settlement - Likelihood of execution is very high due to the relationships WBS has forged with its market maker and broker counterparties. Likelihood of settlement is difficult to assess pre-trade, but WBS monitors the settlement performance of each counterparty so there is a historical track record to base this decision on.

Size - The size of the trade in relation to the liquidity of the stock may have significant influence on the Best Execution process and is directly correlated to the market impact (implicit costs).

Nature - Consideration will be given to the liquidity of the stock on the order book at the relevant time. Execution may be heavily influenced by the level of on or off order book trading patterns in the stock. These factors plus the size of the order will determine the appropriate execution method. This may include the working of an order into the market place using an appropriate benchmark or immediate execution on an outright bid/offer price, for example.

Speed - The importance of speed of transactions will vary. For example, to reduce the implicit costs associated with market impact, an order might be worked over a day or more. Different order types and specific instructions may also have a bearing on the speed of execution.

Other Relevant Considerations – Careful consideration shall be given not just to each element in isolation, but also to the trade-off and interplay between these factors. For example, size against market impact or speed against price, any of which might also be influenced by a client’s specific instruction.

4. Non-UK individual shares

Non-UK individual shares are denominated in a currency different from that of your Wombat cash account which is GBP.

All valuations for Non-UK Individual shares will be shown in the App as GBP using a Foreign Exchange Rate provided by SECCL.

All buy and sell orders are placed in GBP on the App  The GBP price is affected by the Foreign Exchange Rate which can fluctuate throughout the day.  The GBP value of your shares will be affected by the Foreign Exchange Rate both negatively and positively.  

When your order is placed with WBS they will execute a foreign exchange trade to enable the trade to be traded in the market in the underlying currency of the Non-UK share.  Wombat reserves the right to charge a foreign exchange conversion fee of up to 1% of the GBP value of each order.

Where any additional information is required in relation to any order related to Non UK individual shares, such as tax information, you agree to provide that information to us promptly when we request it, and undertake to provide accurate, complete and not misleading information. Where this information is required to be provided before an order can be placed or executed, you agree to provide that information to us as a condition to us accepting the order for execution.

You should be aware that transactions in relation to Non-UK individual shares will be executed at such times as the relevant market dictates. These times may be different from the usual times at which transactions in relation to shares or funds  will be processed and may be at times that differ from the usual cut-off time. As a result, there may be a difference in the price for the Non-UK individual shares at the time that your Instruction has been executed and the time that you have placed your Instruction.

You agree to complete any relevant tax documentation, including but not limited to a W-8BEN form for investment in United States-listed securities, when it is made available to you through our mobile application or our website and before giving any Instruction to trade in Non UK individual shares. The act of opening a Wombat Account(s) on the App you are also confirming that the information you have provided is sufficient for the fulfilment and completion of a W-8BEN. If You become a US person after your account has been opened, you must inform us immediately. This may result in your account being closed with any investments transferred out or liquidated and cash returned to you.

5. Order Types

The following exchange traded order types are available:

• At Best Order - Deal on the next available dealing date at the best available price for that size of order based on the execution venues available, without the client viewing the price in advance.

6. Specific Instruction

6.1 Where you give us a specific instruction as to the execution of an order, we will execute the order in accordance with those specific instructions and you should be aware that doing so may prevent us from applying this policy to achieve the best results.

6.2 Where your specific instructions relate to only part of the order, we will continue to apply our order execution policy to those aspects of the order not covered by those instructions.

6.3 It may not always be possible to execute specific orders on your behalf

7. Aggregation and Priority

7.1 For Unit Trusts and OEICs client orders may be aggregated with other client orders and bulked prior to executing with the fund manager.

7.2 For exchange traded orders, WBS may combine client orders with orders for the account of other clients, or for its own account (including in relation to fractional orders).  The aggregation of orders may operate on some occasions to a client’s (or its customers’) advantage and on some occasions to a client’s (or its customers’) disadvantage in relation to a particular order.  The decision to aggregate will be taken in WBS’s sole discretion and where orders have been aggregated, they will be allocated to clients on a pro-rata basis in accordance with WBS’ order allocation policy.

7.3 Depending on price and the consideration received, the disaggregation of bulked proceeds may result in penny rounding differences which cannot be allocated at individual client level.

8. Charges, Dilution Levy or Exit Charges

8.1 For Unit Trust or OEIC orders fund managers may levy an initial charge on purchase orders and there is a risk that fund managers apply a "dilution levy" to the order. This normally results where there are sizeable buy or sell orders in the market. This is an extra charge placed on the transaction and will be applied proportionately to an order placed.

8.2 Should this occur it will be clearly detailed as a percentage of your order on your contract note.

8.3 Please note such levies are outside of the control of the Wombat Invest or the Custodian.

9. Venues

9.1 For exchange traded orders, WBS may use one or more of the execution venues listed in Section 6 to enable it to obtain the best possible outcome on a consistent basis when executing an order on your behalf. WBS will regularly assess the execution venues available to ensure it is able to consistently obtain the best outcome for you.

10. Monitoring

10.1 We will monitor the effectiveness of our Order Execution Policy. We will notify you of any material changes where they are relevant to you. Any such changes will come into effect the next time that you trade using the service. If you wish to discuss the above or have any further questions, please contact us.

11. Order Venues and RSPs

11.1 Our current execution venues are as follows:

• » London Stock Exchange (LSE); and
• » Alternative Investment Market (AIM).

11.2 WBS use the following Retail Service Providers (Market Makers/Brokers):

• Canaccord
• Flow Traders B.V
• Investec Bank
• KCG Europe
• Peel Hunt
• Shore Capital
• Stifel
• Susquehanna
• Winterflood Securities.

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DriveWealth, LLC Supervisory Procedures Best Execution covering Instant Accounts

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Overview:

DriveWealth, LLC (“DW” or “DriveWealth”) provides execution by utilizing the services of registered
executing brokers. DW also operates a principal facilitation account, for the sole purpose of executing
fractional share orders received on a share base and notional base. The procedures below discuss the
process by which the firm oversees and evaluates the quality of execution provided by its executing
brokers, as well as executions filled in a principal capacity.

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Regulatory Requirements

‍In any transaction for or with a customer or a customer of another broker-dealer, a member and persons
associated with a member shall use reasonable diligence to ascertain the best market for the subject
security and buy or sell in such market so that the resultant price to the customer is as favorable as
possible under prevailing market conditions. Among the factors that will be considered in determining
whether a member has used "reasonable diligence" are:

(A) the characteristics of the market for the security (e.g., price, volatility, relative liquidity, and
pressure on available communications);
(B) the size and type of transaction;
(C) the number of markets checked;
(D) accessibility of the quotation; and
(E) the terms and conditions of the order which result in the transaction, as communicated to the
member and persons associated with the member.

Except as provided herein, a member that accepts and holds an order in an equity security from its own
customer or a customer of another broker-dealer without immediately executing the order is prohibited
from trading that security on the same side of the market for its own account at a price that would satisfy
the customer order, unless it immediately thereafter executes the customer order up to the size and at the
same or better price at which it traded for its own account. ‍

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Firm Policy

The firm is responsible for conducting reasonable diligence on the order flow it receives and routes to
agents or executes in its principal facilitation account. The review is completed monthly, via the Best
Execution Committee, and includes all orders, for all correspondents that are routed and executed
internally. While there is no definition of Best Execution, the factors included in the Regulatory section
are commonly used factors to measure against. The objective of the review is to assess the execution
quality provided by its agents, and downstream execution venues in addition to execution provided by
DriveWealth.

Rule 5310 requires firms to use reasonable due diligence when determining the best execution of
customer orders. Various factors that impact this decision are considered during the best execution
committee meetings, including the characteristics of the market for the securities traded, the size of
orders, the fill rate of execution destinations, the cost of the execution, the percentage of orders filled at
or better than the NBBO and the accessibility of the quotation.

Pursuant to Rule 5310.09(c), DriveWealth routes its order flow to executing brokers that have agreed to
handle the order flow as agent on behalf of DriveWealth and its customers, and generally relies on its
executing broker’s regular and rigorous review. As part of DriveWealth’s best execution committee
meetings, statistical review is completed to ensure its executing brokers are providing best execution.
The review also contemplates the reasonableness and rigor of review completed by the executing
broker, and the results of the review are used to determine and/or change its instructions as to how the
execution broker should be routing DW’s order flow.

DriveWealth reviews its executing broker’s practices in this regard and ensures that adequate oversight
functions are in place to ensure compliance with the provisions of the Rule and to ensure order handling
for DW customer orders are in line with DW’s expectations. To accomplish this review, the firm
receives detailed monthly reports from its executing brokers, for all order flow, which demonstrates the
execution quality across the aforementioned criteria. The Best Ex Committee reviews the information to
identify whether downstream venues are providing quality executions, and if issues are identified,
DriveWealth will instruct its agents to route its orders to more desirable destinations.

For agency routed order flow, DriveWealth exercises reasonable due diligence on its executing brokers
by evaluating the criteria considered in making routing decisions to outbound destinations and relies on
its executing broker’s regular and rigorous review of its routing methodology to remain in compliance
with the Rule. While DriveWealth does not exercise discretion over its routed venues, DriveWealth does
oversee its agent’s regular and rigorous review, by periodically assessing its routing methodology logic
to ensure that DriveWealth’s agent’s methodology is inclusive and utilizes the industry standard factors
that reasonably demonstrate best execution and does not include logic that presents conflicts between
DW, the agent, and the customer (e.g. routing logic does not consider how much a venue is paying in
PFOF). Additionally, on a monthly basis, or as needed, DriveWealth receives Transaction Cost Analysis
(“TCA”) reports from its agents for all order flow.  

For its principally facilitated orders, DriveWealth monitors executions by assessing the execution prices
compared to the NBBO at the time of execution.

Payment for Order flow may be received from its executing brokers, which may present an inherent
conflict between the firm and its customers. To address this perceived conflict, the firm uses the
execution quality reports, price improvement metrics and compliance with Reg NMS to determine if the
perceived conflict has materialized. In the event a realized conflict is observed (where payments are
received, but order execution quality is not as expected), DriveWealth will instruct its executing broker
to handle its customer and counterparty orders differently. Through its supervisory efforts over customer
order and execution, the firm is reasonable able to identify and modify its approach relating to its order
flow instructions. Finally, as part of the wholistic review of its executing broker’s handling of DW
orders, DW has reviewed its executing broker’s order handling practices to ensure they are properly
described and it is understood how they operate (as it relates to nature and types of orders sent to its
executing brokers), which includes obtaining confirmation that payment for order flow is not included
as parameter within its agent’s order routing logic.

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Specific Reviews Completed by Committee

The Execution Committee utilizes the monthly and quarterly reports received from its agents, and
fractional share execution quality for all of DriveWealth’s executions. The review focuses on the overall
performance of DriveWealth’s agents, and uses the information provided to evaluate downstream
executing venues. ‍

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Fractional Share Trading Reviews – Best Execution‍

A.   Rule Requirement Exemptions:

Rule 610 and Rule 611 do not apply to odd-lot orders or to the odd-lot portions of mixed-lot orders. Rule 600(b)(8) defines “bid” or “offer” as the bid price or offer price for one or more round lots of an NMS security. This definition is embedded in the definition of “quotation” in Rule 600(b)(62), as well as the definition of “protected bid” or “protected offer” in Rule 600(b)(57). Consequently, trading centers are permitted to establish their own rules for handling odd-lot orders and the odd-lot portions of mixed-lot orders. For example, although trading centers are not required to handle odd-lot orders or the odd-lot portions of mixed lot orders in accordance with the requirements for automated quotations set forth in Rule 600(b)(3), they are free to incorporate such requirements in their rules if they wish to do so.

This concept extends to fractional share trading, as sub-odd-lot transactions are not marketable and
conforming to Reg NMS. Irrespective of the applicability of Reg NMS, the firm monitors for execution
quality pursuant to FINRA Rule 5310 and consumes the consolidated market data directly into its
internal OMS to provide fractional executions at the NBBO.

B. Dual-Capacity Trading (Whole Share with Fractional Share) Review

Due to the nature of notional based orders, the firm has implemented a reasonable process for evaluating execution quality, as it relates to the different execution scenarios that it fulfils. Dual-capacity transactions, which are defined as trades that amount to at least one whole share, with a fractional fill, are reviewed as part of the agency TCA best execution review. When DW receives an order that requires 1 or more shares to be routed to the street for execution, the street will return the street execution price. Upon receipt, DW then applies the street side fill price to the fractional share, to complete the order. Dual-capacity trades are reviewed as part of the routed order flow TCA review, since the fractional component is filled at the street side price, which includes, among other things price improvement (PI is applied to the factional share if obtained on the street side fill), and the NBBO, EQ and midpoint analysis conducted on the street side fills (agency routes) would similarly cover the fractional fill on dual capacity trades.

It should be noted that DW’s practice of filling orders at the street price for the whole share that is executed (in lieu of filling the fractional price at the market price when the whole share order is received back from the street), reduces possible negative outcomes for best execution (e.g. latency considerations for the round trip dual-capacity) – since the whole + fractional share fills are given the street price (NBBO or better).

C. Fractional only Execution Review:

DriveWealth has an oversight function to ensure that executions in fractional shares are at or within the NBBO price at the time of execution. DriveWealth’s fractional share facilitation account consumes the consolidated market data feed, in order to facilitate executions. The review of fractional share trades for execution quality is a comparison of the execution price to the bid/ask at the time the trade is trade-able (e.g. when the order is released from queue in the sequential order in which it is received). Fractional only transactions are not marketable and therefore, there is no opportunity to scan the market for price improvement opportunities.

Due to the nature of fractional share trading, as non-marketable orders, the firm has a tolerance in place which aligns with the “flicker” or “1 second window” exemption, which allows for some level of deviation from the NBBO in highly liquid and/or securities with fast moving quotes, which is considered as part of the execution quality review. The quality review will yield transactions that are
deemed to be best execution follow-up items subject to potential remediation. To determine whether specific orders yielded require adjustment, the firm investigates the population from the quality review, and assess the securities, market condition, nature of the security and the pricing comparison from the NBBO to make a final determination as to whether any orders received execution not aligned with its Best Execution policy. The populations are discussed at the Best Ex committee meeting and where disposition is determined.

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Measurements

For agency and dual-capacity transactions the firm uses a TCA along with other metrics to evaluate the quality of executions, as detailed below:

a)  Transaction Cost Analysis

The firm’s primary oversight for agency routed orders is the utilisation of TCA reports. The TCA reports break the firm’s order flow down into security characteristics, fill rates, odd lots outside of the
daily reported range, price improvement, and fills at or better than the NBBO.

b) Fractional Only Shares

As mentioned in the fractional only section above, the firm primarily evaluates execution quality for fractional only fills by comparing the price at the time of execution to the bid/ask (NBBO). Additionally, the firm has two methods for reviewing latency, the first is a real-time transactional blotter, which tracks all orders and includes latency metrics and has summary statistics for all order flow to measure the latency of fractional only orders throughout the trading session.

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APPENDIX to DW Execution Policy

‍Rule 606(a)1 U.S. Securities and Exchange Commission (SEC) Rule 606(a) requires all brokerage firms to make publicly available quarterly reports, broken down by calendar month, containing certain required statistical information regarding the routing of held, non-directed customer orders in Regulation NMS stocks and listed options.  Rule 606(b)(3)1 Broker-dealers handle not held customer orders using various order handling and routing arrangements, including by using the services of another broker-dealer. In determining how to comply with the disclosure obligations of Rule 606(b)(3), a broker-dealer using another broker-dealer’s services must determine whether it has exercised “discretion” over the routing of not held customer orders. In the Adopting Release, the Commission stated that, “[i]f the broker-dealer exercises discretion with regard to how an order is routed and ultimately executed, such as (but not limited to) by determining particular venue destinations for an order, choosing among different trading algorithms, adjusting or customising algorithm parameters, or performing other similar tasks involving its own judgment as to how and where to route and execute orders, the broker-dealer must provide its customer the information required by Rule 606(b)(3.  

With respect to the use of another broker-dealer’s algorithms, a broker-dealer exercises discretion when, upon routing an order, it chooses among different algorithmic trading strategies (e.g., volume-weighted average price, percentage of volume, implementation shortfall, etc.) or different levels of urgency (e.g., passive vs. aggressive). A broker-dealer also exercises discretion when, at any time prior to the routing of an order, it participates in adjusting or customising other algorithm parameters that could be material as to how, when and/or where to route and execute orders. As with the case of smart order routers, a broker-dealer also exercises discretion where there is an economic arrangement between two broker-dealers that affects the order routing or execution strategies utilised in the handling of not held customer orders.
 

The scope of Rule 11Ac1-6 is broader than the scope of proposed Rule 11Ac1-5. First, Rule 11Ac1-6 covers a wider range of securities. The definition of "covered security" in paragraph (a)(1) includes not only national market system securities (i.e., exchange-listed equities and Nasdaq National Market equities), but also Nasdaq SmallCap equities and listed options.61 Second, the Rule applies to all broker-dealers that route orders on behalf of their customers. The term "customer order" is defined as any order to buy or sell a covered security that is not for the account of a broker-dealer. It excludes, however, any order for a quantity of a security having a market value of at least $50,000 for a covered security that is an option contract and a market value of at least $200,000 for any other covered security. Large orders are excluded in recognition of the fact that a general overview of order routing practices is more useful for smaller orders that tend to be homogenous.62
Sources1: SEC.gov, Responses to Frequently Asked Questions Concerning Rule 606 of Regulation NMS

SEC disclosure
606 regulations