Purpose
This Policy outlines how Computershare Investor Services PLC (Computershare) selects, monitors and reviews the counterparties that are used to fulfil trade orders, and the factors that will be considered when using such counterparties.
Computershare does not transact directly in the market itself, but passes customers’ orders to counterparties with which we have an established contractual relationship to provide us with execution services. These entities will usually be member firms of the relevant exchange, Retail Service Providers and/or Market Makers. We refer to these entities throughout this policy as “Brokers”.
Principles of the policy
Computershare always acts with integrity and due skill, care and diligence when selecting, monitoring and reviewing Brokers. The primary consideration will be to ensure that the best possible results are obtained for our customers, and to deliver these in accordance with the overarching core outcomes of the Consumer Duty.
Computershare only selects Brokers who can provide an adequate degree of protection under relevant laws and Regulations, and who are able to demonstrate that they have sound governance structures in place.
How do we select our brokers?
Computershare makes a choice of Broker from those who have satisfied the above. Our approach will usually be a consistent selection for all orders within an individual dealing service. When selecting between Brokers, Computershare will consider the following:
Business factors
The organisational structure of the Broker and the entities that control the business.- The legal, regulatory, and market frameworks to which the Broker is subject. This includes validation that the Broker has the appropriate regulatory authority to undertake the relevant activity, and can provide Best Execution in accordance with FCA Rules.
- The range of activities that the Broker undertakes.
- The capacity in which the Broker trades (Principal or Agent), and the controls in place to mitigate any associated risks.
- That the Broker has sound governance structures in place.
- The reputation of the Broker, including any regulatory findings or fines.
- Any relevant operational risks.
Financial factors
- The credit worthiness of the Broker, checked by undertaking a financial analysis.
- The Broker’s ability to maintain and commit adequate capital, when necessary, to complete trades.
- The costs levied by the Broker, since this may affect the final outcome in terms of overall consideration due to the client.
Market factors
- The number of stocks covered by the Broker and their alignment with the current book of trading business with Computershare.
- The Broker’s ability to obtain liquidity, to minimise market impact, and to accommodate unusual market conditions.
- The Broker’s flexibility to employ unique trading strategies, to execute and settle difficult trades, and to handle unusual trading volumes.
- The Broker’s access to alternative trading options with a view on achieving higher quality execution.
Relationship factors
- The timely and accurate provision of execution reports.
- The number and/or frequency of errors.
- The level to which the Broker is responsive to comments or complaints and its responsiveness to correct errors.
- Whether there are adequate lines of communication with the Broker’s staff and traders.
How do we choose a broker for a specific trade?
Computershare makes a choice of Broker from those who have satisfied the above. Our approach will usually be a consistent selection for all orders within an individual dealing service. When selecting between Brokers, Computershare will consider the following:
Best execution factors
- An assessment of the Broker’s ability to consistently provide the best possible results for our client in terms of total consideration (price and costs).
Characteristics of the client
- Particular rules or considerations relevant to the underlying customer or to the service they have signed up to.
Characteristics of the trade orders
- The potential to specify a “limit” order.
- The presence of specific instructions or requirements.
- The frequency of trading of this order type.
- The likely market impact of this order type.
Characteristics of the stock
- Liquidity.
- Market listing.
- Method and currency of settlement.
Characteristics of the Broker
- Whether the Broker is a Market Maker in a particular stock.
- Whether the Broker is the Corporate Broker for a particular stock.
- The ability of the Broker to meet the technical requirements of the trade orders, including (but not limited to) any requirements for straight through (“real time”) electronic trading.
- The ability of the Broker to support Computershare’s settlement requirements, including (but not limited to) any requirements for overseas stock and currency exchange.
- The results of Computershare’s ongoing monitoring programme, including (but not limited to) execution quality, reliability and recent service performance.
Record keeping
Computershare maintains a record of each Broker selection decision and the factors and characteristics which informed that decision.
Monitoring and review
Computershare ensures the appropriateness of our Broker selection in accordance with this policy. We will review and adjust our appointments where we believe better results could be achieved by using an alternative counterparty.
The performance of Brokers is continually monitored through:
- Testing as to the provision of Best Execution, focusing on pricing, and including any other relevant execution factor.
- Quality sampling of trades by both Dealing and Compliance departments, including prompt and accurate information and completion.
- Ongoing Due Diligence assessments of all Brokers, performed on at least an annual basis, and wherever a need arises.
- Regular Broker service review meetings.
This policy shall be reviewed on at least an annual basis. This review shall be documented and an appropriate record of the review will be maintained.