This summary is aimed at professional and retail clients relating to when MMC Limited (“MMC”) executes orders on their behalf.
The Conduct of Business sourcebook sets out a number of execution factors that MMC is required to take into account in respect of financial instruments where MMC receives and transmits client orders by arranging deals for its clients. Throughout this summary, references to execution of orders should be interpreted as arranging deals for MMC’s clients.
The execution criteria are defined as the characteristics of the order which MMC will execute in relation to a financial instrument. MMC will exercise its discretion in assessing the criteria that it needs to take into account to provide the client with the best possible outcome. MMC will seek best execution by taking all reasonable steps.
The execution factors are: –
- The price of the financial instrument;
- The speed and likelihood of execution;
- The overall costs;
- The location of assets relating to the execution;
- The location of the professional support;
- The settlement of the execution;
- The size of the execution;
- The prevailing market conditions
- Any other consideration relevant to the execution of the order.
Given the above list, in practice, this means MMC will execute using the main variables as follows:
Price
A key factor is price. This is usually the most important factor in obtaining the best possible result for our customers. The price paid or sold for an unquoted company takes into account a number of subjective investment variables which centre around the company’s business proposition. At this initial stage of any transaction, a ‘deal price’ is agreed which is reflective of the term sheet agreed with all parties. When the transaction has progressed to the final stages, an ‘execution price’ will be agreed which considers other factors e.g. currency exposure. The difference between the two prices maybe slight and non-material but MMC will seek to achieve the best possible outcome for customers.
Probability and speed of execution
Transactions in unquoted private companies often involve multiple parties e.g. co-investors and therefore the probability and speed of execution to settlement can be subject to delays. There may be other features of the final deal terms to be agreed e.g. deal fees not finalised. MMC will seek to achieve the best possible outcome for customers.
Other factors
External market conditions are a variable. In some circumstances we may judge that the current market conditions are not compatible to the transaction or deal placed on the table. MMC will determine the relative importance of the external market factors by using its commercial judgement and experience, and by taking into account the information available to them.
On the rare occasion when MMC deals in market-traded financial instruments through brokers and market makers, we will rank price as being of primary importance and speed of settlement. Other factors include any transaction or deal costs and any tax issues e.g. pre-clearance from HMRC that a company is an EIS qualifying company.
Specific instruction
Where a client has provided us with specific instructions to deal on their behalf we will execute the order in accordance with those specific instructions. However, we will not owe any duty to provide best execution because these instructions may prevent us from following the Order Execution Policy. The Order Execution Policy is designed to obtain the best possible for our clients on a consistent basis taking into account the factors outlined above.
To be clear, MMC clients do not face or are subject to any individual transactional fees or costs.
Monitoring and review
MMC will monitor the effectiveness of the Order Execution Policy. Based on regular reviews we identify any weaknesses which may lead to MMC clients not receiving best execution, we will correct any deficiencies