With the introduction of alternative trading systems (“ATS”) and multiple marketplaces, dealer members must be prompt, fair, efficient and reasonable in the way they handle and execute their clients’ orders. Securities regulation (UMIR 5.1) require dealer members to make reasonable efforts to obtain best execution when acting for their clients, given current circumstances.
To fulfil this obligation, Eight Capital relies on the use of a smart order router technology “SOR” to source out the best price on each of the alternative market place. All orders are subject to smart order routing with the exception of crosses, which may be executed on the principal marketplace, unless otherwise instructed by the client. For orders that are handled manually, Eight Capital’s trading team will adhere to similar process to source out and obtain the best execution for that order.
General Factors in Determining Best Execution
Certain factors may be considered under UMIR when determining Best Price Execution including the following:
Regular Market Hours – Trades for Listed Canadian Securities
Eight Capital will employ the following procedures in order to meet its best execution obligations.
Eight Capital’s trading team is available to accept and execute clients’ orders between the hours of 9:30 am and 4pm Eastern Standard Time (“EST”), Monday to Friday, not including statutory Canadian holidays. Additionally, the trading team may be available before and after the quoted hours; however Eight Capital cannot guarantee the acceptance or execution of orders outside the stated hours.
Standard Order Handling Process
For securities which are listed on the Toronto Stock Exchange (“TSX”) and also trade on alternative marketplaces, the principal marketplace shall be the TSX, unless otherwise discussed and agreed upon by the client and Eight Capital’s Registered Representative.
Orders that are accepted prior to the opening (9:30 AM) shall be booked on the principal market place for execution on the opening based on an auction process. To eliminate the possibility of any price discrepancy, these orders will not be routed to the alternative marketplaces, as not all market places open at the same time; this may influence the price and the volume of an order which is entered for execution in the pre-opening period. For this reason, automated systems may not be relied upon during the pre-opening session to obtain best execution of clients’ orders, unless otherwise instructed by the client.
Unfilled orders are moved to the post opening session of the marketplace where they were originally entered. Orders received by Eight Capital’s trading team during the post opening session will be entered through an automated system; the smart order router will source out 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 Eight Capital has reasonably determined that the order has the best option for completion.
Orders received after 4 p.m.
Generally, orders that are received after the close of the regular market may be held and entered the next business day in the pre-opening session on the principal marketplace, or may be entered on a marketplace that offers afterhours trading, if warranted by the client.
Duration of Orders
Day Orders Day orders are only good for the day on which they are entered. Market and limit orders received by Eight Capital during the day will be directed through an automated system using a SOR which will route the order to the best available market at the time of receipt. Any unfilled portion of these orders will be booked and remain on a default market determined by Eight Capital until the order is completed, revised, cancelled or expires.
Good till Cancelled Orders
Good Till Cancelled Orders ("GTC") are orders that the client request to remain open until they are filled or cancelled. These orders will be entered in the principal marketplace, currently the TSX, if they are not immediately executed on an alternative marketplace at the time of entry (on or after 9:30 a.m. EST).
Good Through Orders
Good Thru Orders (“GTD”) have a specified date that requires the order to remain open until it is either filled or until it expires at a specified date.
Special Terms Orders
Special Terms Orders (“STO”) are orders with distinct conditions which trade on a specific book, and are not executable in the regular marketplaces. STO’s will only be booked to the special terms market on which they are entered, unless they can be executed on an alternative marketplace. The use of special terms orders can delay or decrease the ability of obtaining best execution, as the receiving market must ensure the “special terms” of the order are satisfied prior to executing the order.
All or None Orders
All or None (“AON”) orders are orders that must be executed in full, and do not book to the marketplace. The client may not wish to trade in the marketplace potentially receiving partial fills or average prices. These orders will not book to a marketplace unless they can be completely filled at the time receipt. These can be executed on any marketplace as agreed to between both parties.
A market order is an order to buy or sell a security at whatever prices are available in a marketplace which will guarantee a complete fill. Given the multiple market environment in which we operate, clients should exercise caution when entering market orders, given the different treatment of such market orders. Eight Capital will route market orders through its SOR which examines each available marketplace and enters the order in the market which it identifies as having the best available bid or offer, unless otherwise instructed by the client.
A limit order is an order for a security to be transacted at a specified price set by the client. If a limit order is not immediately executable, Eight Capital will route and book this order to a marketplace as determined by Eight Capital, or unless instructed otherwise by the client. The order will remain in that market until the order is filled, cancelled or expired. In a multiple market environment, clients should be aware that once their limit order is booked on a market place, it is possible for the security to trade in other markets, and may exclude the client’s booked order from participating.
Market on Close Order
A Market on Close ("MOC") requires that an order be executed on the close, at the securities closing price, of the principal marketplace. All MOC orders will therefore be entered into the TSX, as the principal marketplace. Clients should be aware that orders are executed on an anonymous basis, to this end, you will not know the price at which your order will be executed, until the execution is complete. Although limit orders are accepted in this trading facility, they may not be executed, given the restriction of the order.
At least annually or more frequent if warranted, compliance in conjunction with the head of trading will review the effectiveness of the firms best execution policies and procedures, by reviewing the SOR routing table when there are certain triggering events, some of which are listed below:
Additionally, to ensure our smart routers are in compliance with IIROC‘s best execution rules, Eight Capital will undertake to obtain an annual certification from each smart router provider attesting that their routers performance are reviewed and tested on a regular basis.