The second Markets in Financial Instruments Directive and associated delegated regulations (“MiFID/R”) requires that investment firms report on the quality of execution and the top five execution venues used by class of financial instrument traded on an annual basis. The contents of this report and the trading data provided are published to meet the requirements prescribed by Article 3(3) of Regulatory Technical Standard 28 (“RTS 28”) of MiFID/R.
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Due to the liquid nature of the majority of equity orders, for orders of a normal market size, James Hambro & Partners places the highest importance on price plus costs, including implicit costs. There are a number of parameters to consider when executing an order. These are specific to the order itself, the size of the order relative to the average daily volume in the stock at that point in time; the market conditions for the stock, its sector or the market generally; and factors that might impact the market during the period of execution. Against this backdrop, and in the context of the execution factors, each order is assessed by the dealing team to determine the relative importance of the execution factors. In addition, in the light of these parameters we determine whether the order should be executed predominately using “low touch” or “high touch” execution methods. The method of execution will in part determine which broker we use. Low touch orders are executed electronically utilising broker algorithms. Typically low touch executions have lower commission rates and therefore we favour these where we believe that the best combination of overall price and explicit costs can be achieved. Ordinarily, an order is high touch when it is more likely to be difficult to locate liquidity. In which case electronic execution methods are either not available or they are likely to result in detrimental price movements and market risk caused by longer execution duration. High touch orders typically involve more Trader and counterparty time in order to research the market to locate natural liquidity.