Lek Securities U.K. Limited

RTS 28 Report for the period ending 31 December 2017

The below information is required to be provided under Article 3(3) of RTS 28.  This is a summary of the analysis and conclusions drawn from LekUK’s detailed monitoring of the quality of execution obtained on the execution venues where we executed client orders in the previous year.

When reviewing this report, the reader should bear in mind that the majority of Lek Securities' orders are routed to market center as selected by the customer (Directed Orders).  However, when an order is routed to Lek Securities' order desk or worked using an algorithm, the decision where to send the customer's order is made by the firm.

It is Lek Securities' policy to select the market centre, which is expected, because of the displayed quote, or otherwise, to provide the customer with the best possible execution.

 

Requirement under Article 3(3)
(a) an explanation of the relative importance the firm gave to the execution factors of price, costs, speed, likelihood of execution or any other consideration including qualitative factors when assessing the quality of execution;

Lek Securities U.K. Limited Response
The importance of the various execution factors stipulated by the Rules will vary depending on the circumstances and context of the order. That said, the execution factors that are commonly the most important in the achievement of best execution by LekUK are price and size. LekUK considers these two execution factors as inextricably linked as the price will be affected by the size of any intended bargain. Thus, business is allocated to market centres on the basis of their ability to execute transactions at competitive prices and in acceptable volumes. Market centres who prove unable to achieve these criteria will not be selected to deal on behalf of clients. Vice versa, market centres who prove over a period of time that they have the ability to deal well, at attractive prices and in good volumes are likely to receive further orders.

Speed and likelihood of execution are perceived to be similar concepts and both will have an impact on the price achievable. For example, if LekUK was seeking the prompt execution of an order, that may have an impact on the price attainable. Speed is also considered to correlate to size. Depending on the circumstances prevailing at the time, LekUK may wish to build or sell a position over a period of time to limit market impact as opposed to executing a large single bargain.

As discussed above, when placing an order with a market centre for execution, LekUK’s choice of market centre is driven by their ability to execute transactions at competitive prices and in acceptable volumes. The market impact (i.e. the extent to which the buying or selling moves the price against the buyer or seller), as an indirect cost of trading, can dwarf the direct costs of trading (commissions and fees) especially on larger deals. The primary focus in minimising overall trading costs is, therefore, to choose an execution venue where sufficient liquidity may best be accessed. LekUK aims to deliver best execution by minimising the market impact of transactions.

Requirement under Article 3(3)
(b) a description of any close links, conflicts of interests, and common ownerships with respect to any execution venues used to execute orders;

Lek Securities U.K. Limited Response
LekUK does not have any close links, conflicts of interests or common ownerships with respect to any execution venues used to execute orders.


Requirement under Article 3(3)
(c) a description of any specific arrangements with any execution venues regarding payments made or received, discounts, rebates or non‐ monetary benefits received;


Lek Securities U.K. Limited Response
LekUK generally does not negotiate payment for order flow, but the firm does receive rebates when adding (or removing) liquidity at certain market centres.  When such remuneration is received, it is generally considered a reduction of execution cost and passed on to the customer in the form of reduced commissions. The source and amount such credits, discounts or rebates received will be disclosed to the customer upon request.

Requirement under Article 3(3)
(d) an explanation of the factors that led to a change in the list of execution venues listed in the firm’s execution policy, if such a change occurred;


Lek Securities U.K. Limited Response
LekUK’s policy has remained consistent over time and there are no changes to report.

Requirement under Article 3(3)
(e) an explanation of how order execution differs according to client categorisation, where the firm treats categories of clients differently and where it may affect the order execution arrangements;


Lek Securities U.K. Limited Response
All LekUK clients are treated the same under its Execution Policy.  It is noted however that certain market centres may provide incentives for brokerage firms to route retail business to their respective markets.

Requirement under Article 3(3)
(f) an explanation of whether other criteria were given precedence over immediate price and cost when executing retail client orders and how these other criteria were instrumental in delivering the best possible result in terms of the total consideration to the client;

Lek Securities U.K. Limited Response
The overall quality of execution, as described in detail above, is the only criterium used by the Firm.

Requirement under Article 3(3)
(g) an explanation of how the investment firm has used any data or tools relating to the quality of execution, including any data published under Delegated Regulation (EU) 2017/575 [RTS 27];

Lek Securities U.K. Limited Response
During 2017, LekUK has regularly monitored the quality of execution obtained from the execution venues used to place client orders for execution.

LekUK is satisfied that it has adhered to the requirements set out in its Execution Policy in seeking to obtain best execution for its clients by reference to all relevant factors.

LekUK has access to analyses published by market centres to indicate how well the market centres have performed in achieving best execution in relation to price against others in the market.

Requirement under Article 3(3)
(h) where applicable, an explanation of how the investment firm has used output of a consolidated tape provider.

Lek Securities U.K. Limited Response
This is not applicable in Europe, as there are currently no consolidated tape providers.

In the United States, where LekUK executes many of its orders, executions as subject to Regulation NMS of the US Securities and Exchange Commission.  Reg. NMS references a consolidated tape and prohibits a market centre from executing an order in its market if a better price is available on another exchange or execution venue.

Based on the policies outlined above, during 2017, LekUK routed its client orders as set forth in the spreadsheet entitled “Lek Securities UK Limited RTS 28 Report for the period ending 31 December 2017”

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