kas bank order execution policy · pdf filec. securities borrowing and lending (sbl) d. ......

Order Execution Policy

KAS BANK N.V.

2

Disclaimer

The most recently approved version of this policy document is in the Policy House at

Kaspoint. Printed documents can be out of date and therefore the Policy House should

also be the reference point for the most recent version.

This is the English version of this policy. In case of a (interpretation) difference

between the Dutch version of this document and the English version, the Dutch version

is binding.

Copyright

All information and images from this policy document are the copyright of KAS BANK

N.V. (hereinafter: KAS BANK), unless stated otherwise. This policy is only intended for

internal use by employees of KAS BANK.

No information or image from this policy may be copied, reproduced, republished,

downloaded or distributed in whole or in part to any person or organization outside

KAS BANK. An exception to this exists if the KAS BANK Compliance Department has

given permission in writing by e-mail or otherwise.

3

Contents

1. INTRODUCTION .................................................................................................................................... 5

1.1 BACKGROUND ........................................................................................................................................ 5

1.2 OBJECTIVE ............................................................................................................................................... 5

1.3 SCOPE ......................................................................................................................................................... 5

1.4 CONTEXT ................................................................................................................................................... 6

1.5 RELATED ADMINISTRATIVE AND ORGANISATIONAL PROCESSES .............................. 6

2. DEFINITIONS ......................................................................................................................................... 7

3. POLICY ......................................................................................................................................................10

3.1 EVALUATION AND INFORMATION TO BE PUBLISHED ANNUALLY ..............................10

3.2 INFORMING THE CLIENT AND CONSENT OF THE CLIENT ................................................10

3.3 GENERAL PROVISIONS REGARDING ORDER EXECUTION ...............................................11

3.4 TRADING PLATFORMS WHERE KAS BANK HAS MEMBERSHIPS ....................................11

3.5 TRADING PLATFORMS WHERE KAS BANK DOES NOT HAVE A MEMBERSHIP;

BROKERS; SMART ORDER ROUTING .......................................................................................................11

3.6 SELECTION OF BROKERS .................................................................................................................11

3.7 SPECIFIC INSTRUCTIONS BY THE CLIENT..............................................................................11

4. ORDER EXECUTION OF FINANCIAL INSTRUMENTS WITH THE EXCEPTION OF

CURRENCY AND INTEREST RATE DERIVATIVES AND SBL TRANSACTIONS ........................13

4.1 BEST EXECUTION .................................................................................................................................13

4.2 SEGREGATION .......................................................................................................................................13

4.3 ORDER .......................................................................................................................................................13

4.4 EXECUTION FACTORS ........................................................................................................................13

4.5 EXECUTION ASPECTS ........................................................................................................................14

4.6 SELECTING A PLACE OF EXECUTION .........................................................................................14

5. ORDER EXECUTION OF CURRENCY AND INTEREST RATE DERIVATIVES AND

SECURITIES BORROWING AND LENDING TRANSACTIONS ........................................................15

5.1 CURRENCY DERIVATIVES ................................................................................................................15

5.2 INTEREST RATE DERIVATIVES .....................................................................................................15

5.3 SECURITIES BORROWING AND LENDING ...............................................................................15

6. GOVERNANCE ........................................................................................................................................17

7. MINIMUM STANDARDS .....................................................................................................................18

8. PUBLICATION ........................................................................................................................................18

4

9. AWARENESS & TRAINING ...............................................................................................................18

10. REVISION OF THE POLICY ..............................................................................................................18

11. DEVIATIONS FROM THE POLICY ..................................................................................................18

12. VIOLATIONS OF THE POLICY ........................................................................................................19

13. EFFECTIVE DATE ..................................................................................................................................19

APPENDIX ............................................................................................................................................................20

Table 1 ......................................................................................................................... 20

Financial Instrument..................................................................................................... 20

Preferred place of execution .......................................................................................... 20

Table 2 ......................................................................................................................... 20



Table 3 ......................................................................................................................... 20



Table 4 ......................................................................................................................... 20



5

1. Introduction

In this policy document, KAS BANK describes the current policy and associated procedures with

regard to order execution. This involves compliance with standards and requirements from laws and

regulations, guidelines, best practices and codes of conduct and the management of the associated

risks.

1.1 Background

KAS BANK is the European specialist for the custody and administration of securities and high-

quality risk and reporting services. KAS BANK focuses entirely on business securities services to

professional parties in the pension and securities industry. It preserves the assets of investment

funds and institutions, banks, insurers, brokers, charities and other wealthy parties.

This policy document sets out the basic principles used by KAS BANK to comply with the

requirements of laws and regulations, regulations, best practices and codes of conduct with regard

to the execution of orders in Financial Instruments.

The Treasury department executes orders in Financial Instruments for its professional clients

(including clients that it classifies as “Eligible Counterparties”) as part of its execution only services.

KAS BANK does not provide asset management or investment advice services.

1.2 Objective

The purpose of this order execution policy is to ensure a correct, timely and complete execution of

an order on behalf of a client in a manner that gives the client the best possible result.

KAS BANK also wants to control the risks associated with executing orders in Financial Instruments

by adequately responding to changes in laws and regulations, regulations, best practices and codes

of conduct. KAS BANK also wants to manage these risks by adequately responding to changes in

the economic, political and technological fields. Good management of the integrity risks, such as

those associated with the requirements of laws and regulations, regulations, best practices and

codes of conduct, guarantees the integrity, care and continuity of KAS BANK.

1.3 Scope

This policy applies to KAS BANK, its foreign branches and KAS Trust & Depositary Services B.V. It is

particularly relevant for the Treasury department including the Global Fund Services (unlisted

financial instruments) department.

This policy must be read in conjunction with related internal process descriptions, codes of conduct

and regulations.

This policy relates to order execution. This topic is regulated in the following laws and regulations:

The Netherlands:

• Act on financial supervision (‘Wft’);

• Decision Conduct Supervision of Financial Enterprises Wft;

6

European:

• AIFM Directive;

• MiFID II

These laws and regulations apply to KAS BANK as a bank and investment firm.

1.4 Context

This policy is part of the compliance focus area 'Business integrity' and part of the compliance

standards framework theme 'Business partners'.

Related policies and procedures:

This policy is related to the following KAS BANK policies and internal procedures:

• Policy framework Client acceptance and procedures;

• Business conflicts of interest and procedures policy;

• KAS BANK Code of Conduct;

• Whistleblowing scheme;

• Incident scheme;

• CSR and SRI policy;

• Client classification under MiFID II; and

• All procedures, as described in chapter 4 Minimum Standards.

1.5 Related administrative and organisational processes

KAS BANK has technical and organisational processes in which the minimum standards from this

policy must be guaranteed.

In the specific processes below, the following issues are guaranteed:

• Order execution process ensures that orders are executed in accordance with this policy;

• Access Management guarantees adequate access control to information;

• Client Data Management ensures careful processing of data;

• Supplier Management ensures that the contracts with counterparties and Brokers are in

accordance with this policy;

• Incident Management guarantees the timely identification and resolution of incidents including

data leaks;

• Broker Selection and Monitoring ensures that the selection and monitoring of brokers are carried

out in accordance with the service description;

• Payment management guarantees timely payment to the external parties.

7

2. Definitions

In this policy, KAS BANK uses the following definitions:

Agent:

Person or institution that is authorised to act on behalf of another person (the client / client).

Best Execution:

The execution of an order in the manner that leads to the best possible result for the client.

Broker:

An investment firm (under local law) that has been engaged by KAS BANK to execute orders or

settle orders on the trading platforms or execution venues on which KAS BANK can not act.

Custom Financial Instrument:

Custom Financial Instrument is a Financial Instrument whose conditions are tailored to the specific

needs of the investor. This mainly concerns currency, interest rate and Securities Borrowing and

Lending (SBL) contracts, which originate outside regulated trading platforms (OTC).

Derivatives:

Derived instruments. Financial instruments whose characteristics and value are based on another,

underlying value.

Explanation:

Usually a right or obligation to buy or sell an underlying asset at a pre-determined time in the

future or for a predetermined period (duration).

Execution only

Execution-only investment services means that KAS BANK receives and transfers orders or executes

orders in financial instruments at the request of the client. With execution only, the client makes his

own investment decisions and receives no investment advice from KAS BANK. KAS BANK's

involvement is in principle limited to passing on and / or executing orders that the client has

requested on his own initiative.

8

Financial Instruments:

Financial Instruments as defined in Article 1.1 Wft.

Fixed income:

Financial Instruments with a periodic fixed interest rate (such as bonds).

Home market

The Regulated Market (stock exchange) where a Financial Instrument has its primary listing.

Common terms are Primary Exchange and Primary Venue.

Investment institution:

An investment company that offers, or an investment fund, the possibility to participate in a capital

for collective investment in order to make the participants share in the proceeds of the investments.

MTF:

Multilateral Trading Facility: a multilateral system, not being a Regulated Market or Organized

Trading Facility (OTF), which brings together multiple buying and selling interests of third parties

with regard to Financial Instruments, within this system and according to non-discretionary rules in

such a way that an agreement ensues.

MTFs are legally regulated and supervised trading platforms, in addition to regulated markets and

OTFs.

Order:

Assignment to execute a transaction (purchase or sale) in a Financial Instrument.

Order execution policy:

Policy on execution of orders.

OTC:

Over the Counter. Private market - outside a Regulated Market, MTF or OTF - in Financial

Instruments.

OTF:

9

Organised trading facility’ or ‘OTF’ means a multilateral system which is not a regulated market or

an MTF and in which multiple third-party buying and selling interests in bonds, structured finance

products, emission allowances or derivatives are able to interact in the system in a way that results

in a contract; OTFs are legally regulated and supervised trading platforms, in addition to the

Regulated Markets and MTFs.

Professional client:

Client who is classified as such by KAS BANK on the basis of its "Client categorization under MiFID"

policy.

Regulated Market:

Multilateral system that brings together multiple buying and selling interests of third parties in

relation to Financial Instruments - within this system and according to the non-discretionary rules of

this system - or facilitates their combination in such a way that an agreement ensues in relation to

Financial Instruments which have been admitted to trading under the rules and systems of that

market. Regulated Markets are regulated by law and are supervised. A commonly used term is

stock exchange.

Securities:

Securities (such as shares and bonds) that are traded on the capital market.

Settlement:

The administrative settlement of transactions in financial instruments; the delivery by the seller of

the financial instruments to which the transaction related and the (usually simultaneous) payment

by the purchaser.

Trading platform:

Regulated Market, Multilateral Trading Facility (MTF) or Organized Trading Facility (OTF).

Transaction:

Agreement between two or more parties in which Financial Instruments are bought or sold.

Transparency:

Extent to which a trading platform is characterized by rapid and accurate availability of price and

turnover data.

10

3. Policy

This policy relates to the execution of orders that KAS BANK receives from clients regarding:

a. listed Financial Instruments (such as shares, units and shares in investment institutions, bonds

and other fixed-income securities, and derivatives);

b. unlisted Financial Instruments (such as shares, units and shares in unlisted investment funds,

bonds and other fixed-income securities, and derivatives);

c. Securities Borrowing and Lending (SBL); and

d. derivatives relating to currencies (such as FX Forwards / Swaps, FX NDFs) or interest rates, in so

far as Financial Instruments in the sense of Art. 1 Wft.

3.1 Evaluation and information to be published annually

The Treasury department, as policy owner, evaluates this order execution policy annually. If

substantial changes to the execution of orders occur or have occurred, Treasury will also evaluate

the policy in the interim and adjust it if necessary.

KAS BANK makes the following available on a yearly basis via its website:

• information on the quality of the implementation for each relevant category of Financial

Instruments; and

• for each relevant category of Financial Instruments an overview of the five main execution venues

in terms of trading volumes. If KAS BANK uses less than five execution venues, it will demonstrate

that the selected location (s) of execution will enable it to always achieve the best results for its

clients;

• if KAS BANK engages other investment firms (Brokers) in the execution of orders, for each

relevant category of Financial Instruments an overview of the five main investment firms in terms

of trading volume to which it has forwarded client orders for execution in the previous year or

where client orders for execution, as well as information about the perceived quality of the

execution of the orders.

KAS BANK must be able to demonstrate at the request of its clients that it has executed their orders

in accordance with this policy. KAS BANK must also be able to demonstrate to the AFM that it has

executed the orders in accordance with this policy.

3.2 Informing the client and consent of the client

KAS BANK will make its order execution policy available to its clients before the start of the service.

Clients must agree to the order execution policy before the start of the service.

In addition, KAS BANK makes the policy available on its website on an ongoing basis. KAS BANK

provides the client with the information he needs to access the website. KAS BANK will publish a

material change to the Order Execution Policy to its clients via its website.

11

3.3 General provisions regarding Order execution

KAS BANK executes orders in Financial Instruments exclusively for professional clients.

KAS BANK takes sufficient measures to achieve the best possible result for its clients when

executing orders (Best Execution). It takes into account the price, the costs, the speed, the

likelihood of execution and settlement, the size, the nature and all other aspects relevant to the

execution of the order. This is discussed in more detail in chapters 4 and 5.

KAS BANK chooses to execute orders in Financial Instruments traded on the Regulated Markets,

MTFs or OTFs of which it is a trading member on one of those platforms only.

KAS BANK receives no remuneration, discounts or non-monetary benefits for the routing of orders

from clients to a particular trading platform or place of execution.

3.4 Trading platforms where KAS BANK has memberships

KAS BANK is a trading member of

• Euronext (Regulated Markets of Euronext in Amsterdam, Brussels, Lisbon and Paris)

• Euronext Best of Book (MTF)

• Bloomberg / MTF

• AFS / OTF

KAS BANK executes the orders directly on these platforms.

3.5 Trading platforms where KAS BANK does not have a membership; Brokers;

Smart Order Routing

When executing orders on a different trading platform than the one mentioned above in 3.4, KAS

BANK uses its Brokers network.

KAS BANK can also use Smart Order Routing through its Brokers. With Smart Order Routing, the

Broker compares the prices and other execution factors on various trading platforms in an advanced

manner. On the basis of the results, the order is executed on that / that trading platform (s) where

the best result for the client can be achieved. In the case of Smart Order Routing, the order can

also be wholly or partially executed at an investment firm with systematic internal settlement.

3.6 Selection of Brokers

The Treasury department carefully selects its Brokers. In doing so, it weighs in both qualitative

aspects and solvency and rating. She also assesses the integrity risks for KAS BANK.

KAS BANK assesses the order execution policy and the quality of the execution of these Brokers

annually.

3.7 Specific instructions by the client

The client has the right to give a specific instruction to KAS BANK about the execution of his order.

This specific instruction may relate to any or all parts of the execution of the order. The specific

12

instructions of the client replace the choices KAS BANK makes on the basis of this order execution

policy.

A specific instruction may prevent KAS BANK from following one or more steps of its order

execution policy. The instructions of the client can lead to a different execution than according to

the Best Execution principles of KAS BANK. If KAS BANK follows the instructions of the client in the

execution of the order, it will be deemed to have taken all steps to achieve the best possible result

for the client.

If KAS BANK can not, or can not fully, execute the order in accordance with the specific instruction,

the order will not be executed, or only for that part that KAS BANK can execute according to that

instruction.

13

4. Order execution of Financial Instruments with the exception of currency and interest rate derivatives and SBL transactions

The provisions of chapter 4 apply to orders concerning:

• Listed Financial Instruments (such as shares, units and shares in investment institutions, bonds

and other fixed-income securities, and derivatives); and

• Unlisted Financial Instruments (such as shares, units and shares in non-listed investment

institutions, bonds and other fixed-income securities, and derivatives),

with the exception of currency and interest rate derivatives and SBL transactions.

4.1 Best Execution

When KAS BANK executes orders on behalf of the client, it will take adequate measures to achieve

the best possible result for the client (Best Execution), taking into account the relevant

implementation factors as mentioned in section 4.4.

Best Execution is not focused on a single transaction, but on the joint transactions for a client over

a longer period. In addition, Best Execution is a combination of factors (see 4.2 ). Therefore, it is

possible that an individual transaction is not executed at the best possible price or in a timely

manner.

4.2 Segregation

KAS BANK always carries out client orders separately from orders from other clients unless the

client requests that orders be combined.

4.3 Order

KAS BANK executes orders in order of receipt unless there are compelling reasons for KAS BANK to

deviate from this.

4.4 Execution factors

KAS BANK takes into account the following factors when executing an order:

• price of the Financial Instrument;

• transaction costs;

• speed;

• probability of execution and settlement; and

• size, nature or any other consideration important for the execution of an order.

KAS BANK determines the relative weight of the execution factors on the basis of its commercial

insight and experience, in the light of the available market information and taking into account the

implementation aspects as described in section 4.5.

Although the price of the Financial Instrument and transaction costs related to the execution weigh

heavily in the Best Execution assessment, KAS BANK may, in certain circumstances, for certain

14

clients, orders, Financial Instruments or trading platforms, in the absence of specific instructions

from the client, deviate on the understanding that other performance factors for achieving the best

possible result outweigh the price.

4.5 Execution aspects

The execution aspects that are considered for the determination of the relative weight of the

execution factors are:

• the qualification of the client as a professional investor;

• the characteristics of the order, including whether the order involves a securities financing

transaction;

• the characteristics of the Financial Instruments that are the subject of the order; and

the characteristics of the places of execution where the order can be placed.

4.6 Selecting a place of execution

The place of execution is determined on the basis of the aforementioned implementation factors and

aspects. Depending on an appropriate consideration of the execution factors and aspects, KAS

BANK issues orders at the place of execution that it deems most suitable to achieve the best

possible result. KAS BANK weighs heavily on liquidity and transparency.

The appendix to this policy contains an overview of the trading platforms to which KAS BANK relies

to a significant degree, specified according to the different classes of Financial Instruments.

15

5. Order execution of currency and interest rate derivatives and Securities Borrowing and Lending transactions

The provisions of this chapter 5 apply to orders executed by KAS BANK on behalf of the client

regarding:

• currency derivatives

• interest rate derivatives

• Securities Borrowing and Lending

5.1 Currency derivatives

KAS BANK executes orders in currency derivatives at the place of execution that it deems most

suitable to achieve the best possible result, also in light of the conditions agreed with the client.

KAS BANK collects relevant market data for the optimal execution of orders in Financial Instruments

to measure whether the price offered to the client is fair and meets the obligation of optimal

execution. Here, currency transactions on behalf of a client are only concluded with counterparties

that have been jointly approved by the client and KAS BANK.

Table 2 in the Appendix to this policy lists the preferred place of execution of currency transactions.

This is only deviated from in accordance with a request from the client.

5.2 Interest rate derivatives

For orders in interest rate derivatives that are Tailor-made Financial Instruments, KAS BANK acts as

the counterparty of the client. These instruments are not traded on a regulated trading platform.

The contract between the client and KAS BANK is executed with OTC order execution.

If KAS BANK executes orders in interest rate derivatives that are traded on a regulated trading

platform for clients (pension funds) that are exempted from the central clearing obligation, KAS

BANK can also execute those orders as counterparties or OTCs.

KAS BANK executes orders only OTC after having obtained the consent of the client.

KAS BANK carries out transactions in interest rate derivatives at the place of execution (regulated

platform or OTC) that it deems most suitable to achieve the best possible result, also in light of the

conditions agreed with the client.

KAS BANK collects relevant market data for the optimal execution of orders in Financial Instruments

to measure whether the price offered to the client is fair and meets the obligation of optimal

execution. Here, transactions in interest rate derivatives on behalf of a client are only concluded

with counterparties that have been jointly approved by the client and KAS BANK.

Table 3 in the Appendix to this policy specifies the preferred place of execution of transactions in

interest rate derivatives. This is only deviated from in accordance with a client request.

5.3 Securities Borrowing and Lending

KAS BANK executes transactions in the context of Securities Borrowing and Lending OTC.

16

KAS BANK collects relevant market data for the optimal execution of orders in Custom Financial

Instruments to verify whether the price offered for a client is fair and meets the obligation of

optimal execution. In the event that insufficient market data is available, KAS BANK will charge

transactions depending on the value of the transaction, the term, the collateral to be received and

other characteristics of the transaction, including the liquidity of the securities to be borrowed.

Table 4 in the Appendix to this policy specifies the preferred place of execution.

17

6. Governance

KAS BANK operates according to the 'Three lines of defence model' (hereinafter: '3LoD'), which

originates from the Risk Governance Model of KAS BANK. Within this principle, each line (i.e. the

first, second and third line) has its own role and responsibility in recognising, controlling and

preventing the risks associated with order execution.

As a first line, the Treasury department took measures and set up procedures to identify and

adequately manage the risks involved in the execution of an order.

Treasury has the responsibility for implementing and effectively complying with this policy. This

means, among other things, that it ensures that the relevant employees are aware of this policy

and of the associated procedures and measures, and that this policy is properly safeguarded.

Treasury is responsible for, among other things:

• the selection of KAS BANK's Brokers and

• the annual monitoring of the existing Broker network;

• the annual assessment of the orders executed by Brokers of KAS BANK.

The Compliance department advises and supports the second line Treasury in the implementation of

the policy. Compliance performs periodic monitoring of this policy and the associated procedures.

Compliance submits the monitoring report for approval to the Board of Directors, the Enterprise

Risk Management Committee (ERMC) or the Operational Risk Management Committee (ORMC). The

Managing Director Treasury receives a copy of this report.

As a third line, the Internal Audit Department has the task of giving an independent opinion on the

effectiveness, structure and operation of this policy.

The Internal Audit Department reports on the results to the Board of Directors and the Audit

Committee of KAS BANK.

18

7. Minimum Standards

- KAS BANK focuses on market parties with a low or normal risk profile.

- the responsibilities of the departments involved have been elaborated;

- there is a central registration of all parties;

- the data collected in relation to clients is kept up to date; and

- this policy is, among other things, guaranteed in the order execution process.

8. Publication

The most recent version of KAS BANK's order execution policy is published in the Policy House. The

Policy House therefore contains the applicable policy of KAS BANK.

9. Awareness & Training

In the context of increasing the awareness of employees in the field of the order execution policy,

KAS BANK uses the following means:

• presentations and training courses;

• training in the context of onboarding of new employees;

10. Revision of the policy

This policy document is reviewed annually by the Treasury department, unless there is reason for

an interim review. Treasury, in cooperation with Compliance and possibly with other stakeholders,

tests the policy for accuracy, completeness and topicality.

11. Deviations from the policy

If there are circumstances that may justify deviation from the policy, a special procedure must be

followed to obtain management approval.

The Managing Director Treasury gives written reasons for deviating from this policy and requests

advice from Compliance.

Deviation from the policy is handed over to the ERMC with the Compliance advice, in which both the

first and the second line are represented. The ERMC makes a decision, taking into account the

Compliance advice.

Decisions and actions taken are clearly described in the ERMC meeting minutes.

19

12. Violations of the policy

This policy stems from legal obligations that apply to KAS BANK. Violations of this policy may result

in administrative and criminal sanctions for KAS BANK, damage to its reputation and third-party

claims. KAS BANK therefore expects its employees to act in accordance with this policy. KAS BANK

can impose disciplinary measures where this policy is violated.

13. Effective date

This order execution policy will take effect on 1 May 2018.

20

APPENDIX

Table 1

Financial Instrument Preferred place of execution

Listed securities (such as shares, bonds, other

fixed-income securities, investment institutions

and derivatives)

Direct via memberships:

• Regulated markets of Euronext

• Euronext Best of Book (MTF)

• Bloomberg MTF

Via its broker network*:

• Home market

• MTFs

Financial instruments traded outside the exchange

(including shares, bonds, other fixed-income

securities, investment institutions and derivatives)

Direct via memberships:

Bloomberg MTF

AFS (OTF)

Or via its broker network*:

• MTFs

Participations / shares in unlisted investment

institutions

Directly placed at investment institution

Table 2


Currency transactions, such as FX

Forwards/Swaps, FX NDF’s

FX ALL (Thomson Reuters) (MTF)

Table 3


Interest Rate Derivatives OTC (incl. Bloomberg)

Table 4


Securities Borrowing and Lending

OTC (incl. Bloomberg)

* KAS BANK periodically draws up a list of the execution venues agreed with the Brokers. This list is

available from KAS BANK and is published on the KAS BANK website.

kas bank order execution policy · pdf filec. securities borrowing and lending (sbl) d. ......

Documents