1. General
1.1 Introduction
Resonanz Capital GmbH (“RC”) provides its clients with portfolio management services and invests in units of investment funds, listed securities and derivatives on behalf of clients.
To carry out these services, RC executes orders on behalf of clients and transmits or places orders for clients with other entities for execution. RC is required to take all sufficient steps to obtain the best possible result for its clients.[1] This Policy refers to this overarching principle as RC’s duty to deliver “Best Execution.”
1.2 Scope
This Policy and its overarching principle apply to all RC staff members permitted to place client orders (the “Business”).
It also applies to:
· Portfolio management services made on behalf of Professional Clients only (“Clients”), and thus the requirements for retail clients under §82(3) WpHG do not apply and
· Transactions made in any financial instruments as defined in §2(4) WpHG (“Financial Instruments”).
These include, but are not limited to:
· Units in investment assets (e.g., UCITS and AIFs)
· Securities (e.g. shares, bonds)
· Derivative transactions (e.g. total return swaps) and
· Market money instruments.
2. Best Execution Principles
2.1 Best Execution Obligations
When RC executes orders for Clients, Business has the direct responsibility for best execution for Client orders. When RC places or transmits orders for Clients, Business relies on either brokers or other counterparties to execute orders on an agency basis. If RC relies on other counterparties to execute orders on an agency basis, these entities are responsible for the duty of best execution.
2.2 When Best Execution Obligations Do Not Apply – Specific Client Instructions
When a Client gives RC specific instructions as to how Business should execute the Client’s order, Business must give priority to that instruction over the requirements set forth in this Policy. For example, when a Client gives RC specific instructions on the use of a particular broker or brokers, Business is not required to seek a better price from another broker.[2]
Where any Client’s instruction relates to only part of the order, Business must apply this Policy to those aspects of the order not covered by the Client’s specific instruction.[3]
While RC will attempt to provide best execution as far as possible, any specific Client instructions may prevent RC from taking steps that it has designed and implemented in this Policy to obtain the best possible result. In such cases RC’s obligation to fulfill its best execution obligations under §82(4) WpHG are deemed fulfilled.
2.3 Best Execution Considerations
Business must take all sufficient steps to obtain the best possible result for RC’s Clients and must consider the following execution criteria:
· Price of the financial instrument
· Costs associated with the order execution
· Speed
· Likelihood of execution
· Likelihood of settlement
· Size and
· Nature of order.[4]
Business must weigh the above criteria in respect of the characteristics of the Client, the Client order, the Financial Instrument and the execution venue.[5]
2.4 Best Execution Considerations when Placing Orders in Units of Investment Assets
2.4.1 Direct Subscriptions and Redemptions
RC invests in Financial Instruments such as units in investment assets (e.g., UCITs and AIFs) by subscribing to or redeeming such units directly with the fund’s appointed transfer agent at the applicable net asset value (“NAV”).
When RC subscribes or redeems a unit in an investment asset, the concept of execution venue is not applicable due to the nature of this type of Financial Instrument. Thus, this criterion will not be weighted when considering the criteria for best execution of this type of Financial Instrument.
Business will, however, consider and weight the following criteria:
· Costs (e.g., subscription or redemption fees, distribution channel or currency conversion costs)
· Share class selection and
· Timing of the order’s submission (e.g. before or after the cut-off time of the daily NAV).
If RC can prioritize saving costs without jeopardizing the order or delaying it, Business will proceed accordingly. However, saving costs may not always be in the Client’s best interest. In such cases, Business will also consider timing, liquidity, expected returns and other relevant factors.
2.5 Best Execution Considerations when Placing Orders in Securities (e.g. shares or bonds)
RC invests in Financial Instruments such as securities and primarily invests in sovereign bonds.
Trades in these securities are typically executed on electronic execution venues and Business uses a request for quote model that requires approximately three brokers to quote their best price. Business uses the brokers that are documented in RC’s Broker List.
Business also checks that the broker’s offers and execution of the transaction are at arm's length and maintains transparent procedures and comprehensible documentation of each material step of a transaction and is accountable to RC.
RC's primary objective is to obtain the security’s best possible overall price, which also includes all costs associated with the purchase or sale of the security, for its Client. In addition, Business will take into consideration and weight the criteria in Section 2.3 as well as the:
· Reliability of the available broker
· Experience gained with the available broker
· Market conditions and
· Pre- and post-trade transparency guaranteed by the respective brokers/execution venue.[6]
Business’ procedure to select the best broker must be designed so that external auditors can verify the result. Merely, a verifiable selection process must be documented; it is not necessary to provide an explicit justification for each execution venue included in Business’ selection of the best broker.
2.6 Best Execution Considerations when Placing Orders in Derivative Transactions
RC invests in Financial Instruments such as derivatives transactions (e.g. total return swaps). Business trades the derivatives transactions over-the-counter (“OTC”) on a bilateral basis.
When RC invests in OTC derivative transactions, the concept of execution venues is not applicable due to the nature of this type of Financial Instrument. Thus, this criterion will not be weighted when considering the criteria for best execution of this type of Financial Instrument.
For these types of Financial Instruments, RC is limited to working with the named counterparty in its clients’ Derivates Master Agreement or ISDA Agreement (“Framework Agreement”). Business negotiates directly the economic terms of the derivative transaction in the schedules and confirmations under its clients’ existing Framework Agreements. These schedules and confirmations are the result of this bilateral negotiation and specific to each trade.
In its negotiations, Business verifies the price fairness by gathering objective market data, and where possible, by comparing similar or comparable products.[7]
3. Notification to Clients
RC shall communicate its Best Execution Policy to its Clients prior to the first provision of investment services and shall also make it available on its website.[8] In those instances where RC is acting as an outsourced asset manager, RC will provide this policy to the legal fund manager (KVG), who will in turn provide it to the fund’s Clients.
4. Receipt of Remuneration
Business must not accept:
· Remuneration
· A discount nor
· A non-monetary benefit
whether for executing Client orders at a particular execution venue or for routing client orders to a particular execution venue.[9]
5. Annual Review
The Chief Compliance Officer will monitor adherence to this Policy at least annually. This is done by randomly monitoring the actual orders executed.[10]
6. Definitions
For the purposes of this Policy, the following definitions apply:
Bestmögliche Ausführung von Kundenaufträgen means best possible execution for client orders.
Financial Instruments are those instruments as defined in §2(4) WpHG.
Professional Client is a client who possesses the experience, knowledge and expertise to make its own investment decisions and properly assess the risks that it incurs and must fulfill certain criteria set forth under Article 4(10) MiFID II and Annex II and §67(2) WpHG.
WpHG means the German Securities Act.
[1] Art. 27 of the Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments (“MiFID II”); § 82(1) Wertpapierhandelsgesetz (“WpHG”) – Bestmögliche Ausführung von Kundenaufträgen
[2] Article 64(2) of the Commission Delegated Regulation (EU) 2017/565 (“MiFID II Delegated Regulation”); §82(9) WpHG - Bestmögliche Ausführung von Kundenaufträgen
[3] Section 5, Article 64(2) MiFID II Delegated Regulation; §82(9) WpHG - Bestmögliche Ausführung von Kundenaufträgen
[4] § 82(1-2) WpHG – Bestmögliche Ausführung von Kundenaufträgen
[5] § 82(2) WpHG – Bestmögliche Ausführung von Kundenaufträgen
[6] BT 4.1 MaComp
[7] Article 64(4) MiFID II Delegated Regulation; §82(9) WpHG - Bestmögliche Ausführung von Kundenaufträgen
[8] §82(6) WpHG – Bestmögliche Ausführung von Kundenaufträgen
[9] §82(8) WpHG – Bestmögliche Ausführung von Kundenaufträgen
[10] BT 4.3 MaComp