Order Execution Policy
I. THE POLICY
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Purpose
The purpose of the Order Execution Policy (“the Policy”) is to set out the strategy adopted by Fundsmith LLP (“Fundsmith” or “the Firm”) to obtain the best possible result for each Fund when orders are placed with other entities for execution.
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Introduction
Fundsmith LLP (“Fundsmith” or “the Firm”) is authorised in the UK by the Financial Conduct Authority (“FCA”) as a Collective Portfolio Management Firm. Fundsmith is:
- The authorised corporate director of two open-ended collective investment schemes which are authorised under UK UCITS;
- Authorised under UK AIFMD as a full scope alternative investment fund manager in respect of a closed-ended investment trust listed on the London Stock Exchange, which is considered a UK alternative investment fund (“AIF”).
- Appointed as the investment manager to three US domiciled limited partnerships, which are considered non-UK AIFs.
The above funds are collectively referred to as “Funds”, and each a “Fund”.
The Funds, invest in listed equities on a global basis, employing a buy-and-hold investment strategy that seeks to achieve long-term growth in value. The Firm’s approach is to be a long-term investor in its investee companies and it does not adopt short-term trading strategies.
Fundsmith has delegated the management of trade execution for its Funds to its affiliate, Fundsmith Investment Services Limited (“FISL”). Fundsmith and FISL are related entities by virtue of common ownership. FISL is also the investment manager of the Fundsmith SICAV and a number of segregated mandates. FISL is responsible for the implementation of the Policy in respect of all clients of both firms.
FISL has engaged Northern Trust Securities LLP (“NTS”) to provide broker and trade execution services for the Funds on an agency or matched principal basis. NTS is a leading provider of execution services with in-depth expertise of trade execution across global equity markets. NTS was selected to undertake this function following detailed due diligence of its execution capabilities.
See section four for information on NTS’ selection of execution venues.
See section six for information on Fundsmith’s oversight of FISL and NTS.
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Execution factors
In its role as management company to the Funds, Fundsmith ensures that all sufficient steps are taken to obtain the best possible result for each Fund that it manages when orders are placed on behalf of the Funds with other entities, taking into account:
- price;
- costs;
- speed;
- likelihood of execution;
- likelihood of settlement;
- order size and nature;
- and any other consideration relevant to the execution of the decision to deal,
(collectively, the “Execution Factors”).
When determining the relative importance of the Execution Factors, the following criteria are taken into account:
- the objective, investment policy and risks specific to the Fund, as indicated in its prospectus or its constituting instrument;
- the characteristics of the order;
- the characteristics of the financial instruments that are the subject of the order;
- the characteristics of the execution venues to which the order can be directed.
The relative importance of the Execution Factors will vary considerably between orders. In executing trades, NTS will use their expertise and commercial judgement to evaluate the available market information to achieve the optimal balance across a range of potentially conflicting Execution Factors. Notwithstanding that, in certain situations, the Execution Factors will generally be prioritised as follows:
For orders in equities that are highly liquid, price and costs will usually be the most important Execution Factors. For orders where there is less liquidity, the price, size of order and likelihood of execution tend to be prioritised. Furthermore, given order sizes can be significant, market impact is an important factor and the preference, where possible, will be to trade in blocks.
In responding to significant subscriptions and redemptions, program trades are undertaken, which typically involve single trades in multiple equities. In these circumstances, speed, price and likelihood of execution and settlement tend to be the most important Execution Factors.
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Execution venues
NTS use their expertise and judgement to obtain prices from execution venues including: regulated markets; multilateral trading facilities; organised trading facilities; systematic internalisers; market makers and other liquidity providers; as well as non-UK / non-EU entities performing similar functions to the foregoing.
NTS conduct ongoing monitoring on its chosen execution venues, which includes, but is not limited to, consideration of creditworthiness and financial stability and review of the performance of the execution venue.
See Appendix I for a list of execution venues on which NTS places significant reliance in meeting its obligation to take all reasonable steps to obtain the best possible result for the execution of orders on a consistent basis.
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Execution outside of a trading venue
NTS may execute an order on behalf of the Funds which takes place outside of a trading venue, being a regulated market, a multilateral trading facility or an organised trading facility. Orders executed outside a trading venue may give rise to counterparty risk. Additional information about the consequences of this can be provided on request.
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Oversight
Fundsmith monitors the implementation of the Policy and the effectiveness of the order execution arrangements on a regular basis to identify any deficiencies and correct them where appropriate.
Fundsmith maintains a supplier management framework, the purpose of which is to ensure that suppliers remain appropriate to provide the relevant service. The execution arrangements of FISL and NTS are subject to ongoing oversight to ensure they continue to allow Fundsmith to obtain the best possible results for the Funds on a consistent basis.
The execution quality of NTS is reviewed through second line compliance monitoring that considers third party total cost analysis.
APPENDIX I – NTS' EXECUTION VENUES
A J Bell Securities Limited | First Equity Limited | ODDO BHF SCA |
Abbey Nat. Treasury Serv Plc | First Sentinel Corporate Finance | Old Mission |
Abg Sundal Collier Asa | Fiske plc | Oppenheimer |
Abn Amro Bank N.V | Flow Traders | Optiver V.O.F. |
Academy Securities | Forte Securities Limited | ORA Traders B.V. |
Acg Advisors (Uk) Llp | Freetrade Limited | Otkritie Capital Intl Ltd |
Adm Investor Services Intl Ltd | Gca Altium Limited | Panmure Gordon (Uk) Limited |
Alexander David Securities Ltd | GFI Securities Limited | Pareto Securities |
Alfa Cap Holdings (Cyprus) Ltd | GHC Capital Markets Limited | Pavilion Global Markets Ltd |
Algoengineering Europe Limited | Gibraltar Asset Management Ltd | Peel Hunt Llp |
Algorithmic Trading Group Bv | Global Investment Strategy UK Limited | Pershing |
Alize Trading Sas | Global Liquidity | Peterhouse Capital Limited |
All Options International B.V. | Goldenberg Hehmeyer LLP | Pictet Global Markets (UK) Limited |
Allenby Capital Limited | Goldman Sachs | Pilling & Co Stockbrokers Ltd |
Alliance Trust Savings Limited | Goodbody Stockbrokers Uc | Piper Sandler |
Anglo-Suisse Capital Limited | GPIM Limited | Platform Securities LLP |
Arbuthnot Latham & Co. Limited | GTS | Pragma |
Arctic Securities As | GüX ADR | QCM Cayman Ltd |
Armira Capital Limited | Haitong International (UK) Limited | Quilter Cheviot Ltd |
Arnold Stansby & Co Limited | Halifax Share Dealing Limited | R.J. O'Brien Limited |
Arqaam Capital Limited | Hargreaves Lansdown Asset Mgnt | Radix Trading Europe B.V. |
Atonline Limited | Hauck & Aufhaeuser Privatbankiers Ag | Ravenscroft (CI) Limited |
Aurel BGC | Hedley & Company Stockbrokers Ltd | Raymond James |
Autonomous Research Llp | Hobart Capital Markets Llp | RBC |
Avalon Capital Partners Limited | HSBC | Redburn Atlantic |
Avior Capital Markets Int Limited | Huatai Financial Holdings | Redmayne-Bentley LLP |
Axis Capital Markets Limited | Hubwise Securities Limited | Renaissance Capital Limited |
Baader Bank | Hudson River Trading Europe Ltd | Riverfort Global Capital |
Baird | Hybridan LLP | Rosenblatt |
BAML | IBKR Financial Services AG | Rowan Dartington & Co Limited |
Banca Imi S.P.A. | ICAP | RW Baird |
Banco Santander S.A. | ICBC Standard Bank Plc | S P Angel Corporate Finc Llp |
Bank Julius Baer & Co. Ag | iDealing.com Limited | Samsung |
Bank of Nova Scotia (London Branch) | IG Markets Limited | Sanford Bernstein |
Barclays | IIFL Securities Limited (India Only) | Sanlam Securities UK Limited |
Barratt & Cooke | IMC Trading B.V. | Sapia Partners LLP |
Barrenjoey Markets Pty Ltd | Instinet Europe & APAC Limited | Sberbank CIB (UK) Ltd |
Bcs Prime Brokerage Limited | Interactive Brokers | Sbg Securities Pty Limited |
Beaufort Securities Ltd | Intermonte Sim S.P.A | Scotia |
Berenberg | Intesa Sanpaolo S.p.A. | Seaport Group Securities |
Bell Potter Securities Limited | Investec Bank Plc | SEB |
BestEx | Investment Funds Direct Limited | Seven Investment Management LLP |
BGC Brokers L.P. | ISI US HT | SG Option Europe S.A. |
BGL BNP Paribas | ITAU BBA Securities | Shard Capital Partners Llp |
BIDS Trading | ITI Capital Limited | Shore Capital Stockbrokers Ltd |
Blankstone Sington Limited | J & E Davy | Sigma Broking Limited |
BlockCross | J.M. Finn & Co.Ltd | Skandinaviska Enskilda |
Bmo Capital Markets Limited | J.P. Morgan | SMBC Nikko (Japan Only) |
Bnp Paribas | James Brearley & Sons Limited | Smith & Williamson Investment |
Bradesco | James Sharp & Co LLP | Societe Generale |
Brandon Hill Capital Ltd | Jane Street Financial Limited | Sova Capital Limited |
Brewin Dolphin Limited | Jarvis Investment Management Limited | Spark Capital Advisors (India) Private Limited |
Britannia Global Markets Limited | Jarden | Speedroute |
Bryan Garnier & Company Limited | Jefferies International Ltd | SSW Market Making GmbH |
BTIG | Joh. Berenberg, Gossler & Co. Kg | Stephens |
Cabrera | Jump Trading Europe B.V. | Stern Brothers |
Caixabank | Kbc Securities N.V. | Stifel |
Canaccord | KBW | Stockdale Securities Limited |
Canadian Imperial Bank of Commerce | KCG (VIRTU) | StoneX |
Cantor, Fitzgerald & Co., Inc. | Kempen & Co N.V. | SunTrust |
CAPIS US | Kepler Chevreux | Susquehanna Intl Sec Ltd |
Capital Plus Partners Limited | KeyBanc | Svenska Handelsbanken AB (publ.) |
Cardale Asset Management Limited | Killik & Co LLP | Tavira Securities Limited |
Carnegie Investment Bank Ab | King & Shaxson Limited | Telsey |
Castlefield Investment Partners LLP | Kyte Broking Limited | TFS Derivatives Ltd |
CastleOak Securities | Lakeshore Securities | The Link Asset and Securities Co Ltd |
Cave & Sons Limited | LEK Securities UK Limited | The Share Centre Limited |
Cavendish | LGT Vestra LLP | The Toronto-Dominion Bank |
China International Capital Corporation | LHCM Ltd | Third Platform Services Limited |
CICC | Liberum Capital Limited | Thomas Grant & Company Ltd |
Citadel | Linear Investments Limited | Tigress |
Citigroup Capital Markets | Liquid Capital Australia Pty Ltd | Tilney Investment Management |
Clearpool Technology | Liquidnet | Tourmaline Europe LLP |
CLSA | Lloyds Bank | Tower Research Capital Europe Limited |
CODA | Logic Investments Ltd | Trium Capital Managers Ltd |
Commerzbank Ag | Loop Capital Markets | Tullett Prebon |
Cooperatieve Rabobank U.A. | Louis Capital Markets Uk Llp | Turner Pope Investments (TPI) Ltd |
Cowen Execution Services Limited | Luminex | Two Sigma |
Credit Agricole | LXM Finance LLP | UBS |
Credit Industriel et Commercial | M D Barnard & Co Ltd | UG Europe AG |
Credo Capital Limited | Macquarie | Unicredit Bank Ag |
CWG Markets Ltd | Mainfirst Bank Ag | Utr8 BV |
Daiwa Capital Markets | Marex Financial | Valbury Capital Limited |
Danske Bank As | Mariana UFP LLP | Van Lanschot Kempen Wealth Mgnt |
Dash Financial | Market Wizards B.V. | Vantage Capital Markets LLP |
Deutsche Bank | Maxim Group LLC | Velocity Trade International |
Dinosaur Financial | MCAP | Virtu |
Dnb Bank Asa | Mediobanca - Banca di Credito | Vontobel |
Dougall FIX Connection | Mirabaud Securities Limited | VTB Capital PLC |
Dowgate Cap Stockbrokers Ltd | Mischler Financial Group, Inc. | W H Ireland Limited |
DRW | Mizuho International Plc | Walker Crips Stockbrokers Ltd |
EC Markets Group Ltd | MMX Trading B.V. | Webb Traders B.V. |
Eclipse Futures (HK) Limited | Monecor (London) Limited | Wedbush Europe Limited |
ED&F Man Capital | Morgan Stanley | Wells Fargo |
EFG | Mufg Securities Emea Plc | Whitman Howard Limited |
Embark Investment Services Limited | NAGA Markets Europe | William Blair |
Emkay (India Only) | National Financial Services LLC (Fidelity) | Wilson Advisory (Australia Only) |
Equiniti Financial Services Limited | Natixis | Winterflood Securities Ltd |
Everbright Sun Hung Kai | Natwest Markets Plc | Wolverine |
Execution Noble Ltd | Nomura International Plc | Wood And Company |
Exotix Partners Llp | North South Capital | Xconnect Trading Limited |
Farley & Thompson LLP | Novum Securities Limited | XTX Markets Limited |
Fidante Partners Europe Ltd | Nplusü Singer Capital Mkts Ltd | Zeus Capital Limited |
FinecoBank S.p.A. | Numis Securities Limited | Zurcher Kantonalbank |
Finovesta GmbH | Nyenburgh Holding B.V. |