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Version as of February 2022

Order Execution Policy

This Order Execution Policy is for both professional and retail clients

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DNB has a duty to take all sufficient steps to achieve the best possible result when deciding on behalf of clients where to execute client orders (“best execution”).

1. Purpose of this policy

1.1 Introduction

DNB Bank ASA (“DNB”) is an investment firm, licensed to perform investment services by the Norwegian Financial Supervisory Authority. In DNB, Investment banking activities are performed by the business area DNB Markets. In this document, DNB refers to activities in DNB Markets. Legal requirements for investment firms are set out in the EU Directive MiFID II. As an overarching principle, DNB must act honestly, fairly and professionally in accordance with our clients’ best interest. Specifically, DNB has a duty to take all sufficient steps to achieve the best possible result when deciding on behalf of clients where to execute client orders (“best execution”).

Best execution includes an obligation to implement processes that contribute to best execution and make it possible to document achieved results. This order execution policy is based on the requirements in MiFID II and defines best execution, describes various order types and trading venues, and specifies how DNB has organised trading in financial instruments to deliver best execution to our clients.

1.2 What is Best Execution

When executing client orders in financial instruments, investment firms are required to take all sufficient steps in order to obtain the best possible result for their clients. Taking into account the price, cost, market impact, speed, likelihood of execution, order size, nature, and any other factor relevant for the execution of the order. In general this means that when DNB acts on behalf of a client, DNB have the obligation to deliver the best result to the client. But even where best execution requirements does not apply, DNB must still act honestly, fairly and endeavour to achieve the best possible result for our clients.

2. Scope of this policy

2.1 Instrument Scope

Best execution obligation applies to financial instruments, which includes listed and unlisted securities, such as equities and bonds, as well as money market instruments, interest rate-, foreign exchange- and commodities derivatives, and emission allowances. Best execution obligation does not apply to instruments that are not financial instruments. This means that transactions in FX spot, deposits, loans, repos, and securities financing transactions not deemed financial instruments, are out of scope. FX forwards entered into between DNB and non-financial counterparties, where the purpose of the trade is hedging of commercial payments, the contracts are traded off venue, and the contracts are settled physically, are not subject to the best execution requirement. Likewise, currency exchange in relation to international transfers is not in scope for best execution. Although the aforementioned instruments are not financial instruments, DNB will still endeavour to act in clients’ best interest when clients trade such instruments with DNB.

2.2 Investment services

Best execution applies when DNB performs the following investment services in connection with financial instruments:

2.2.1 Execution of orders on behalf of clients

When providing the investment service “execution of order on client behalf”, DNB acts to conclude agreements to buy or sell financial instruments on behalf of clients. This is for instance the case when DNB is a member of a trading venue and executes an order on the trading venue in DNB’s own name on behalf of a client, or when DNB buys or sells units in investment funds on behalf of a client directly from the management company. When providing the service of execution of order, there is normally no intermediary between DNB acting on the client’s behalf and the execution venue. DNB may execute client orders by dealing on own account. Dealing on own account means trading against proprietary capital, resulting in the conclusion of transaction in financial instruments.

DNB may trade in a principal capacity and execute client orders against its own account, including as a Systematic Internaliser, market maker or liquidity provider. This is the case when clients trade with DNB as a counterparty, for instance when trading bonds or derivatives. When DNB is the counterparty for non-cleared transactions, clients assume counterparty risk towards DNB.

2.2.2 Reception and transmission of client orders

When providing the investment service “receipt and transmission of order”, DNB receives the client order and passes it on to another investment firm for execution. This can for instance be the case when DNB is not a member of the trading venue where the instruments the client wants to buy or sell are admitted to trading.

2.3 Geographical Scope

This order execution policy is valid for all DNB entities, including DNB’s non-Norwegian entities. Please note that the offer of instrument classes differ between the various DNB entities. Therefore, not all instrument classes described in this order execution policy are available at all locations. Likewise, not all entities service retail clients.

3. Execution factors and relative importance

When DNB executes orders on behalf of clients, DNB will take into account:

  • Price
  • Cost
  • Market impact
  • Speed of execution
  • Likelihood for execution and settlement
  • Size
  • Type of order
  • Other relevant factors.

In addition to the aforementioned factors, DNB will consider the type of client (retail/professional), the characteristics of the client order, the characteristics of the financial instruments that are part of the order, and finally the characteristics of the trading systems where orders may be placed.

3.1 Retail Clients

When DNB is executing an order on behalf of a retail client, the provision of best execution will be determined in terms of Total Consideration. Total Consideration is the price of the relevant financial instrument plus the costs related to the execution when passed on to the client. These costs could include expenses incurred that are directly related to the execution of the order, such as execution venue fees, processing costs, clearing and settlement and any other relevant fees paid to third parties involved in the execution of the order, including stamp duty and financial transaction tax. This means that other factors such as swiftness, probability for execution and settlement only take precedence over price and cost if this contributes to the Best Result for the client.

3.2 Professional Clients

DNB will, using its reasonable judgement and commercial experience, determine the relative importance of the execution factors taking into account type of client, type or order, financial instrument involved, available trading venues and prevailing market conditions. Unless special circumstances set forth in this policy apply, DNB’s priority when executing an order for a professional client will be to obtain the best possible result for the client in terms of total consideration. However, there might be situations where execution factors such as potential market impact, speed, and likelihood of execution should be prioritised over price.

3.3 Special Circumstances

There may be some situations where market conditions are severely disrupted, where DNB might not be able to follow the general rule set forth in its policy.

3.4 Spesific Client Instructions

Order-execution instructions from clients (e.g. with a specific price limit or within a specific timeframe) could prevent DNB from executing orders according to our standard procedures and setup for obtaining Best Execution. Consequently, if such instructions are given, the provisions relating to Best Execution for those aspects of the order will not apply.

4. Different methods of executing client orders

In order to obtain best execution for clients, an investment firm may use one or a combination of different methods of execution and also act in different trading capacities. In practice, this will depend on the financial instrument in question. DNB will for some instruments execute orders on behalf of clients by acting as agent or trading on a matched principal basis. When acting as an agent, DNB will on behalf of clients choose the venue where the client order will be executed. This trading capacity is mainly the case when trading equities. When trading as an agent, DNB will choose the venues that on a consistent basis ensure best execution. DNB may also trade as principal, matched principal or riskless principal, as explained above. These trading capacities are mainly used when trading bonds, interest rate derivatives, foreign exchange derivatives, commodity derivatives and equity derivatives. DNB will also trade as principal when trading equities as an SI. Orders that include specific price limits may not always be possible to execute under the prevailing market conditions. DNB will be required to make un-executed limit orders public (i.e. show the order to the market), unless the client gives other instructions. By accepting DNB’s order execution policy, clients authorise DNB to keep an order or parts of it from the public where DNB considers it to be in the clients’ best interest.

5. Timing of the execution of orders

In cases where a client does not give specific instructions, DNB will disclose and commence the execution of the order immediately after receipt of the order from the client. This means that DNB will process incoming orders based on time priority unless DNB considers that the Best Result can be achieved by combining an order with other orders. DNB reserves the right to aggregate client orders with orders from other clients, individuals or companies associated with or not associated with DNB. The aggregation of orders may take place if it is unlikely that aggregation in general will entail a disadvantage for certain clients. However, clients are made aware that the aggregation of orders in certain cases may entail a disadvantage. DNB reserves the right to aggregate client orders with transactions made for DNB' own account. If the total order is only partially executed, client’s orders will be given priority over DNB' orders. However, exceptions apply if DNB is not able to trade under corresponding favourable conditions without aggregation. If orders are received outside the marketplace’s opening hours, orders will normally be executedwhen the marketplace reopens.

6. Execution venues and counterparties

DNB will at all times seek to use the execution venues that will enable us to provide our clients with the best possible result on a continuous basis. As a result DNB could also, where DNB find it beneficiary for the client, execute orders outside a Regulated Market or Multilateral Trading Facility.

Relevant types of execution venues are:

  • Regulated Market (RM)
  • Multilateral Trading Facility (MTF)
  • Systematic Internaliser (SI)
  • Market Maker (MM)
  • Other Liquidity Provider (OLP)
  • Organised trading facility (OTF) - for non-equity instruments

DNB will for some financial instruments take the position as SI, Market Maker, or provide liquidity by quoting prices. This will involve DNB acting as principal. Orders executed through these execution venues will be subject to the same best execution requirement as other orders, in accordance with this execution policy. DNB will also execute orders through other counterparties if favourable for the client. In such cases DNB will make sure that the other party’s execution setup complies with our expectations. These counterparties are well known and respected Investment Firms carefully selected by DNB and listed at www.dnb.no/en/mifid. Please see www.dnb.no/en/mifid for further details on the execution of client orders for a specific class of instrument and a list of execution venues. The list of execution venues will be updated as necessary.

7. Acceptance

When signing DNB’s client agreement, new clients are asked to accept DNB’s order execution policy. Later updates of the execution policy will be handled as follows;

  • Minor changes to the order execution policy will be published on our website. Clients will not receive any notification.
  • Material changes will require a notification to clients. Notifications will be sent by email only, and clients are responsible for providing DNB with an updated email address.

Clients who place orders or request a quote with DNB will be deemed to have accepted the prevailing order execution policy.

8. Monitoring and review

DNB will at all times do our best to secure the best possible result for clients according to this order execution policy. For all instrument classes, pre trade processes have been designed to achieve best execution. Best execution procedures are in place to monitor execution quality. This includes continuous and detailed monitoring of the execution quality and the quality and appropriateness of the execution arrangements. Where available, prices are benchmarked against relevant external and internal reference prices to ensure that best execution is achieved on a consistent basis.

A summary of this monitoring will be published on a yearly basis on our website.This order execution policy is subject to review at least annually, or when an update is needed due to material changes in execution processes. The latest version of this order execution can be found at our MiFid-page.

9. External conditions in the market or in technical systems

Should external conditions occur in the market or in technical systems, DNB refers to our general business terms regarding liability and exemption from liability.

10. Schedules

10.1 Equities

10.1.1 Products in scope

This appendix to the DNB order execution policy provides further details regarding the application of best execution requirements in relation to equities and equity-like instruments. This includes equities, primary capital certificates, preference shares, ADRs, warrants and exchange traded products such as Exchange Traded Funds (ETF) and Exchange Traded Notes (ETN). Equity instruments may be listed on a regulated marked, multilateral trading facility, or they could be unlisted. The aforementioned instruments have different characteristics, among them different risk factors, liquidity and credit risk.

10.1.2 How DNB executes client orders and applies best execution

When executing client orders in equity and equity-like instruments, DNB may act on an agency basis, or as a principal, as described below. Orders will by default be sent through DNB’s Smart Order Router (SOR) on their way to the market unless the client gives any special instructions. SOR is a system with access to several execution venues available to DNB and picks shares where the best price is available. The SOR may include DNB’s SI as one possible execution venue. The SOR may, if it finds it suitable, split the main order and execute on several execution venues, in accordance with this order execution policy. DNB may also match two client orders internally where DNB finds it to be in the interest of the client and within the current market regulations.

DNB will take the role as Systematic Internaliser(SI) in some equities (see complete list at www.dnb.no/en/mifid). DNB acts as principal when trading as an SI. DNB may also reply to a client’s request for quote (RFQ). The price will depend on market conditions, size of the order, liquidity etc. In these situations, when trading on own account DNB will use “The four fold legitimate reliance test” to determine whether DNB owe best execution obligations to clients, taking into account the following factors:

  1. which party initiates the transaction – the client or the firm;
  2. questions of market practice and the existence of a convention to ‘shop around’;
  3. the relative levels of price transparency within a market; and
  4. information provided by DNB.

10.1.3 Prioritisation of Execution Factors

When executing client orders to which best execution applies, DNB will take the following Execution Factors into account:

i. Price

ii. Costs

iii. Market Impact

iv. Speed

v. Likelihood of execution and settlement

vi. Size, and

vii. Nature or any other consideration relevant to the order.

For equities and equity-like instruments DNB will normally execute orders for retail and professional clients the same way. However, for professional clients, there may be situations where possible market impact, speed and likelihood of execution will be prioritised over price.

10.1.4 Order/quote-handling process

Clients trading equities and equity-like instruments interact with DNB in various ways. Clients may place their order or RFQs manually or electronically. A non-exhaustive list includes telephone, Bloomberg, and other electronic trading channels, such as trading via dnb.no. DNB may use algorithms when executing client orders. These algorithms are intended to minimise the market impact and may execute orders according to certain benchmarks, such as trading a percent of the market volume during a period of time.

Orders entered electronically may be transmitted directly to the market according to the specifications from the client. The order will be routed through our SOR or algorithm engine, unless there is a specific instruction on the execution venue. Orders received by e.g. telephone or Bloomberg will be sent to the market or algorithm engine, according to specifications from the client.Orders with validity for more than one day will on daily basis be withdrawn from the market and resent as a new order the following morning unless the client expressly requests an overnight order to be placed on a specific execution venue.

10.1.5 Execution venues and counterparties

DNB uses several venues to execute client orders in equities and equity-like instruments. In some situations DNB may also use other investment firms to execute client orders. A list of the relevant execution venues and investment firms can be found at www.dnb.no/mifid. This list will be updated when necessary. Clients will not be notified separately of any changes to these venues and should therefore refer to the current list of Execution Venues from time to time.

10.1.6 Benchmarking and monitoring

For equities and equity-like instruments DNB will benchmark executed transactions against available market data by use of a transaction cost analysis (TCA). Internal policies are established to monitor and follow up on outliers. For the previous reporting period, DNB has used external TCA tools to periodically and randomly investigate the execution quality of single orders and periods of trading.

10.2 Debt instruments

10.2.1 Products in scope

This appendix to the DNB order execution policy provides further details regarding the application of best execution requirements in relation to debt instruments. Debt instruments include bonds, such as government bonds, corporate bonds (including High Yield Bonds), Floating and Fixed Rate Notes, hybrid bonds, covered bonds, convertible bonds, commercial paper (CP), and money market instruments, such as government securities and CDs. The list is not exhaustive. The aforementioned instruments have different characteristics, among them different risk profiles, liquidity and counterparty risk.

10.2.2 How DNB applies best execution

When trading debt instruments with professional and retail clients, DNB normally acts on a principal or matched principal basis. DNB will seek to quote a fair price, consisting of the bid/ask price DNB would obtain under the prevailing market conditions, and a margin. In the all-in price, the margin included shall cover the bank’s costs related to market risk, counterparty risk, funding, capital adequacy requirements, operational costs, taxes, execution venue fees, clearing fees, settlement costs and a profit to the bank. When pricing a bond, the price will be based on transaction data and observable prices in the market. In certain instruments and under certain market conditions there may be limited or no information available about current market prices. In such cases, the price will be based on a best estimate, in accordance with the current pricing of similar instruments and/or issuers. In cases where a client wants to sell bonds that DNB does not want to keep in our inventory, DNB will have to search for a buyer in the market. Likewise, in cases where a client wants to invest in a bond that DNB does not keep in stock, DNB will have to contact possible sellers. Margins may in such cases increase to reflect the efforts made by DNB.

10.2.3 How DNB quotes prices and applies best execution

Clients trading bonds interact with DNB in various ways. Clients may request quotes manually by telephone, or by electronic channels such as Bloomberg. DNB will quote a price, and trades are concluded when clients and DNB agree on a price. Best execution does not apply when clients accept prices quoted.

10.2.4 Execution venues and counterparties

Bonds are normally traded off exchange. This means that liquidity is obtained through client orders, by using DNB’s own trading book, or by sourcing liquidity in the market. DNB trades as Principal, whereby the execution venue will be DNB. This means that DNB is the client’s counterparty in the transaction.

10.2.5 Benchmarking and monitoring

DNB will benchmark executed bond transactions against available market data by use of a transaction cost analysis (TCA). Internal policies are established to monitor and follow up on outliers.

10.3 Interest rate derivatives

10.3.1 Products in scope

This appendix to the DNB execution policy provides further details regarding the application of best execution requirements in relation to interest rate derivatives. This includes forward rate agreements, interest rate swaps, cross currency swaps, interest rate futures, interest rate options, and combinations thereof.

10.3.2 How DNB quotes prices and applies best execution

Interest rate derivatives are traded on a request for quote basis. When trading interest rate derivatives with professional and retail clients, DNB acts on a principal basis. Best execution does not apply when clients accept prices quoted. DNB will seek to quote a fair price, consisting of the bid/ask price DNB would obtain under the prevailing market conditions, and a margin. In the all-in price, the margin included shall cover the bank’s costs related to market risk, counterparty risk, funding, capital adequacy requirements, operational costs, taxes, execution venue fees, clearing fees, settlement costs and a profit to the bank. When pricing an interest rate derivative, the price will be based on DNB’s own interest rate curves, volatility surfaces etc., and observable prices from other market participants. In certain instruments and under certain market conditions there may be limited or no information available about current market prices. In such cases, the price will be based on a best estimate, in accordance with DNB’s own interest rate curves, predicted volatility etc. Margins will be added to the bid/ask price, and will vary from client to client, dependent on the size and maturity of the transaction, capital adequacy requirements, the client’s risk of default, clearing costs, funding costs, the transaction’s effect on risk in the client’s current portfolio of transactions with DNB, etc.

10.3.3 Quote-handling process

Clients trading interest rate derivatives interact with DNB in various ways. Clients may request quotes manually by telephone, or by electronic channels. DNB will quote a price, and trades are concluded when clients and DNB agree on a price. DNB does not accept orders in interest rate derivatives.

10.3.4 Execution venues and counterparties

DNB trades as Principal when trading interest rate derivatives with clients. DNB will as a consequence be counterparty and execution venue for these instruments.

10.3.5 Benchmarking and monitoring

For interest rate derivatives DNB will benchmark executed transactions against available market data by use of a transaction cost analysis (TCA). Internal policies are established to monitor and follow up on outliers.

10.4 FX spot

10.4.1 Products in scope

This appendix to the DNB order execution policy provides further details regarding trading and execution of FX spot contracts. FX spot is not subject to the best execution requirements. However, DNB has an obligation to act honestly, fairly, and in the clients’ best interest. Below, DNB will describe how trading in FX spot is undertaken.

10.4.2 How DNB trades FX spot

Unless other is specifically agreed, DNB will transact with all clients, including professional and retail clients, solely as an at-risk principal. In such capacity DNB does not act as an agent. DNB will always seek to quote a fair price, based upon the bid/ask price DNB can expect to obtain under the prevailing market conditions for a similar type of transaction, adding a mark-up or markdown to cover market risk and operational costs etc., including a profit to the bank. In addition, mark-ups and markdowns will vary dependent on the size of the transaction, liquidity in the relevant market and historical and expected turnover, including trading behaviour, of each specific individual client/client group.

10.4.3 Order/quote-handling process

An “order” in FX spot refers to any request by a client to enter into a transaction with DNB on terms consistent with those specified by the client, including orders with terms that permit DNB to exercise discretion as to the price, time or size at which DNB may agree to enter into a transaction with the client. DNB will look for market opportunities that satisfy the terms of a client’s order. DNB will exercise our reasonable discretion in entering into a transaction based on a client’s order with respect to fill quantity, execution time, prioritisation, and whether to pre-hedge the order or use internal or external sources of liquidity. When DNB accepts to “work” an order on behalf of a client, DNB will attempt to enter into a transaction within the price, time and size parameters requested by the client. Our receipt of an order does not create a contract between DNB and a client. No transaction or other contract will result from an order until DNB confirms to the client that the order has been partially or fully filled.

Price provision and execution

As a market-maker DNB may have a number of positions and execute against competing orders of multiple counterparties, as well as to satisfy our own interests. As a consequence of the above DNB may trade with other counterparties prior to or alongside the client order (“pre-hedging”) or executing against a client or counterparty’s order. All quotes provided to a client are indicative quotes unless otherwise is indicated, i.e. by providing a quote in response to a request for a firm quote, e.g. a “request for quote” or a “request for stream”.

Any price quoted to a client is an “all-in” price, which includes a margin.

10.4.4 Execution venues and counterparties

DNB utilises a wide variety of execution venues and other market participants when trading FX spot in the interbank market. When trading with clients, DNB offers manual execution, by phone, and electronic execution via trading venues, MTFs (e.g. FXAll, Bloomberg and 360T) in addition to execution via the trading platform on the bank’s website, www.dnb.no. DNB acts in all circumstances and in all venues as a principal.

10.5 Foreign Exchange Derivatives

10.5.1 Products in scope

This appendix to the DNB execution policy provides further details regarding the application of best execution requirements in relation to foreign exchange (“FX”) derivatives. This includes FX forwards, FX swaps, FX options and non-deliverable forwards, swaps and options.

FX forwards entered into between DNB and non-financial counterparties, where the purpose of the trade is hedging of commercial payments and the contracts are settled physically, are not subject to the best execution requirement.

10.5.2 How DNB quotes prices and applies best execution

Foreign exchange derivatives are traded on a request for quote basis. When trading FX derivatives with professional and retail clients, DNB acts on a principal basis. Best execution does not apply when clients accept prices quoted. DNB will seek to quote all clients, including retail and professional clients, a fair price, consisting of the bid/ask price DNB would obtain under the prevailing market conditions, and a margin. The agreed price includes costs and charges, covering the bank’s costs related to market risk, counterparty risk, funding, capital adequacy requirements, operational costs, taxes, execution venue fees, clearing fees, settlement costs and a profit to the bank. When checking market price levels, DNB will utilise observable quotes in relevant markets and market places, executed trades and prevailing market conditions. In certain instruments and under certain market conditions there may be neither indicative quotes for the requested trade nor information available about recent similar trades. In such cases, the price will be based on DNB’s assumption of a correct price, taking into consideration the actual market conditions, adjusted for relevant risk factors, including the potential lack of an underlying market for the requested trade. Margins (mark-ups and markdowns) will vary, based on several factors. In addition to the factors described above, mark-ups and markdowns will vary, dependent on the size and the duration of the requested transactions, in addition to trading behaviour and historical and expected turnover of each specific individual client/client group.

10.5.3 Quote-handling process

Clients trading FX derivatives may interact with DNB in various ways. Clients may request quotes by telephone, or by electronic means, including MTFs such as Bloomberg FXGO or FXAll. DNB will quote a price upon request for the client to accept or reject. A trade is concluded when the client and DNB agree upon the requested trade. When clients are requesting and executing trades via electronic means, the trade is concluded when the trade is accepted by the client and confirmed as executed by DNB. Best execution does not apply when clients accept prices quoted.

When offering execution through electronic execution platforms, DNB will apply “last look” to manage execution risk without degrading the quality of spreads and provided liquidity. In this, last look is utilised to protect us from communication latencies in instances where a client requests to trade on an indicated price that has changed or become stale. Along with staleness checks DNB performs a price check. If, after a receipt of a client’s request to trade, the price for a transaction is at a level beyond a threshold applied in our acceptance logic, DNB will reject the trade request.

DNB only accepts orders i.e. “at-best” or “limit” orders in FX spot. DNB does not accept similar orders in any FX derivative.

10.5.4 Execution venues and counterparties

DNB trades as Principal when trading FX derivatives with clients. DNB may act as a Systematic Internaliser (SI), and as a consequence be counterparty and execution venue for these instruments. In addition, DNB will be a potential counterparty for clients who trade on MTFs i.e. Bloomberg FXGO, FXAll and 360T.

10.5.4 Benchmarking and monitoring

For FX forwards DNB will benchmark executed transactions against available market data by use of transaction cost analysis (TCA). Internal policies are established to monitor and follow up on outliers.

10.6 Commodity Derivatives

10.6.1 Products in scope

This appendix to the DNB execution policy provides further details regarding the application of best execution requirements in relation to commodity derivatives. This includes futures, forwards, swaps and options, and combinations thereof, with various underlying commodities.

10.6.2 How DNB quotes prices and applies best execution

Commodity derivatives are traded on a request for quote basis. When trading commodity derivatives with professional and retail clients, DNB acts on a principal basis. Best execution does not apply when clients accept prices quoted. DNB will seek to quote a fair price, consisting of the bid/ask price DNB would obtain under the prevailing market conditions, and a margin. In the all-in price, the margin included shall cover the bank’s costs related to market risk, counterparty risk, funding, capital adequacy requirements, operational costs, taxes, execution venue fees, clearing fees, settlement costs and a profit to the bank. When pricing a commodity derivative, the price will be based on DNB’s own view of the market level, as well as forward curves and volatility curves for each respective underlying commodity, and observable prices from other market participants. In certain instruments and under certain market conditions there may be limited or no information available about current market prices. In such cases, DNB reserves the right to refrain from quoting on a client request. Quotes provided to a client are indicative quotes unless explicitly stated as a firm and tradeable quote.

10.6.3 Quote-handling process

Clients trading commodity derivatives interact with DNB in various ways. Clients may request quotes manually by telephone, or by electronic channels. DNB will quote a price, and trades are concluded when clients and DNB agree on a price. DNB may receive orders in commodity derivatives. An “order” refers to any request by a client to enter into a transaction with DNB on terms consistent with those specified by the client, including orders with terms that permit DNB to exercise discretion as to the price, time or size at which DNB may agree to enter into a transaction with the client. When DNB accepts to “work” an order on behalf of a client, DNB will enter into a transaction within the price, time and size parameters requested by the client. Our receipt of an order does not create a contract between DNB and a client. No transaction or other contract will result from an order until DNB confirms to the client that the order has been partially or fully filled. DNB may look for market opportunities that satisfy or improve the terms of a client’s order. DNB will exercise our reasonable discretion in entering into a transaction based on a client’s order, including with respect to fill quantity, execution time, prioritisation and whether to use internal or external sources of liquidity.

10.6.4 Execution venues and counterparties

DNB trades as Principal when trading commodity derivatives with clients. DNB will as a consequence be counterparty and execution venue for these instruments.

10.6.5 Benchmarking and monitoring

For commodity derivatives DNB will benchmark executed transactions against market data. Internal Systems are in place to record observed price levels. Recorded data will be used in random checks to monitor client prices and the corresponding market levels at the time of the transaction.

10.7 Equity derivatives

10.7.1 Products in scope

This appendix to the DNB order execution policy provides further details regarding the application of best execution requirements in relation to equity derivatives. Equity derivatives include index futures, index options, stock forwards, stock options, total return swaps (TRS) and other tailor-made derivatives. Equity derivatives may be exchange traded derivatives or OTC derivatives.

10.7.2 How DNB applies best execution

Equity derivatives are traded both on an agency and request for quote basis. DNB will normally execute orders for retail and professional clients the same way. When quoting a price in an exchange traded derivative, DNB will seek to quote a fair price taking into account the size of the order compared to the liquidity in the market. The client may enter an agency order if the client does not want to accept the quoted price. When quoting a price in an OTC-derivative, DNB will seek to quote a fair price taking into account DNB’s forecast on dividend, volatility curves, interest rate curves, and observable market prices from similar derivatives. In certain instruments and under certain market conditions there may be limited or no information available about similar market prices. In such cases, the price will be based on a best estimate, in accordance with DNB’s forecast on dividend and predicted volatility. Best execution does not apply when clients accept prices quoted. DNB will take the role as Systematic Internaliser (SI) in some OTC-derivatives (see complete list at www.dnb.no/en/mifid ). DNB acts as principal when trading as an SI. In the bid/ask price DNB may include a margin to cover capital adequacy requirements, the client’s risk of default, netting agreements, clearing costs, funding costs, the transaction’s effect on risk in the client’s current portfolio of transactions with DNB, etc. The imbedded margin will therefore vary from client to client.

10.7.3 Prioritisation of Execution Factors

When executing client orders to which best execution applies DNB shall take the following Execution Factors into account:

  1. Price
  2. Speed
  3. Likelihood of execution
  4. Size, and
  5. Nature or any other consideration relevant to the order.

10.7.4 Order/quote-handling process

Clients trading equity derivatives interact with DNB in various ways. Clients may place an order or request for quote manually by telephone or by electronic communication channels such as Bloomberg. When receiving an order DNB will work the order according to specifications from the client when deciding to trade on a quoted price or to work the order in the market. DNB may use algorithms when executing client orders. These algorithms are intended to minimise the market impact and may execute orders according to certain benchmarks, such as trading a certain percent of the market volume during a period of time.

10.7.5 Execution venues and counterparties

Exchange traded derivatives will be executed at the execution venue where the instrument is listed. DNB are using other investment firms to execute client orders in exchange traded non-Nordic equity derivatives. DNB reviews market structure changes on an ongoing basis and execution venues are included or

removed based on the liquidity offered. Execution venues available in the reporting period have changed as a result of this process. DNB trades as Principal when trading unlisted OTC derivatives with clients.

10.7.6 Benchmarking and monitoring

Executions in exchange traded derivatives are monitored and internal policies are established to follow up on outliers.

Order Execution Policy for print (PDF)

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