This English translation is provided solely for your convenience. It is not binding for the Bank. The German text is the sole authoritative version and shall prevail in the event of a dispute. You can request the German version from us at any time.
Investment firms are required to ensure that orders from customers to buy or sell financial instruments are executed in accordance with a written policy which aims to produce the best-possible result for the customer.
This does not mean that the execution of each order must actually produce the best result. Rather, the deciding factor is whether the procedure used typically produces the best possible result for the customer.
BayernLB executes orders to buy or sell financial instruments (securities and other financial instruments) in accordance with the following principles.
These principles describe the general procedure used by BayernLB for retail customers and professional customers within the meaning of the German Securities Trading Act (WpHG – Wertpapierhandelsgesetz).
If exeptional market situations or market/system disruptions arise, such as the failure of individual or multiple trading venues, BayernLB may choose an execution that deviates from these principles while safeguarding the customer's interests.
The best execution principles apply equally to retail and professional customers regardless of the type of financial instrument. Unless the customer instructs otherwise, BayernLB always conducts transactions for retail customers using the fixed-price model.
1 Fixed-price transactions
2 Agency transactions
3 Notice about special types of execution
(1) Request-for-Quote-trading for Exchange Traded Funds (ETF):
BayernLB executes orders on Request-for-Quote platforms when instructed to do so by the customer.
RFQ systems allow firm quotes to be obtained from up to eight counterparties before a transaction is conducted. In the first step, BayernLB selects a maximum of eight counterparties with which it has most often conducted transactions in the past relative to all orders.
BayernLB will comply with customers’ wishes for particular counterparties when the counterparties have gone through BayernLB’s know-your-customer process and have been set up for requests in the system.
From the eight quotes, BayernLB will select the one with the best price.
(2) Request-for-Quote-trading for Exchange Traded Derivatives (ETD):
Orders that are supposed to be executed not only on Xetra but also MTFs and alternative trading platforms are only executed by BayernLB when the customer instructs it to do so. In these cases, BayernLB forwards the entire order to Morgan Stanley for execution. Morgan Stanley’s principles of execution then apply.
BayernLB executes orders on Request-for-Quote platforms when instructed to do so by the customer.
This system allows firm quotes to be obtained from up to eight counterparties before a transaction is conducted. In the first step, BayernLB selects a maximum of eight counterparties with which it has most often conducted transactions in the past relative to all order.
BayernLB will comply with customers’ wishes for particular counterparties, when the couterparties can be selected and technically activated for BayernLB on the EUREX EN-Light platform.
From the eight quotes, BayernLB will select the one with the best price.
1. Explanation of the factors in the selection of an execution venue
Pursuant to Section 82 para 2 of the German Securities Trading Act (WpHG), BayernLB is required to take into consideration all criteria relevant to achieving the best execution results when preparing its Best Execution Principles. The criteria include:
Price
The price of a financial instrument depends fundamentally on supply and demand as well as the price determination mechanisms of the execution venue anchored in the regulatory framework. The comparison of price quality between execution venues is based on executed trades.
Costs
Costs consist of two basic components: third-party and own costs. In the first step in determining the best execution venue for customer orders, only third-party costs are considered in accordance with section 33a sub-section 3 of WpHG. Third-party costs incurred arise from the transaction costs (e.g. brokerage, transaction charges) and settlement costs (e.g. clearing fees, delivery fees) payable. In the event that multiple execution venues are shown to be equal, own fees and commission shall be taken into account.
Speed of execution
This refers to the period of time between the presence of an executable order at the execution venue and the execution confirmation by the execution venue.
Likelihood of execution
This describes the probability with which an executable order is executed at the execution location.
Certainty of settlement
Certainty of settlement covers all factors that maximise investor protection:
2 Weighting of factors considered in determining the best execution venue
The criteria are weighted according to the type and size of the order, the customer’s circumstances, the order, the financial instrument and the execution venue.
Unless the customer instructs otherwise, BayernLB always conducts transactions for retail customers using the fixed-price model.
For professional customers, BayernLB gives priority to costs, price and likelihood of execution when determing the best possible execution venue. If more than one execution venue offers the best execution in terms of costs, price and likelihood of execution, then speed of execution and settlement security are evaluated next.
If BayernLB transmits orders, this applies accordingly to the selection of the best possible entity to transmit orders to.
When evaluating which entity to transmit an order to, the costs that the entity charges the customer by class of financial instrument and country of execution are analysed. The costs are based on individual agreements with each entity.
If several execution venues or entities to transmit orders to still offer the best execution, then BayernLB will select one at its discretion.
BayernLB distuinguishes execution venues and entities to transmit orders to by class of financial instrument as well as domestic and foreign. The following table summarises the execution venues and entities that are generally eligible from BayernLB’s point of view.
Financial instrument | Region | Execution venues | Order execution | Order transmission |
---|---|---|---|---|
Equities | Germany | Xetra | X | |
other venues (MTF) | X | |||
Germany, Abroad | Domestic regional exchange | X | ||
Abroad | Various trading venues | X | ||
ETF | Germany | Xetra | X | |
RFQ platforms (Bloomberg RFQE) | X | |||
Abroad | Various trading venues | X | ||
RFQ platforms (Bloomberg RFQE) | X | |||
ETD | Germany | EUREX | X | |
RFQ platforms (EUREX EN-Light) | X | |||
Abroad | Various trading venues | X |
1. Overview of multilateral trading facilities (MTF)
When execution orders for domestic stock exchanges, BayernLB takes the following multilateral trading system (MTFs) into account within the framework of its execution principles.
Multilateral trading facilities (MTF) | Website |
---|---|
AQUIS EXCHANGE | www.aquis.eu |
CBOE DXE Orderbook | www.markets.cboe.com |
TURQUOISE EXCHANGE | www.lseg.com |
2. Overview of Domestic regional exchange
BayernLB forwards orders directly th the forwarding institution Joh. Berenberg, Gossler & Co. KG to execute the order.
Domestic regional exchange | Website |
---|---|
Berlin-Bremen stock exchange | www.boerse-berlin.de |
Dusseldorf stock exchange | www.boerse-duesseldorf.de |
Frankfurt stock exchange | www.boerse-frankfurt.de |
Hamburg-Hannover stock exchange | www.boersenag.de |
Munich stock exchange | www.boerse-muenchen.de |
Stuttgart stock exchange | www.boerse-stuttgart.de |
3. Overview of entities to which orders are transmitted
BayernLB uses the following entities to transmit execute orders.
Entity to which orders are transmitted | Website | Financial instrument |
---|---|---|
Joh. Berenberg, Gossler & Co KG | www.berenberg.de | Equities on domestic regional exchange |
Baader Bank | www.baaderbank.de | Equities and ETFs |
Jefferies GmbH | www.jefferies.com | Equities and ETFs |
Citigroup Global Markets Europe AG | www.citigroup.com | Equities and ETFs |
Credit Suisse Securities S.V.,S.A. | www.credit-suisse.com | Equities and ETFs |
Morgan Stanley Europe SSE | www.morganstanley.com | Equities and ETFs |
UBS Europe SE | www.ubs.com | Equities, ETFs and ETDs |
BayernLB reviews its execution venues and entities for transmitted orders selected in accordance with these principles at least once a year. In addition, the policy is reviewed whenever a major change occurs that leads to the conclusion that executing orders on the execution venues covered by the Execution Principles can no longer be assumed to be always in the customer’s best interests. BayernLB regularly reviews the effectiveness of its Execution Principles and revises them as required.