This document sets out Interactive Brokers (U.K.) Limited ("IBKR UK") order execution policy ("Policy") in respect of its retail and professional clients ("you" or "Client") for transactions in financial instruments covered by the Client Agreement For Certain Products Carried By Interactive Brokers (U.K.) Limited (collectively, "Carried Products"). This Policy does not cover trading in any product carried in accounts held at IBKR UK's U.S. affiliate Interactive Brokers LLC. This document summarises the arrangements that IBKR UK has put in place to provide its direct carried-clients with best execution when IBKR UK executes an order on their behalf in relation to any Carried Products.
IBKR UK provides execution-only electronic brokerage services to you. The orders you submit to IBKR UK through the Interactive Brokers Group's ("IB") trading platforms are executed by IBKR UK on your behalf by electronically routing them to markets or dealers using IB's proprietary order routing technology.
When IBKR UK executes an order on your behalf, IBKR UK will take all sufficient steps to obtain the best possible result for you taking into account the best execution factors including price, costs, speed, likelihood of execution, size, nature of an order and any other consideration relevant to the execution of the order such as the nature of the relevant market, prevailing market conditions and possible market impact.
The relative importance of each of the execution factors may depend on:
IBKR UK determines whether you are a retail or professional client at account opening in accordance with the rules of the UK Financial Conduct Authority ("FCA Rules").
The execution factors are applied on a trade-by-trade basis taking into account whether the order is marketable or not. A marketable order is a buy order with a price at or above the lowest offer in the market or a sell order with a price at or below the highest bid in the market.
For marketable orders, the primary execution factor is either total consideration or price depending on your instruction. The total consideration represents the price of the financial instrument and the costs related to execution ("external cost"), which include all expenses incurred by the client which are directly related to the execution of the order, including execution fees, clearing and settlement fees and other fees paid to third parties involved in the execution of the order.
For non-marketable orders, the primary execution factor for clients on a fixed commission structure (which covers all external costs) is likelihood of execution. The primary execution factors for clients on a tiered commission structure (where clients pay for external costs) are typically a blend of cost and likelihood of execution.
Both in the case of marketable and non-marketable orders, the remaining execution factors – order size, nature of the order and any other consideration relevant to the efficient execution of you order – are generally secondary and applied where they may optimise the primary factors.
When submitting an order through the IB trading platforms, you may choose smart order routing or provide specific instructions to directly route your orders to your chosen venue. Your orders may be filled in one or multiple market transactions across one or more execution venues. IBKR UK will deal fairly and in due turn with all orders received from its clients. To the extent it is reasonably practicable to do so, IBKR UK will deal with all orders in accordance with this Policy and its general terms and conditions.
IBKR UK offers smart order routing for products that are listed on more than one execution venue. SmartRouting is a proprietary computerised routing algorithm designed to optimise both speed and either price or total consideration, by continuously scanning the bids and offers at each of those competing execution venues and automatically routing orders directly to the best execution venues or dealer.
SmartRouting is premised upon the principle that an order is most likely to be executed at the optimal price, at the greatest speed and with the highest levels of accuracy and certainty of completion if that order is submitted via direct access to a fully automated market venue. Moreover, to the extent that an order is associated with a product listed on multiple market venues, smart order routing is achieved by constantly reviewing the bids and offers at each of those venues and by directing the order to the venue offering the best total consideration or the best price, if price has been selected as the primary execution factor.
For retail clients, the best possible result achievable for the client is determined by reference to the total consideration. Total consideration is the prioritised factor where the "Cost-Considered when Routing" functionality is active in the IB trading platforms, which is the default option unless the client selects "Price". Otherwise SmartRouting will direct the order to the venue providing the best price.
Clients may provide specific client instructions for any given order. The IB trading platforms offer access to numerous order types, including both native (exchange-supported order type) and simulated (order type created by IB). The IB trading platforms also enable clients to provide order instructions with respect to pricing, timing, speed, price improvement and other advanced trading functions.
Where you provide specific instructions to route orders directly via the IB trading platforms to the order book of a particular venue of your choice, you should be aware that any specific instructions may prevent IBKR UK from taking the steps that IBKR UK has designed and implemented in this Policy to obtain the best execution. To the extent that IBKR UK is able to accommodate such requests, IBKR UK will give the specific instructions precedence over the SmartRouting process, this may result in a different outcome for the trade than that which solely relies on SmartRouting.
Order Types and Algorithms
IB trading platforms provide you with the functionalities to choose your own order types based on the characteristics of the financial instrument, the characteristics of the order, and your own objectives and specific execution strategies.
IB trading platforms support over 60 order types and algorithms that allow you to tailor your orders to, among other things, include instructions concerning pricing or timing of orders or to speed execution, provide price improvement, limit risk, time the market and allow privacy. The information on order types and algorithms is made available on the IBKR UK website under the Technology menu option and then Order Types and Algos. You may find specific information on the order types and algorithms by sorting the order types and algorithms by product and/or category.
Specifying a Venue
Each execution venue administers its own set of trading rules. Accordingly, if you decide not to select SmartRouting, you should be familiar with the various trading and order handling rules of those market venues to which you intend to direct route your orders. A complete listing of market venues along with website links is made available on the IBKR UK website under the Products menu option and then Exchange Listings.
Where IBKR UK is a member of a trading venue, IBKR UK also executes orders on behalf of IBKR UK affiliates. The IBKR UK affiliates route their clients' orders to IBKR UK and IBKR UK executes these orders as venue-specific orders.
Our policy is to maintain a choice of venues and entities that are most likely to provide you with best execution on a consistent basis. IBKR UK considers a wide variety of execution venues and entities based upon the level of relevance the execution venues maintain within their particular region in addition to factors such as product breadth, liquidity, electronic access, costs and speed and likelihood of settlement.
IBKR UK periodically considers the emergence of new venues which are currently unavailable or changes to existing venues with respect to the product offerings, and takes into account the quarterly execution quality publications to compare possible competing venues. IBKR UK conducts trading venues review when there is a material change and at least annually.
The venues will typically fall into the classification of regulated markets, Multilateral Trading Facilities, systemic internalisers, and third-party investment firms, brokers and/or affiliates acting as a market maker or liquidity provider.
Third party brokers
Where we use a third party broker to execute transactions we retain an overarching best execution obligation, subject to the facts and circumstances surrounding the relevant market and the terms and instructions provided by you. We satisfy this obligation by undertaking due diligence to validate the adequacy of the third party broker's execution performance and connectivity and to ensure that there are satisfactory arrangements to ensure the confidentiality of our order flow and execution instructions.
For certain financial instruments IBKR UK executes on a single venue or with a single liquidity provider, IBKR UK will consider periodically whether IBKR UK can reasonably expect that the execution venue or liquidity provider will enable us to obtain results for our clients that are at least as good as the results that we can reasonably expect from using alternative execution venues or dealer.
Over-the-Counter Trades Executed by IBKR UK
When executing orders in Over-the-Counter ("OTC") products including bespoke products, you may utilise the information made available on the Trader Work Station to check the price of the underlying financial instrument used in the estimation of the price of the OTC product and, where you subscribed for market data, by comparing with similar or comparable products to gauge the fairness of the price of the OTC product proposed to you.
IBKR UK conducts systematic testing and monitoring to assess the effectiveness of our overall execution arrangements. This Policy is reviewed on an annual basis or on the occurrence of a material change in our execution arrangements or in our underlying regulatory obligations. The purpose of the review is to carry out an overall assessment of whether this Policy and IBKR UK's execution arrangements are reasonably designed to enable IBKR UK to obtain the best possible result for the execution of our client orders. The review will include consideration of venue reviews, including any venue removal and selection, any modifications required to this Policy, including the relative importance of the best execution factors.
We will notify you of any material changes to our execution policy. For other updates, including the list of execution venues and entities, please refer to the relevant sections on our website.
Pursuant to the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act 2019, Interactive Brokers Australia Pty. Ltd. has prepared the following target market determinations relating to certain financial products for which it is deemed to be the issuer. Our Target Market Determinations are located here: Target Market Determinations.
Product Disclosure Statements are also available for each of these products. You should carefully consider these Disclosures in deciding whether to acquire, or to continue to hold, the relevant financial product.