# Best Execution Policy: [Firm name]

> Order execution policy and its monitoring framework for an investment
> firm that executes client orders, places them with brokers in
> portfolio management, or receives and transmits them. It sets the
> execution factors and their relative importance by asset class, the
> venues and brokers used and how they are selected, order handling and
> allocation, treatment of specific instructions, costs and the ban on
> payment for order flow, monitoring and transaction cost analysis,
> annual review, client information and records. Based on MiFID II
> (Directive 2014/65/EU) Articles 24, 27 and 28 as amended by Directive
> (EU) 2024/790 (transposition by 2025-09-29), MiFIR (Regulation (EU)
> No 600/2014) Article 39a as inserted by Regulation (EU) 2024/791,
> Commission Delegated Regulation (EU) 2017/565 Articles 64 to 70, and
> Commission Delegated Regulation (EU) 2026/825 on order execution
> policies (applies from 2028-02-12). US rows reflect the SEC
> interpretation of the adviser's duty of care (Release IA-5248, 2019).
> Replace every `[bracketed]` value and every row marked *Example*. This
> is a document format, not legal or investment advice. Obtain the law
> and the rules for the normative text.

<!--
Guidance: How to use this template
- Start with section 1. Which obligations apply depends on the service:
  firms that execute orders follow MiFID II Article 27 and Delegated
  Regulation 2017/565 Article 64 and 66; portfolio managers and
  reception-and-transmission firms that place orders with brokers follow
  Article 65 of the Delegated Regulation. Many firms do both.
- Plan for Delegated Regulation (EU) 2026/825 now. It entered into
  force in August 2026 and applies from 2028-02-12. It adds required
  policy contents (venue list fields, routing criteria, single-venue
  justification, monitoring thresholds, classes of instruments). The
  sections below already carry its structure; mark items "from
  2028-02-12" until then. 2026/825 applies to firms executing client
  orders; check whether your competent authority expects it for
  Article 65 placement and transmission flows.
- The public venue reports (RTS 27) and top-five reports (RTS 28) are
  gone: Directive (EU) 2024/790 deleted Article 27(2) and 27(6) and
  replaced Article 27(3) (now a post-execution venue notice for
  instruments under the trading obligations), and Delegated Regulation 2026/825 repeals Delegated
  Regulations 2017/575 and 2017/576. Do not keep producing them as a
  legal requirement; keep internal monitoring.
- Keep the factor tables, venue list and thresholds in appendices that
  the best execution committee can update without re-approving the whole
  policy, but record every change in the revision history.
- Related documents: Conflicts of Interest Register
  (`compliance/conflicts-of-interest-register`), Research and Soft
  Dollar Policy (`compliance/research-and-soft-dollar-policy`), Form ADV
  Part 2A Brochure (`compliance/form-adv-part-2a-brochure`, Item 12),
  Annual Compliance Review (`compliance/annual-compliance-review`),
  Valuation Policy (`compliance/valuation-policy`), MiFID Suitability
  Report (`compliance/mifid-suitability-report`).
-->

## Document control

<!-- Guidance: Identify the firm, the services and entities covered, and the body that approves the policy. A change to venues relied on significantly, to factor priorities or to routing logic is a material change and must be notified to clients with an ongoing relationship. -->

| Field | Value |
|---|---|
| Document ID | [POL-BEX-001] |
| Version | [1.0] |
| Status | [Draft / Approved / Superseded] |
| Owner | [@head-of-trading] |
| Approvers/reviewers | [@management-body], [@best-execution-committee], [@compliance], [@risk] |
| Last updated | YYYY-MM-DD |
| Classification | [Internal; client summary public] |
| Entities covered | [Legal names, licences, competent authorities] |
| Services covered | [Execution of orders / Portfolio management / Reception and transmission / Dealing on own account] |
| Client categories | [Retail / Professional / Eligible counterparties (out of scope under MiFID II Art. 30)] |
| Effective date | YYYY-MM-DD |
| Next annual review | YYYY-MM-DD |

*Example*: POL-BEX-001 version 3.0 for Kestrel Bay Capital Europe
(fictional MiFID investment firm: portfolio management and reception and
transmission of orders for retail and professional clients) and, in the
US rows, its affiliate Kestrel Bay Capital (fictional SEC-registered
investment adviser). Kestrel Bay Capital Europe does not deal on own
account; it executes euro bond orders itself by request for quote on
multilateral trading facilities and places all other orders with
approved brokers.

### Approvals

| Body or role | Name | Decision | Date |
|---|---|---|---|
| Management body | [Chair] | [Approved] | YYYY-MM-DD |
| Best execution committee | [Chair] | [Recommended] | YYYY-MM-DD |
| Compliance | [Name] | [Reviewed] | YYYY-MM-DD |

### Revision history

| Version | Date | Author | Change |
|---|---|---|---|
| 2.0 | YYYY-MM-DD | [@head-of-trading] | RTS 28 top-five report removed after Directive (EU) 2024/790 transposition |
| 3.0 | YYYY-MM-DD | [@head-of-trading] | Restructured for Delegated Regulation (EU) 2026/825; payment for order flow ban confirmed after national exemptions ended on 2026-06-30 |
| [x.y] | YYYY-MM-DD | [@author] | [Change] |

## Contents

1. [Purpose scope and legal basis](#1-purpose-scope-and-legal-basis)
2. [Governance and responsibilities](#2-governance-and-responsibilities)
3. [Execution factors and their relative importance](#3-execution-factors-and-their-relative-importance)
4. [Classes of instruments and execution approach](#4-classes-of-instruments-and-execution-approach)
5. [Execution venues and brokers](#5-execution-venues-and-brokers)
6. [Order routing criteria](#6-order-routing-criteria)
7. [Order handling aggregation and allocation](#7-order-handling-aggregation-and-allocation)
8. [Specific client instructions](#8-specific-client-instructions)
9. [Price fairness for OTC instruments](#9-price-fairness-for-otc-instruments)
10. [Costs commissions and payment for order flow](#10-costs-commissions-and-payment-for-order-flow)
11. [Monitoring and transaction cost analysis](#11-monitoring-and-transaction-cost-analysis)
12. [Annual review and material change](#12-annual-review-and-material-change)
13. [Client information and consent](#13-client-information-and-consent)
14. [Records](#14-records)
15. [Jurisdiction notes](#15-jurisdiction-notes)
16. [Glossary and references](#16-glossary-and-references)
17. [Standard and licence note](#standard-and-licence-note)

## 1. Purpose scope and legal basis

<!-- Guidance: State what "best execution" means for the firm and which obligations apply to which service. The core duty is to take all sufficient steps to obtain the best possible result for clients, considering the execution factors in MiFID II Article 27(1). Pitfall: one generic policy for a firm that both executes and transmits orders, without showing which rule governs which flow. -->

The firm takes all sufficient steps to obtain, on a consistent basis,
the best possible result for its clients when it executes their orders,
or when it places or transmits orders with other entities for
execution. Best possible result does not mean the best price on every
single order; it means a process that is designed to achieve the best
result across orders and is shown to work through monitoring.

| Service or flow | Obligation (reference) | Section |
|---|---|---|
| Execution of client orders | MiFID II Art. 27(1), (4), (5), (7); Del. Reg. 2017/565 Art. 64, 66 | 3 to 13 |
| Portfolio management placing orders with brokers | Del. Reg. 2017/565 Art. 65(1), (4) to (7) | 5, 11, 12 |
| Reception and transmission of orders | Del. Reg. 2017/565 Art. 65(2), (4) to (7) | 5, 11, 12 |
| Client order handling | MiFID II Art. 28; Del. Reg. 2017/565 Art. 67 to 70 | 7 |
| Payment for order flow | MiFIR Art. 39a | 10 |
| Execution of client orders, from 2028-02-12 | Del. Reg. (EU) 2026/825 Art. 2 to 9 (apply as good practice to Art. 65 placement and transmission flows) | 4 to 6, 11, 12 |
| US adviser trades | Advisers Act fiduciary duty of care (Release IA-5248) | 15 |

Out of scope: transactions with eligible counterparties (MiFID II
Article 30), except where the firm has agreed otherwise, and
subscriptions or redemptions of fund units dealt at net asset value
with the fund's transfer agent, where the only factor the firm controls
is the timing of the order and the share class chosen.

*Example*: all three flows apply to Kestrel Bay Capital Europe:
execution (euro bonds by request for quote), portfolio management
(equities, ETFs and listed derivatives through brokers) and reception
and transmission (advisory clients' orders passed to brokers).

## 2. Governance and responsibilities

<!-- Guidance: Name who owns the policy, who monitors it and who challenges it. Monitoring by the same desk that executes is first-line control; compliance provides independent oversight. Pitfall: a committee that meets but never changes a broker or a factor ranking because no thresholds are set. -->

| Role | Responsibility |
|---|---|
| Management body | Approves the policy and receives the annual effectiveness report |
| Best execution committee | Approves venue and broker list changes, reviews monitoring results, decides remediation |
| Head of trading | Owns the policy, factor tables and routing rules; first-line monitoring |
| Traders | Apply the policy, record the rationale for non-standard execution |
| Compliance | Independent testing, exception review, client complaint review |
| Risk | Counterparty and operational risk assessment of venues and brokers |
| Operations | Settlement quality data, failed trade reporting |

Committee *Example*: chair is the chief operating officer, members are
the head of trading, the head of portfolio management, compliance and
risk; meets quarterly and after any trigger in section 12; quorum three
members including compliance; minutes kept for five years.

```mermaid
flowchart LR
  A["Order from portfolio manager or client"] --> B["Pre-trade checks and order record"]
  B --> C{"Specific client instruction?"}
  C -- Yes --> D["Follow instruction for that aspect"]
  C -- No --> E["Routing criteria by class"]
  D --> F["Execution or placement with broker"]
  E --> F
  F --> G["Allocation and client confirmation"]
  G --> H["Post-trade monitoring and TCA"]
  H --> I["Committee review and remediation"]
  I --> E
```

## 3. Execution factors and their relative importance

<!-- Guidance: Rank the execution factors (price, costs, speed, likelihood of execution and settlement, size, nature, other relevant considerations) per class of instrument and client type, using the criteria in Delegated Regulation 2017/565 Article 64(1). For retail clients the best result is judged by total consideration (MiFID II Article 27(1)). Pitfall: ranking price first for everything, including illiquid bonds where likelihood of execution decides the outcome. -->

The relative importance of the factors depends on the characteristics
of the client (retail or professional), of the order (size, urgency,
securities financing transaction), of the instrument and of the venues
available (Delegated Regulation 2017/565 Article 64(1)). For retail
clients, total consideration (price plus all costs directly related to
execution, including venue, clearing and settlement fees) takes
precedence; other factors count only to the extent that they improve
total consideration.

| Class | Client | 1st | 2nd | 3rd | 4th | Notes (*Example*) |
|---|---|---|---|---|---|---|
| Shares, liquid | Retail | Total consideration | Likelihood of execution | Speed | Size | Total consideration decides |
| Shares, liquid | Professional | Price | Market impact (size) | Costs | Likelihood | Algorithms used for orders above 10% of average daily volume |
| Shares, small cap | Both | Likelihood of execution | Price | Size | Costs | Liquidity drives the outcome |
| ETFs | Both | Price (spread to fair value) | Likelihood | Costs | Size | Request for quote to market makers for large orders |
| Bonds | Both | Price | Likelihood of execution | Size | Settlement | At least three quotes where available |
| Listed derivatives | Professional | Price | Speed | Likelihood | Costs | Exchange-traded only |
| FX for settlement | Both | Price (spread) | Costs | Speed | Settlement | Compared with an independent benchmark rate |
| Fund units at NAV | Both | Timing | Costs (share class) | Not applicable | Not applicable | No venue choice; outside the best execution scope (section 1), shown for order handling only |

Record the reason whenever a trader departs from the ranking, for
example by giving speed precedence ahead of an announced event.

## 4. Classes of instruments and execution approach

<!-- Guidance: List the classes of instruments the firm trades and identify sub-classes where execution methods differ or the class is too broad for monitoring. From 2028-02-12 the classes follow the Annex of Delegated Regulation 2026/825 (Article 9). Pitfall: one "equities" class that mixes large-cap order book trading with small-cap block trades. -->

Classes in the Annex of Delegated Regulation 2026/825 (names
abbreviated): shares and depositary receipts; ETFs, ETNs and ETCs;
certificates and other equity-like instruments; bonds and money market
instruments; structured finance products; options and futures admitted
to trading on a trading venue; other derivatives; contracts for
difference; emission allowances; other instruments.

| Class ID | Class (Annex) | Sub-class (firm) | Execution method | Who executes |
|---|---|---|---|---|
| CL-01 *(Example)* | Shares and depositary receipts | EU large and mid cap | Broker algorithms on lit and dark venues | Approved brokers |
| CL-02 *(Example)* | Shares and depositary receipts | Small cap and blocks | Broker high-touch, block venues | Approved brokers |
| CL-03 *(Example)* | ETFs, ETNs, ETCs | All | Request for quote to at least three market makers above EUR 500,000; on exchange below | Brokers and RFQ platforms |
| CL-04 *(Example)* | Bonds and money market instruments | Euro government and corporate | Request for quote on MTFs | Firm (execution) |
| CL-05 *(Example)* | Options and futures on a trading venue | Index futures | Direct market access through clearing broker | Approved brokers |
| [CL-NN] | [Class] | [Sub-class] | [Method] | [Who] |

## 5. Execution venues and brokers

<!-- Guidance: Keep an internal list of venues and brokers with the fields that Delegated Regulation 2026/825 Article 2(2) will require (from 2028-02-12), and set selection criteria (Article 3). Where only one venue is used for a class, justify it (Article 3(3)). For portfolio management and transmission, list the entities the firm places orders with (Delegated Regulation 2017/565 Article 65(5)). Pitfall: a broker list without approval dates, approvers or permitted classes. -->

### 5.1 Internal list

| Venue or broker ID | Name and identifier (LEI or MIC) | Approved on | Approved by | Classes | Transaction types | Client types | Limitations |
|---|---|---|---|---|---|---|---|
| VEN-001 *(Example)* | [Broker A], LEI [code] | 2025-03-12 | Best execution committee | CL-01, CL-02 | Cash equity, no SFT | Retail and professional | None |
| VEN-002 *(Example)* | [Broker B], LEI [code] | 2025-03-12 | Best execution committee | CL-01, CL-03, CL-05 | Cash equity, futures | Retail and professional | Futures for professional clients only |
| VEN-003 *(Example)* | [Bond MTF 1], MIC [code] | 2024-11-07 | Best execution committee | CL-04 | Cash bonds | Retail and professional | None |
| VEN-004 *(Example)* | [Bond MTF 2], MIC [code] | 2026-02-19 | Best execution committee | CL-04 | Cash bonds | Professional | Retail orders only if no quote on VEN-003 |
| [VEN-NNN] | [Name, ID] | YYYY-MM-DD | [Body] | [Classes] | [Types] | [Clients] | [Limits] |

Record the measures the firm takes to confirm that each venue is
authorised by its competent authority, or by the third-country
authority (Delegated Regulation 2026/825 Article 2(1)(b)).

### 5.2 Selection and review criteria

Select venues and brokers by reference to the characteristics and
needs of the clients and to the execution factors, including the order
types available, typical order sizes and frequencies, execution prices
compared with reference data, and the fees and costs the firm pays
(execution and trading fees, membership and connectivity, clearing,
settlement and custody).

Broker scorecard *(Example)*, weights add up to 100%:

| Criterion | Weight | Broker A score (1 to 5) | Weighted |
|---|---|---|---|
| Execution quality versus benchmarks | 40% | 4 | 1.60 |
| Total cost (commission and fees) | 20% | 3 | 0.60 |
| Settlement quality (fails, timeliness) | 15% | 5 | 0.75 |
| Operational and counterparty risk | 15% | 4 | 0.60 |
| Service, access to liquidity, reporting | 10% | 4 | 0.40 |
| **Total** | **100%** | | **3.95** |

Brokers scoring below 3.00 for two consecutive quarters are placed on
watch; below 2.50 they are suspended pending committee review
(*Example* thresholds).

### 5.3 Single venue justification

If one venue or one broker is used for a class or for all orders,
explain why that choice obtains the best possible result on a
consistent basis and compare it periodically with alternatives
(Delegated Regulation 2026/825 Articles 3(3) and 8(3)).

| Class | Single venue or broker | Justification | Last comparison |
|---|---|---|---|
| [Class] | [Name] | [Reason, data] | YYYY-MM-DD |

## 6. Order routing criteria

<!-- Guidance: Where an order could go to two or more listed venues or brokers, state the criteria and their relative importance for choosing one (Delegated Regulation 2026/825 Article 4). For retail clients only criteria that affect total consideration count. Describe any automatic router. Pitfall: routing logic configured by a vendor that the firm cannot explain. -->

| Criterion | Retail orders | Professional orders |
|---|---|---|
| Class of instrument | Determines the eligible venues | Determines the eligible venues |
| All execution-related costs including the firm's own commissions | Decisive with price (total consideration) | Considered with price |
| Size and nature of the order | Only where it changes total consideration | Algorithm and venue choice |
| Market data, including historical data | Fill rates and price improvement by venue | Fill rates, market impact, venue toxicity |

Automatic order routing *(Example)*: Broker A's smart order router is
used for CL-01. The firm reviews the router's documented logic each
year, receives venue-level fill data monthly and tests that routing
follows total consideration for retail orders. Record the main
characteristics of any router and the arrangements that keep it
consistent with these criteria.

## 7. Order handling aggregation and allocation

<!-- Guidance: Record orders promptly and accurately, execute comparable orders in sequence, and aggregate only when it is unlikely to disadvantage any client, with disclosure and a written allocation policy (Delegated Regulation 2017/565 Articles 67 and 68). Pitfall: allocating partial fills after seeing the prices, which can favour some accounts. -->

Rules:

- Record each order with time, client or account, instrument, side,
  size, order type and any instruction before it is worked.
- Execute otherwise comparable client orders in the sequence received,
  unless the order characteristics or market conditions make this
  impracticable or client interests require otherwise.
- Tell retail clients promptly about any material difficulty in
  carrying out their orders.
- Aggregate client orders, or client and own-account orders, only under
  the conditions of Article 68 and Article 69 of the Delegated
  Regulation, and allocate under the pre-set allocation below.
- Allocate partial fills pro rata to the pre-trade intended quantities,
  at the average price, unless a documented exception applies
  (minimum lot sizes, de minimis amounts).

Partial fill *(Example)*: an aggregated buy order for 30,000 shares for
three portfolios (15,000, 10,000 and 5,000) is 80% filled (24,000
shares at an average price of EUR 42.57). Pro rata allocation: 12,000,
8,000 and 4,000 shares, each at EUR 42.57. Check: 12,000 + 8,000 +
4,000 = 24,000.

## 8. Specific client instructions

<!-- Guidance: A specific instruction satisfies the duty only for the aspect it covers (Delegated Regulation 2017/565 Article 64(2)). From 2028-02-12, the policy must say how instructions are told apart from ordinary orders and how venue choice offered to retail clients is handled (Delegated Regulation 2026/825 Article 5). Pitfall: treating a client's choice of limit price as an instruction that switches off best execution for the whole order. -->

Clients are warned clearly that a specific instruction may prevent the
firm from following the steps in this policy for the parts of the
order the instruction covers (Delegated Regulation 2017/565 Article
66(3)(f)). The firm treats only the instructed aspect as instructed and
applies this policy to all other aspects of the order.

| Instruction type | Treated as specific instruction for | Policy still applies to |
|---|---|---|
| Client names a venue | Venue | Timing, order type, price within the venue |
| Client sets a limit price | Price limit | Venue, routing, timing within the limit |
| Client asks for execution at the close | Timing | Venue choice for the closing auction |
| Client chooses one of several options offered by the firm | The option chosen | All other aspects |

If the firm invites retail clients to choose a venue, it must not steer
the choice by its pricing; where commissions differ by venue, it
explains the differences (Delegated Regulation 2017/565 Article 64(3)
and 66(4), (5)). If the client does not choose, the order is routed
under this policy.

## 9. Price fairness for OTC instruments

<!-- Guidance: For OTC products, including bespoke ones, check the fairness of the price proposed to the client by gathering market data and comparing with similar products (Delegated Regulation 2017/565 Article 64(4)). From 2028-02-12 the policy lists the valuation arrangements and data providers used (Delegated Regulation 2026/825 Article 2(3)). Pitfall: accepting a single dealer quote for an illiquid bond without any reference price. -->

| Class | Reference data (*Example*) | Data provider | Fallback |
|---|---|---|---|
| Euro government bonds | Composite mid price at time of execution | [Provider] | Comparable bonds of the same issuer and maturity |
| Euro corporate bonds | Composite price, evaluated price | [Provider] | Spread to a comparable bond or curve |
| FX forwards | Spot plus forward points from an independent source | [Provider] | Internal model from interest rate differentials |
| [Class] | [Data] | [Provider] | [Fallback] |

Bond request for quote *(Example)*: sell EUR 2,000,000 nominal of a
euro corporate bond. Quotes received: 98.62, 98.55 and 98.70. Executed
at 98.70 with the best bidder; clean proceeds EUR 1,974,000
(2,000,000 x 0.9870). Improvement against the second-best quote:
0.08 points x EUR 20,000 per point = EUR 1,600. Composite mid at
execution was 98.78, so the execution was 0.08 points (8.1 basis points
of price) below mid, within the *Example* threshold of 15 basis points
for investment-grade corporate bonds of this size.

The firm does not deal on own account. A firm that does must specify
how it obtains the best result when dealing against the client, how it
manages the conflict, how it checks price fairness against market
prices or, failing that, comparable instruments or a model (Delegated
Regulation 2026/825 Article 6).

## 10. Costs commissions and payment for order flow

<!-- Guidance: Do not structure or charge commissions to discriminate unfairly between venues (Delegated Regulation 2017/565 Article 64(3)). Investment firms acting for retail or professional clients must not receive payment for order flow (MiFIR Article 39a, inserted by Regulation (EU) 2024/791); the transitional national exemption ended on 2026-06-30. Pitfall: venue rebates that benefit the firm rather than the client. -->

Rules:

- The firm does not receive any fee, commission or non-monetary
  benefit from a third party for executing client orders on a
  particular venue or for forwarding them to a third party for
  execution on a particular venue (MiFIR Article 39a(1)). Rebates or
  discounts on venue fees under a public tariff are acceptable only if
  they benefit the client exclusively and give the firm no monetary
  benefit.
- Commissions are set per class and are disclosed in the client fee
  schedule. Where commissions differ by venue, the differences are
  explained to clients.
- Any inducement related to execution venues is disclosed and must
  comply with MiFID II Article 24(9) (Delegated Regulation 2017/565
  Article 66(6)). Research paid with execution commissions follows the
  Research and Soft Dollar Policy (`compliance/research-and-soft-dollar-policy`).
- Portfolio management: third-party payments are not accepted or kept,
  other than minor non-monetary benefits disclosed to clients (MiFID II
  Article 24(8)).

Retail total consideration *(Example)*: a retail client buys 200 shares
at EUR 42.57; firm commission 0.10% (EUR 8.51), venue and clearing fees
EUR 1.50. Total consideration EUR 8,514.00 + 8.51 + 1.50 =
EUR 8,524.01. A venue showing EUR 42.56 with EUR 4.00 fees gives
EUR 8,512.00 + 8.51 + 4.00 = EUR 8,524.51 (commission unchanged), so
the first venue gives the better total consideration despite the worse
price.

## 11. Monitoring and transaction cost analysis

<!-- Guidance: Monitor whether orders follow the policy and whether execution quality is achieved on a consistent basis (MiFID II Article 27(7)). From 2028-02-12, set pre-determined thresholds per class on a representative sample: accepted price deviation from reference data, minimum share of volume and minimum number of orders meeting the reference values (Delegated Regulation 2026/825 Article 7). Pitfall: TCA reports that are produced and filed without thresholds or follow-up. -->

### 11.1 Measures

Implementation shortfall for a fully executed buy order, in basis
points of the arrival value:

$$
IS_{\text{bp}} = \frac{Q\,(\bar{P}_{\text{exec}} - P_{\text{arrival}}) + C + F}{Q\,P_{\text{arrival}}} \times 10{,}000
$$

where $Q$ is the quantity, $\bar{P}_{\text{exec}}$ the average
execution price, $P_{\text{arrival}}$ the price when the order reached
the desk, $C$ the commission and $F$ other fees. For a sell order,
reverse the sign of the price term.

*Example*: buy 10,000 shares, arrival price EUR 42.50, average
execution EUR 42.57, commission 4 basis points on EUR 425,700
(EUR 170.28), fees EUR 25.00.

| Component | EUR | Basis points of EUR 425,000 |
|---|---|---|
| Price (10,000 x 0.07) | 700.00 | 16.47 |
| Commission | 170.28 | 4.01 |
| Fees | 25.00 | 0.59 |
| **Total implementation shortfall** | **895.28** | **21.07** |

The result is within the *Example* threshold of 25 basis points for
CL-01 orders between 5% and 10% of average daily volume.

### 11.2 Thresholds and sample

| Class | Reference data | Accepted deviation (*Example*) | Minimum share of volume within reference (*Example*) | Minimum orders in sample (*Example*) |
|---|---|---|---|---|
| CL-01 | Arrival price and venue best bid and offer, consolidated tape where available | 25 bp implementation shortfall | 95% | 200 per quarter |
| CL-03 | Fair value from creation basket (iNAV) | 10 bp from iNAV | 90% | 50 per quarter |
| CL-04 | Composite mid at execution | 15 bp from mid | 90% | 100 per quarter |
| [Class] | [Data] | [Deviation] | [%] | [Number] |

### 11.3 Exceptions and follow-up

| Exception ID | Date | Order and class | Breach | Root cause | Action | Closed |
|---|---|---|---|---|---|---|
| BEX-EXC-001 *(Example)* | 2026-08-14 | Buy small-cap shares, CL-02 | 62 bp shortfall versus 40 bp threshold | Liquidity fell after a profit warning; trader prioritised completion | Rationale accepted; no broker issue | 2026-08-21 |
| BEX-EXC-002 *(Example)* | 2026-09-03 | Sell bond, CL-04 | Single quote only | Illiquid issue | Price checked against evaluated price; accepted | 2026-09-05 |
| [BEX-EXC-NNN] | YYYY-MM-DD | [Order] | [Breach] | [Cause] | [Action] | YYYY-MM-DD |

## 12. Annual review and material change

<!-- Guidance: Review the policy and arrangements at least annually and whenever a material change affects the ability to obtain the best result (Delegated Regulation 2017/565 Article 66(1); from 2028-02-12 also Delegated Regulation 2026/825 Article 8). Correct deficiencies within a reasonable time. Pitfall: an annual review that is a re-approval of the same text without looking at the monitoring data. -->

The review covers at least: monitoring results and exceptions; fees and
costs paid to venues and brokers; market developments, including
liquidity dry-ups, and their effect on venues; new venues and their
functions, fees, transparency and liquidity; venues that disappeared;
and, where a single venue is used, a comparison with alternatives.

| Trigger ID | Material change (*Example*) | Action |
|---|---|---|
| MC-001 | A venue or broker relied on significantly is lost, merged or degraded | Out-of-cycle review, client notification |
| MC-002 | Monitoring shows non-compliance with the policy or the Article 27(1) duty | Root cause, remediation plan, committee decision |
| MC-003 | New consolidated tape data or new venue changes the best available result | Review venue list and routing |
| MC-004 | Regulatory change (for example, Delegated Regulation 2026/825 application on 2028-02-12) | Policy update and approval |

Annual review record *(Example)*: review of 2026-10-08 covered
4,812 orders. CL-01: 96.4% of volume within threshold (minimum 95%);
CL-04: 88.0% within threshold (minimum 90%), traced to one MTF with
thin dealer participation in high-yield issues. Action: extend VEN-004
to retail high-yield orders and require two venues for every high-yield
RFQ; re-test in Q1 2027.

## 13. Client information and consent

<!-- Guidance: Give clients appropriate information on the policy in good time, obtain their prior consent to it, and obtain express consent before executing outside a trading venue (MiFID II Article 27(5)). Notify clients with an ongoing relationship of material changes (Article 27(7) as amended). Pitfall: a client summary that lists venues but does not explain the factor priorities. -->

The client summary contains, adapted to the class and service
(Delegated Regulation 2017/565 Article 66(2), (3)):

- the relative importance of the factors, or the process to set it;
- the venues or brokers relied on significantly, per class and for
  retail, professional and securities financing orders;
- the factors used to select venues, including qualitative ones;
- whether orders may be executed outside a trading venue, the
  consequences such as counterparty risk, and more detail on request;
- a clear warning about specific instructions;
- a summary of venue selection, execution strategies and how execution
  quality is monitored and verified.

| Item | Method | Record |
|---|---|---|
| Policy summary delivered | [Durable medium / website under the Article 3(2) conditions] | [Date, version] |
| Prior consent to the policy | [Account opening form, tick box] | [Reference] |
| Express consent to execution outside a trading venue | [General agreement / per transaction] | [Reference] |
| Notification of material changes | [Email, portal] | [Date, version] |
| Venue of execution for instruments under trading obligations | [Trade confirmation field] | MiFID II Art. 27(3) as replaced |
| Demonstration on request | [Process, response time] | MiFID II Art. 27(8) |

The public annual reports on execution venues and the top five venues
(RTS 27 and RTS 28) are no longer required in the EU; do not describe
them to clients as a regulatory publication. Check whether national law
or Delegated Regulation 2017/565 Article 65(6) in its current
consolidated form still requires any publication for portfolio managers
and transmitting firms.

## 14. Records

<!-- Guidance: Keep the records needed to reconstruct each order and to show that the policy was followed and monitored (MiFID II Article 16(6); Delegated Regulation 2017/565 Article 72 and Annex I). Pitfall: keeping trade data but not the quotes, the reference prices or the trader's rationale. -->

| Record | Content | Retention (*Example*) |
|---|---|---|
| Order record | Time stamps, instructions, routing, venue, fills | 5 years, or longer if national law requires |
| Quotes and RFQ log | Dealers asked, quotes, time, winner | 5 years |
| Reference price snapshots | Composite or tape prices used for checks | 5 years |
| Trader rationale for exceptions | Free text with time stamp | 5 years |
| Monitoring and TCA reports | Monthly, quarterly, annual | 5 years |
| Committee minutes and venue approvals | Decisions, approvers, data used | 5 years |
| Client consents and notifications | Policy version, dates | Life of relationship plus 5 years |
| Telephone and electronic communications | Order-related | As required by MiFID II Art. 16(7) and national law |

## 15. Jurisdiction notes

<!-- Guidance: Keep one row per regime the firm operates in. Rows are as of 2026-10; check local law. Pitfall: copying an EU policy for a UK or US entity without checking the local rules. -->

| Jurisdiction | Rule set (names and numbers) | Notes as of 2026-10 |
|---|---|---|
| EU | MiFID II Art. 24, 27, 28 (as amended by Directive (EU) 2024/790); MiFIR Art. 39a; Del. Reg. 2017/565 Art. 64 to 70; Del. Reg. (EU) 2026/825 | 2026/825 applies from 2028-02-12; public RTS 27 and RTS 28 reporting removed; payment for order flow banned, national exemptions ended 2026-06-30 |
| UK | FCA Handbook COBS 11.2A (MiFID business), COBS 11.2 and 11.2B; PRIN 2A Consumer Duty | FCA removed RTS 27 and RTS 28 reporting from 2021-12-01 (PS21/20). Reference only; obtain the Handbook |
| US, investment adviser | Advisers Act fiduciary duty: duty of care includes the duty to seek best execution (SEC Release IA-5248, 2019); Form ADV Part 2A Item 12 brokerage practices; Exchange Act Section 28(e) for research | Periodic and systematic evaluation of execution quality is expected; disclose soft dollar and directed brokerage practices |
| US, broker-dealer | FINRA Rule 5310 (cited by number only); SEC Regulation NMS order routing disclosures | Applies to the broker, not to the adviser |
| [Other] | [Rule] | [Note] |

## 16. Glossary and references

<!-- Guidance: Define the terms used and list the sources. Pitfall: using desk jargon (IS, iNAV, RFQ) in the client summary without explanation. -->

| Term | Meaning |
|---|---|
| Best possible result | The outcome the policy is designed to achieve for clients on a consistent basis, judged on the execution factors |
| Total consideration | Price of the instrument plus all costs directly related to execution, for retail clients |
| Execution venue | Regulated market, MTF, OTF, systematic internaliser, market maker or other liquidity provider, or a similar third-country entity |
| Request for quote (RFQ) | Asking several dealers for prices before trading |
| Implementation shortfall | Difference between the value at arrival price and the value achieved, including costs |
| iNAV | Indicative net asset value of an ETF during the trading day |
| Payment for order flow | A payment from a third party for sending client orders to a particular venue |
| Consolidated tape | A single stream of trade and quote data across venues, published by an authorised provider |

References (obtain the official texts):

- Directive 2014/65/EU (MiFID II), Articles 16, 24, 27, 28 and 30, as
  amended by Directive (EU) 2021/338 and Directive (EU) 2024/790.
- Regulation (EU) No 600/2014 (MiFIR), Article 39a, inserted by
  Regulation (EU) 2024/791.
- Commission Delegated Regulation (EU) 2017/565, Articles 64 to 70 and
  72.
- Commission Delegated Regulation (EU) 2026/825 of 14 April 2026 on
  the criteria for establishing and assessing the effectiveness of order
  execution policies (OJ L series, 23 July 2026), repealing Delegated
  Regulations (EU) 2017/575 and (EU) 2017/576.
- SEC Release IA-5248, Commission Interpretation Regarding Standard of
  Conduct for Investment Advisers (effective 2019-07-12).
- FCA PS21/20, FCA Handbook COBS 11.2A and FINRA Rule 5310, cited by
  reference only.

## Standard and licence note

Based on Directive 2014/65/EU (MiFID II) as amended by Directive (EU)
2024/790, Regulation (EU) No 600/2014 as amended by Regulation (EU)
2024/791, and Commission Delegated Regulations (EU) 2017/565 and
2026/825, as published on EUR-Lex (reuse authorised with
acknowledgement under Commission Decision 2011/833/EU), and on SEC
Release IA-5248 (US public material). FCA Handbook modules and FINRA
rules are cited by reference only. All text is original; no
legislative text is reproduced, and article numbers are given so that
the reader can check each requirement. Kestrel Bay Capital Europe,
Kestrel Bay Capital, the brokers, venues and all figures are
fictional. Check the current consolidated texts, national transposition
and the application date of Delegated Regulation (EU) 2026/825 before
use. This is a document format, not legal or investment advice.
Template licence: MIT.