Trading execution report

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Trading execution report

In line with the regulatory requirements outlined by MiFID II1, Woodford is required to provide an annual review of the quality of our execution, along with details of the main execution venues utilised. Please find our 2017 report below.

Factors considered when trading

In the course of our fund management duties, we place orders primarily in equities but also sometimes in foreign exchange (spot and forward contracts) markets for currency hedging purposes.

When executing client orders, we will take into account the following criteria for determining the relative importance:

  • The characteristics of the client
  • The characteristics of the client order
  • The characteristics of financial instruments that are the subject of that order
  • The characteristics of the execution venues to which that order can be directed.

We will, in normal circumstances, give price a higher relative importance when seeking to obtain best execution, but may take into consideration a range of other factors. Examples of situations where we would not consider price to be the primary factor include:

  • If order size is a high percentage of the average daily volume, potential market impact is a key consideration – in these situations, the price to execute the order may be outside the spread and the trading team may decide that size and liquidity are more important than price
  • With settlement always closely monitored, the trading team may decide to suspend trading with a broker if they are unable to settle trades in a timely manner
  • In illiquid securities, sometimes simply obtaining or disposing the security is the primary objective

Conflicts of interest and specific arrangements

Woodford is not a direct market participant. We place orders with brokers to access the market. We do not have any close links or common ownerships with any of our brokers.

Woodford does not have any specific arrangements with any brokers regarding payments made or received. Commission rates are determined by the Best Execution and Research Committee (BERC) and reflect our requirements to access liquidity. The trading team is responsible for determining the order type and channel, based on available liquidity. All brokers operate on an execution only basis and all research costs are borne by Woodford.

Factors considered when selecting execution venues

The following are some of the key factors considered before appointing new brokers and evaluating existing relationships:

  • Availability of liquidity and market breadth to support best execution
  • Market structure and liquidity pools
  • Cost implications per broker
  • Changes in the structure of market
  • Credit position of broker
  • Regulatory and legal investigations
  • The organisation
  • Trading capability

Formal broker reviews are conducted annually by the Head of Trading, supported by an internal quarterly review and an ongoing, daily monitoring process. The status of any broker that has been put on hold is reviewed during the monthly BERC meeting.

Client categorisation

Not applicable. We do not have any retail clients although some of our funds have specific mandate requirements.

Monitoring quality of execution

We use an independent external Transaction Cost Analysis provider, ITG, to assist with trading desk monitoring. The BERC meets monthly and has a mandate to monitor best execution and adherence to the Best Execution policy. The BERC is comprised of representatives from the investment, compliance, investment operations and risk teams.

The BERC monitors trading activity on an exceptions basis against a series of parameters that assess trading impact and execution cost against a series of parameters to assess effectiveness. Monitoring parameters are reviewed on an annual basis by BERC or more frequently on trigger events such as new fund launch or new asset class launch. Trading parameters are set by the investment team and approved by BERC. The BERC also maintains an ongoing vigilance of changes in regulatory requirements relevant to us.

Execution venue report 2017

Equities

Less than one average trade per business day in 2017? No.

Counterparty Volume traded (%) Proportion of orders executed (%) Directed trade (% volume)
Deutsche Bank 13.9 5.8 0.0
Jefferies 13.0 8.9 0.0
Redburn 7.9 17.9 0.0
Morgan Stanley 6.7 3.5 0.0
ITG 6.5 7.0 0.0

Exchange Traded Products

Less than one average trade per business day in 2017? Yes.

Counterparty Volume traded (%) Proportion of orders executed (%) Directed trade (% volume)
Liberum 100.0 100.0 0.0

Currency derivatives

Less than one average trade per business day in 2017? No.

Counterparty Volume traded (%) Proportion of orders executed (%) Directed trade (% volume)
Northern Trust 100.0 100.0 0.0

Footnotes

  1. Markets in Financial Instruments Directive – the second round of this European Union wide initiative came into effect in January 2018

Woodford Investment Management Ltd is authorised and regulated by the Financial Conduct Authority (firm reference number 745433). Incorporated in England and Wales, company number 10118169. Registered address 9400 Garsington Road, Oxford OX4 2HN.

Woodford Patient Capital Trust plc is incorporated in England and Wales, company number 09405653. Registered as an investment company under section 833 of the Companies Act 2006. Registered address Beaufort House, 51 New North Road, Exeter, EX4 4EP.

The Woodford Funds (Ireland) ICAV (the “Fund”) has appointed as Swiss Representative Oligo Swiss Fund Services SA, Av. Villamont 17, 1005 Lausanne, Switzerland. The Fund’s Swiss paying agent is Neue Helvetische Bank AG. All fund documentation including, Prospectus, Key Investor Information Documents, Instrument of Incorporation and financial reports may be obtained free of charge from the Swiss Representative in Lausanne. The place of performance and jurisdiction for all shares distributed in or from Switzerland is at the registered office of the Swiss Representative. Fund prices can be found at www.fundinfo.com.

© 2018 Woodford Investment Management Ltd.
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