RTS28 2019
Atlantic House Fund Management LLP
Top 5 Venues Execution Report 2019

Introduction

This document has been issued by Atlantic House Fund Management LLP (AHFM) who is authorised and regulated by the Financial Conduct Authority (‘FCA’) as a MiFID Investment Firm; the main regulated activity it performs is portfolio management. AHFM has published this document in line with the requirements of MiFID II and supplementing Regulatory Technical Standards (RTS). The legislation requires portfolio managers to summarise and disclose annually the top five execution venues in terms of trading volumes where they executed decisions to deal in the preceding year and associated information on the quality of execution for each class of financial instrument. AHFM do not have a centralised dealing team however trade execution must follow the AHFM Execution Policy, the dealing element of the investment management team’s responsibilities is overseen as part of the firm’s compliance monitoring program. Transactions are concluded with external counterparties in relation to the discretionary investment decisions made by AHFM’s portfolio management teams. During 2019, AHFM undertook dealing in the following financial instruments for clients.


DEBT INSTRUMENT: BONDS


Interest Rate Derivatives: Swaps, forwards, and other interest rates derivatives


Equity Derivatives: Swaps and other equity derivatives


Securitised Derivatives: Other securitised derivatives


Exchange traded products (Exchange traded funds, exchange traded notes and exchange traded commodities)


Equities – Shares & Depositary Receipts – Tick size liquidity bands 5 and 6 (from 2000 trades per day)


Currency derivatives – swaps, forwards and other currency derivatives

Glossary and Abbreviation of Terms

Abbreviation/TermDefinition
Aggressive OrdersAggressive order means an order entered into the order book that took liquidity.
AHFMAtlantic House Fund Management LLP
Directed OrdersDirected order means an order where a specific execution venue was specified by the client prior to the execution of the order
FCAFinancial Conduct Authority
MiFIDMarkets in Financial Instruments Directive
OTCOver the counter (OTC) is a security traded outside of a formal exchange via an agreement between two parties.
Passive OrdersPassive order means an order entered into the order book that provided liquidity.
Total Return Swap (TRS)A total return swap is a swap agreement in which one party makes payments based on a set rate, either fixed or variable, while the other party makes payments based on the return of an
VenueA venue is where a client order is executed. For this report we show the legal name of the venue that the order was passed to.


AHFM’s quantitative reports do not contain information on passive / aggressive orders because we believe that the notion of passive / aggressive applies only where a firm directly executes on execution venues that operate transparent order books. This does not apply to AHFM.

Quantitative report and Qualitative commentary for each asset class

Class of instrumentDebt Instruments: Bonds
Notification if < 1 average trade per business day in the previous yearY
Top five execution venues ranked in terms of trading volumes (descending order)Proportion of volume traded as a percentage of total in that classProportion of orders executed as percentage of total in that classPercentage of passive ordersPercentage of aggressive ordersPercentage of directed orders
Citigroup Global Markets Ltd51.58%20.00%   
JP Morgan Securities plc24.24%11.25%   
King & Shaxson Ltd22.76%63.75%   
RBC Europe Ltd1.42%5.00%   
   
Qualitative CommentaryThe primary trading factors considered for this asset class when selecting the venue were price and likelihood of execution and size.  The majority of the trades by notional are traded alongside OTC interest rate contracts where simultaneous bond execution ensures reduced risk and tighter liquidity. AHFM regularly reviews its bond counterparties and, where appropriate, adds counterparties based on execution ability, transaction cost and operational capabilities.
Class of instrumentInterest Rate Derivatives: Swaps, forwards, and other interest rates derivatives
Notification if < 1 average trade per business day in the previous yearY
Top five execution venues ranked in terms of trading volumes (descending order)Proportion of volume traded as a percentage of total in that classProportion of orders executed as percentage of total in that classPercentage of passive ordersPercentage of aggressive ordersPercentage of directed orders
Citigroup Global Markets Ltd51.94%50%   
JP Morgan Securities plc48.06%50%
Qualitative CommentaryTrades were split between Citigroup and J P Morgan, the interest derivatives were linked to the Bonds transactions detailed above.  We have internal models to ensure best execution is provided by the counterparty.
Class of instrumentEquity Derivatives: Swaps and other equity derivatives
Notification if < 1 average trade per business day in the previous yearN
Top five execution venues ranked in terms of trading volumes (descending order)Proportion of volume traded as a percentage of total in that classProportion of orders executed as percentage of total in that classPercentage of passive ordersPercentage of aggressive ordersPercentage of directed orders
Citigroup Global Markets Ltd36.84%34.07%
UBS AG, London Branch23.26%9.20%
Société Générale10.69%5.18%
JP Morgan Securities plc10.63%31.09%
Credit Suisse International8.97%9.20%
Qualitative CommentaryAHFM trades some equity index/basket product through OTC swaps. These are executed with a counterparty under ISDA documentation, which needs to be in place for all funds/accounts trading the swap.   AHFM have a rich list of top tier investment banks to choose from, each Swap transaction goes through an RFQ process. A significant percentage of the trades completed in 2019 were top ups of the original transaction with the counterparty. We have internal pricing models to ensure pricing received is of good standing.
Class of instrumentSecuritised Derivatives: Other securitised derivatives
Notification if < 1 average trade per business day in the previous yearY
Top five execution venues ranked in terms of trading volumes (descending order)Proportion of volume traded as a percentage of total in that classProportion of orders executed as percentage of total in that classPercentage of passive ordersPercentage of aggressive ordersPercentage of directed orders
RBC Europe Ltd66.67%50.00%
Citigroup Global Markets Ltd33.33%50.00%
   
Qualitative CommentaryAcross 2019 AHFM traded structured investments with a couple of counterparties. For these products a competitive RFQ process was held, we are able to price each product using internal models to ensure pricing receive is competitive.
Class of instrumentExchange traded products (Exchange traded funds, exchange traded notes and exchange traded commodities)
Notification if < 1 average trade per business day in the previous yearY
Top five execution venues ranked in terms of trading volumes (descending order)Proportion of volume traded as a percentage of total in that classProportion of orders executed as percentage of total in that classPercentage of passive ordersPercentage of aggressive ordersPercentage of directed orders
Winterflood Securities94.10%70.00%
RBC Europe Ltd5.90%30.00%
   
Qualitative CommentaryWinterflood Securities are the market leading ETF liquidity provider in the UK, given the volume of flow which they see from other participants in the market. During the process of selecting Winterflood for this business we assessed several counterparties and found that both the likelihood and cost of execution at Winterflood was the best available at the time. AHFM also executes ‘risk price’ ETFs with RBC as we find we are able to access senior traders who offer competitive prices which we are not able to find elsewhere in the market
Class of instrumentEquities – Shares & Depositary Receipts – Tick size liquidity bands 5 and 6 (from 2000 trades per day)
Notification if < 1 average trade per business day in the previous yearY
Top five execution venues ranked in terms of trading volumes (descending order)Proportion of volume traded as a percentage of total in that classProportion of orders executed as percentage of total in that classPercentage of passive ordersPercentage of aggressive ordersPercentage of directed orders
RBC Europe Ltd96.86%97.75%
Winterflood Securities2.10%1.13%
Citigroup Global Markets Ltd1.05%1.12%
   
Qualitative CommentaryAHFM runs a regular review of their counterparties for cash equities and has access to multiple trading venues across several leading banks in the cash equity market. RBC, the largest counterparty, provides a high level of service and access to multiple trading venues both through its algorithmic trading platform. In addition we are able to access senior traders and sales traders with in depth knowledge of individual security liquidity information and price movements.
Class of instrumentCurrency derivatives – swaps, forwards and other currency derivatives
Notification if < 1 average trade per business day in the previous yearY
Top five execution venues ranked in terms of trading volumes (descending order)Proportion of volume traded as a percentage of total in that classProportion of orders executed as percentage of total in that classPercentage of passive ordersPercentage of aggressive ordersPercentage of directed orders
JP Morgan Securities plc98.89%99.00%
Citigroup Global Markets Ltd1.11%1.00%
   
Qualitative CommentaryAHFM ran a pre trade survey of all currency counterparties based on several indicators including but not limited to market share of counterparty, service, cost, execution abilities and range of products offered. JP Morgan, the party where we have executed the most transactions, are the worlds largest FX banks and provide AHFM access to the wider banks offsetting flow when executing transactions. Additionally, we are able to access senior traders and persons to assist in trade execution queries or operational issues.

Qualitative Report

In accordance with Article 3(3) of RTS 28, AHFM hereby publishes a summary of the analysis and conclusions the firm has drawn from detailed monitoring of the quality of execution obtained during 2019. This qualitative report attempts to provide a more transparent picture of the firm’s order execution policy in practice, execution strategies and tools used to assess the strategies’ quality.  The qualitative commentary has been inserted at the bottom of each asset class above.