Institutional Equity Order Handling Practices

To ensure LPS Capital LLC (“LPSC”) best execution obligations and order handling practices are transparent to our customers we are providing you with information regarding the Firm’s equity policies when handling certain types of orders in equity securities for institutional clients.

Best Execution
LPSC seeks to execute its customers’ orders at the most favorable terms reasonably available under the prevailing market conditions. In seeking the best quality of execution of your order, the Firm will take into account a number of factors based on the terms and conditions governing your order and all applicable regulatory requirements.

Not Held Orders
A “not held” order is one in which the customer has granted the Firm price and time discretion. Orders accepted on behalf of our institutional clients will be handled on a “not held” basis unless affirmatively stated by you or your representative upon submission that LPSC is to handle your order according to specific terms and conditions, i.e., “Held” order (see below). A “not held” designation provides the Firm greater flexibility in the manner in which that order is executed by allowing LPSC to take into consideration several factors, including, the size of the order relative to the liquidity in the market, the relative urgency for execution, special instructions relating to representing a certain percentage of volume in the market, benchmarking agency executions to the market volume weighted average price, and requests for capital commitment. Furthermore, all or part of a “not held” order may not be displayed in a public quotation system. All of these factors will have an impact on how these types of orders are executed, and consequently some “not held” orders may be executed at prices that are inferior to prices that are less favorable than prices received by other customer orders.

Held Orders
A ”held” order is one in which you instruct the Firm to immediately submit for execution at the best available market price, subject to size and limit price constraints. “Held” orders prohibit the Firm from having discretion in handling your order. “Held” orders obligate the Firm to execute your market order immediately at the then prevailing market price or your limit order at your limit price (or better).

FINRA Rule 5320 – Prohibition Against Trading Ahead of Customer Orders
Rule 5320 generally prohibits a member firm that accepts and holds a customer order from trading for its own account at terms that would satisfy the customer order, unless the member immediately thereafter executes the customer order at the same or better price than it traded for its own account. While the rule applies broadly to all types of clients and order sizes, it provides the below listed exemptions that permit LPSC to trade for its own account ahead of customer orders. Please note that consistent with existing regulatory guidance, the Rule is not applicable to not-held orders.

  1. Large orders (orders of 10,000 or more shares with a total value of $100,000 or more) and/or orders by institutional accounts are exempted from the requirements of Rule 5320. LPSC will generally handle such orders in accordance with customer instructions. While handling such orders, LPSC may trade for its own account at prices that would satisfy the customer order without having the obligation to immediately thereafter fill the customer order at that price.
  2. As an institutional client, LPSC is permitted under Rule 5320 to trade for its own account while handling your order, unless you inform us otherwise. Please note that you may notify us that you do not consent (opt-out of consent) by contacting your LPSC sales representative. Your election may be applied on an order-by-order or an all order basis. Such instruction may limit the range of execution alternatives that LPSC and our routing destinations are able to offer.
  3. Rule 5320 contains a “no knowledge” exemption, which permits a firm to trade for its own account in certain securities provided that the unit trading does not have knowledge of client orders that would trigger restrictions under the Rule. LPSC maintains and utilizes an effective system of internal controls known as information barriers between its trading units. These information barriers are designed to prevent one trading unit from having knowledge of customer orders held by a different trading unit. As such, from time to time one trading unit may hold a customer order while another trading unit, without having knowledge of the customer order, executes an order for a Firm account that would satisfy the customer order.

FINRA Rule 5270 Front Running of Block Transactions
Rule 5270 prohibits LPSC and its affiliates from trading for its own accounts when the Firm has material, non-public information concerning an imminent customer block transaction. The Rule applies to any equity security, fixed income security, option, derivative, security-based swap or other financial instrument overlying a security that is the subject of an imminent block transaction. Rule 5270 does allow for certain permitted transactions. Among these permitted transactions, the Rule allows for member firms to trade principally for its own account for the purpose of fulfilling, or facilitating the execution of the customer block order. These may include hedging, block positioning, or engaging in transactions in related financial instruments (which include options or derivatives) that fulfill or facilitate your block transaction. LPSC when engaging in such hedging or positioning activity will make every effort to minimize any potential market impact and obtain the best possible prices for your orders.

Please contact your LPSC representative or the Compliance Department at Compliance@LPSCinc.com if you have any questions regarding the manner in which we handle your orders as described in this letter.

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