Clarus Securities Inc.

Clarus' Order Handling and Best Execution Policy

(Formerly "Trading on Multiple Markets")

August 07, 2019



Overview

 The purpose of this document is to provide our clients with an overview of Clarus Securities Inc.’s (“Clarus”) order handling and approach to “Best Execution” in accordance with the Universal Market Integrity Rules (“UMIR”) and applicable Canadian securities laws.

The Canadian equity market is composed of multiple marketplaces, which include exchanges and Alternative Trading Systems (“ATSs”). Under this arrangement, a single security can trade on multiple marketplaces. In Canada, Clarus connects to the following marketplaces and ATSs: Toronto Stock Exchange (TSX), TSX Venture Exchange (TSXV), TSX Alpha Exchange, Canadian Securities Exchange (CSE) (CNSX and Pure Trading), Aequitas NEO Exchange (NEO Lit and NEO), Nasdaq Canada Exchange (CXC, CX2 and CXD), Omega ATS (Omega and Lynx) and Tri-Act MatchNow. 


Best Execution Policy

Clarus is committed to using all reasonable efforts to ensure our clients achieve the ‘best execution’ of their orders for securities that are quoted or traded on all marketplaces. Clarus will seek to obtain the best price available for each trade executed; however, market conditions and volatility may result in an execution price that differs from that quoted at the time of the order entry.

Clarus will execute each client order in the most beneficial terms available under the prevailing market circumstances at the time of the order.  Factors to be considered include security, order size and spread, the speed of execution, the likelihood of execution and settlement, market center volume, liquidity and availability, overall transaction cost and any other factors deemed relevant at the time of the order. 


Accepting Client Orders

Where clients provide specific information for order execution, Clarus will endeavor to execute the order in accordance with the client instructions on a best-effort basis, but the instructions must be in adherence to the trader’s role as a “gatekeeper”. If the trader has any concerns with the instructions, the trader can refuse to execute the order.

Clarus’ trading desk is located in Toronto and orders are directed to the trade desk by telephone, or electronically through Bloomberg Messenger or a FIX connection. All order flow is handled by licensed traders on a manual basis.

When handling client orders, traders will apply their professional judgment given prevailing market conditions, while considering the client’s needs, the nature of the transaction, the security and the routing options available.


Processing Client Orders

Orders are processed through IRESS’s trade platform via a Smart Order Router (“SOR”) that sweeps the Canadian marketplaces, both protected and unprotected, to the liquidity on the different venues. To determine which quotes are eligible to be accessed by the order, the sweep router will access liquidity using a prescribed rule. If an order’s quantity can be fully executed by the total displayed volume of all eligible quotes, the sweep router will access the best-priced quotes first, thereby obtaining best possible outcome for each order.

Alternatively, the trader can access specific IRESS or Virtu ITG algos (with a specific purpose given the specific security and market conditions) within the SOR that allows the traders to obtain best execution of the client order. Algo-trading provides the following benefits:

If the security is inter-listed on a U.S. market, the Virtu ITG algo can also include the U.S. marketplace taking into consideration the foreign exchange rate in computing the best price available for the client. If the order partly or fully completed in U.S. dollars, the trade confirmation will show the value of the trade in Canadian dollars, including the commission charged.

For securities that trade only on U.S. marketplaces, Clarus utilizes Virtu ITG’s smart router.


IRESS Market Technology Canada and Virtu ITG Canada Corp

As Clarus relies upon these intermediaries for their order handling technology, we obtain annual attestations of their Best Execution and Order Handling Procedures from each of the parties and that each has complied with and tested its best execution policies and procedures in accordance with IIROC Dealer Member Rule 3300.


Fees. Payments and Commissions

Institutional clients pay a commission in accordance with an agreed upon schedule, and for retail clients, a commission is agreed upon prior to executing the order.

Clarus may be charged marketplace fees or receive rebates when routing client orders in Canada. These fees and rebates are not passed along to the client, nor are the routing strategies primarily employed by Clarus based on these fees or rebates. With exception that Clarus may receive rebates under certain trading circumstances, Clarus does not have conflicts of interest with any of the marketplaces, ATSs or intermediaries that it is connected to.


Order Handing of Canadian Listed Securities

Multiple Markets in Canada

For Canadian listed securities, the primary marketplace will be the Exchange on which the security is listed. Currently there are six equities Exchanges in Canada – The Toronto Stock Exchange, TSX Venture Exchange, TSX Alpha Exchange, Canadian Securities Exchange (CSE), Nasdaq Canada Exchange, and Aequitas NEO Exchange Inc. For client orders that are executed on multiple marketplaces, the trade confirmation will include the following disclosure: “traded on multiple marketplaces, details available upon request”.

Clarus does not have conflicts of interest with any of the marketplaces, ATSs or intermediaries that it is connected to. Marketplace/ATS hours of operation can be found on their respective websites

Hours of Operation

Clarus trading staff will be available to execute client orders during the hours between 9:30 am to 4:00 pm Eastern Standard Time (“EST”), Monday through Friday, not including statutory Canadian holidays. Clarus trading staff may be available outside of these hours; however, Clarus cannot guarantee trade execution outside the hours of 9:30 am to 4:00 pm EST.

Order Handling of Canadian Securities

Unless an exception is made between Clarus trading staff and the client:

Day Orders: A Day Order will only be valid between the hours of 9:30 a.m. and 4:00 p.m. A Day Order is an order to trade that expires if it is not executed the day that it is booked into the marketplace. If the Day Order is received prior to the opening of the primary marketplace at 9:30 am, the order will not route to an alternate marketplace. If the order is received after 9:30 am, the order will be routed for trading through the SOR and the trader may employ an algo strategy to fill the order. This will ensure that any immediately executable portion of the order will trade against the best available price according to the parameters set by the trader. The unexecuted portion of the order will then book on a marketplace according to the specific SOR setting, or according to parameters selected by the trader. Any unfilled portion of the order will expire at 4:00 p.m. unless otherwise agreed upon between the client and Clarus’s trader.

Good Til Cancelled (Open) Orders: Open orders are orders that will remain valid until a specific date of expiry.  If the Day Order is received prior to the opening of the primary marketplace at 9:30 am, the order will not route to an alternate marketplace. If the order is received after 9:30 am, the order will be routed for trading through the SOR and the trader may employ an algo strategy to fill the order. This will ensure that any immediately executable portion of the order will trade against the best available price according to the parameters set by the trader. The unexecuted portion of the order will then book on a marketplace according to the specific SOR setting, or according to parameters selected by the trader. The order will remain in the system until it is executed or it expires.

Market Orders: A Market Order is an order to buy or sell a security at whatever prices are available in the marketplace to help ensure a complete fill. Upon entry to the market, these orders require immediate completion. If the trader determines, based on market conditions, that immediately trading the entire order would not be in the best interest of the client then the client will be consulted and the trade desk will manage the order accordingly. If the Day Order is received prior to the opening of the primary marketplace at 9:30 am, the order will not route to an alternate marketplace. If the order is received after 9:30 am, the order will be routed for trading through the SOR and the trader may employ an algo strategy to fill the order. This will ensure that any immediately executable portion of the order will trade against the best available price according to the parameters set by the trader. The unexecuted portion of the order will then book on a marketplace according to the specific SOR setting, or according to parameters selected by the trader. Any unfilled portion of the order will expire at 4:00 p.m. unless otherwise agreed upon between the client and Clarus’s trader.

Limit Orders: A Limit Order is an order for a security at a specific minimum sale price or maximum purchase price that is not to be exceeded. If the Limit Order is received prior to the opening of the primary marketplace at 9:30 am, the order will not route to an alternate marketplace. If the order is received after 9:30 am, the order will be routed for trading through the SOR and the trader may employ an algo strategy to fill the order. This will ensure that any immediately executable portion of the order will trade against the best available price according to the parameters set by the trader. The unexecuted portion of the order will then book on a marketplace according to the specific SOR setting, or according to parameters selected by the trader, or through an algo strategy, the trader will attempt to fill the order throughout the day. Any unfilled portion of the order will expire at 4:00 p.m. unless otherwise agreed upon between the client and Clarus’s trader.

Special Terms Orders: Special Terms Orders are orders with specific terms that are not executable in the regular marketplace.  Special Terms Orders will be executed by Clarus and will only be entered to the Special Term Market of the Primary Marketplace unless they are immediately executable on an alternative marketplace at the time of entry.  Special Terms Orders will expire at the close of the primary market.

Stop Loss Orders: Stop Loss Orders are orders that become limit orders when a board lot is traded at, or superior to, the stop- loss price on the marketplace in which the order has been booked.  These orders will only be entered in the Primary Marketplace order book and will remain there until the order is executed or expires, whichever comes first.

Market on Close Orders: A Market on Close Order (“MOC”) is an order to execute a security at the calculated closing price of the security on the principal marketplace. This is an anonymous price facility; the price at which the order will be executed is unknown, until the order is executed.  Limit offset orders may be entered; however, execution of a limit order may be filled by the marketplace. Currently, the TSX and the TSX-Venture are the only exchanges that offer MOC facilities with significant volumes. All MOC orders are entered on the TSX or TSXV as the principal marketplace.

Although, Aequitas NEO Exchange offers MOC orders for NEO-listed securities, Clarus doesn’t execute MOC orders on this exchange.

Multiple Client Orders (in the same security): Depending on the nature and type of order a client gives, generally allocations for similar orders received at the same time (or for overlapping timeframes as the case may be) are allocated to client’s pro-rata.

Extenuating Circumstances

In the event of technical or other issues that limit Clarus access to specific marketplaces, orders received will be directed to either the primary marketplace as circumstances warrant and as determined at the sole discretion of Clarus.


Over-The-Counter Securities

Over-the-counter (“OTC”) securities refers to securities that are not executed on a marketplace, which includes unlisted securities and private unlisted issuers. In accordance with IIROC Rule 3300, Clarus must make reasonable efforts to ensure that client trades in OTC securities are executed at prices that are fair and reasonable in relation to prevailing market conditions. When determining best execution, the price, as well as any commission or mark-up are considered in the client’s over-all price. Some of the pricing sources used to determine fair price may include information from: valid electronic trading platforms, outside liquidity providers, or applying the Black-Scholes Model.


Best Execution Governance Committee

Clarus has established a Best Execution Governance Committee (the “Committee”) that has responsibility for this policy. The Committee is comprised of the Head of Trading, the Chief Financial Officer and the Chief Compliance Officer and will meet annually or more frequently if required as in the case of a material change.

Also, Rule 3300 requires that Clarus Securities Inc. reviews this policy annually, or more frequently as required to ensure that we handle clients’ orders and order flow in order to maintain effective best execution policies and procedures.  As appropriate, we will modify and enhance our order routing practices to the benefit of our clients.


Events Triggering a Review of Router Preferences

Internal Testing

Compliance will conduct an internal review for best execution on a random sampling basis to verify whether the firm is attaining best execution for client orders.


Amendments

Changes to this policy may be made from time-to-time at the sole discretion of Clarus.  Notification will occur through a statement of account message and the revised “Clarus’ Order Handling and Best Execution Policy” will be posted to Clarus website www.clarussecurities.com