Best Execution and Order Handling Disclosure - Stocks & Options
September 2024
Wealthsimple Investments Inc. (“WSII”) is a registered investment dealer and member of the Canadian Investment Regulatory Organization (“CIRO”). Under CIRO’s rules, WSII is required to have policies and procedures that are designed to achieve “best execution” for client orders and provide its clients with information on those policies and procedures.
This disclosure applies to our order handling practices for listed stocks and exchange-traded funds (“ETFs”) in Canada and the United States and listed options contracts in the United States. WSII may review and amend this disclosure to reflect changes in our business practices or changes in our regulatory environment.
Best execution is defined as “obtaining the most advantageous execution terms reasonably available under the circumstances.” WSII will take all reasonable steps to achieve best execution for client orders, taking into consideration the kind of stock, ETF or options contract to be traded and the nature of the order and in accordance with applicable regulatory requirements and the rules of the applicable exchanges, alternative trading systems and market centers (collectively, “marketplaces”).
Some investment dealers are a Participating Organization, member, or subscriber of the available Canadian or U.S. marketplaces (referred to as “Executing Brokers”). WSII is not an Executing Broker. WSII routes client orders to unaffiliated Executing Brokers that we have assessed and entered into agreements with, which then execute the orders on WSII’s behalf.
Factors Considered for Achieving Best Execution
WSII considers several factors in its attempt to achieve best execution, including the:
Price;
Speed of execution;
Certainty of execution;
Overall cost of the transaction; and
Prevailing market conditions, which includes the direction of the market, the depth of the posted market, the last sale price and prices and volumes of previous trades, the size of the spread and the liquidity of the stock, ETF or options contract.
The above factors are considered along with any order handling instructions WSII may receive from you, its client, such as a limit price or good-till-cancelled instruction.
Order Handling and Routing
WSII utilizes vendor-provided order management systems and routes orders to its Executing Brokers for execution. Executing Brokers may use Smart Order Routers (“SORs”) to manage client orders routed to marketplaces or other trading venues. Orders for stocks or options contracts listed only in the United States may be routed by our U.S. Executing Brokers to a marketplace, trading venue or liquidity provider.
WSII and/or its Executing Brokers may pay marketplace fees or receive marketplace rebates when routing orders to certain Canadian marketplaces. The fee schedules of each marketplace are available on the respective websites.
WSII and/or its Executing Brokers may receive remuneration in the form of cash, rebates and/or credits against fees in return for routing client orders for U.S. stocks and options contracts to its U.S. Executing Brokers. However, WSII’s best execution obligation requires prioritization of and consideration for the factors listed above, outside of any remuneration WSII may receive.
Trade execution details are provided via the trade confirmation(s) WSII provides to you. The trade confirmation will include the total quantity bought or sold, the execution price, and the commission charged by WSII, and indicate whether you received an average price and/or if we acted as principal or agent in executing all or part of the order. Additional information can be made available upon request.
Hours of Operation
In general, WSII will immediately accept orders for execution during the hours that markets are open for trading on regular business days. For stocks, ETFs and most options contracts, this is between the hours of 9:30am to 4:00 pm Eastern Time (or “ET”). Some options contracts are traded later into the day, and for those options contracts, we may accept orders later than 4:00pm ET during regular business days. Unless an order is designated for extended hours trading (as described further below), orders received prior to market open (9:30am ET) or after market close (generally 4:00pm ET) are queued and routed for execution during the next trading session.
WSII follows the holiday calendar of the primary Canadian marketplaces for orders in Canadian-listed stocks and ETFs and the primary U.S. marketplaces for orders in U.S.-listed stocks, ETFs and options contracts. These holiday calendars can differ - on certain days, the Canadian marketplaces may be open for trading while the U.S. marketplaces are closed.
Regular Trading Hours
Generally, orders received during the regular trading session (9:30am to 4:00pm ET) are immediately routed to WSII’s Executing Brokers for execution, and handled by the SOR of the applicable Executing Broker.
Unless designated for extended hours trading, any portion of an order that cannot be immediately filled will be entered on the listing exchange or an alternative marketplace(s) until the order is filled, expired, changed or cancelled.
Extended Hours Trading
WSII will accept orders for execution during pre-market (7:00 am - 9:30 am) and post-market trading hours (4:00 pm- 8:00 pm) for U.S. listed stocks and ETFs. Market orders are not accepted during extended trading hours (pre-market and post-market), WSII will only accept limit orders. Clients are responsible for indicating whether an order should trade during extended trading hours when entering their order.
Other relevant considerations for trading during extended trading hours can be found in our Extended Hours Trading Disclosure.
Day Orders
A Day Order is an order to trade that expires if it is not executed on the intended trading day. Generally, the intended trading day for a Day Order is the day that the order is placed, if the applicable market is open, or any day prior to the next day that the market is open. All Day Orders entered prior to market close (4:00pm ET) will expire, if not filled in full, at 4:00pm ET. Day Orders entered after market close will be queued for order entry on the following trading day. Day Orders entered on a weekend or holiday, when markets are closed, will be queued for order entry on the following trading day, but expire at the end of that trading day if not filled.
To participate in extended hours trading sessions, clients must indicate they wish for their order to be eligible for the extended hours session during order entry. Extended hours orders entered prior to or during pre-market trading hours will remain active throughout pre-market, regular and post-market trading sessions for that day, unless executed or cancelled. Extended hours orders that are not executed or cancelled will expire at the end of the extended hours trading session (8:00 pm ET). Extended hours orders entered after 8:00 PM ET, will be queued for the start of next trading day pre-market session until cancelled.
Good Till Cancelled Orders
Good Till Cancelled (or “GTC”) orders are orders that will remain valid (between 9:30am and 5:00pm each trading day) until fully executed, partially executed, cancelled by the client or a specified date of expiry. If not immediately executable, these orders will be entered and remain open in WSII’s trading systems until fully executed, partially executed, cancelled by our client or expiry, whichever comes first. GTC orders may not be available on all marketplaces or for all order types due to marketplace rules or Executing Broker order handling practices.
Good Till Date (“GTD”) orders are orders that will remain valid (between 9:30am and 5:00pm each trading day) until executed, cancelled or an expiry date selected by WSII’s client. GTD orders cannot be valid for longer than 90 days.
Market Orders
A market order is an order to buy or sell a stock, ETF, or options at the prevailing prices available in the marketplace to help ensure a complete execution of your order.
A market order will be executed at the best available price if completed. Due to market conditions, your execution price may differ from the price displayed in the Wealthsimple mobile or web applications. WSII has implemented a cash reservation on market buy orders to ensure you have sufficient funds in the account to cover the full balance of your trade in the event of a sudden price movement. However, the responsibility still remains with you to ensure that you have sufficient funds in your account to complete an order. Market buy orders queued for the market open that may cause a delinquency in your account may be cancelled. Market orders for securities with low liquidity may be unfilled or partially unfilled which will be cancelled.
WSII does not support modification of market orders. Orders are modified when the initial instructions submitted to WSII are subsequently corrected. Pending and unfilled market orders in stocks, ETFs and options contracts can be cancelled.
Limit Orders
A limit order is an order for a stock, ETF or options contract at a specific minimum sale price or maximum purchase price that is not to be exceeded. There is no guarantee that limit orders will be executed, even if the trading price of a stock, ETF or options contract reaches the limit price of your order.
WSII supports modification of limit order instructions for limit orders for stocks and ETFs. Modifications on partially filled orders are not permitted. WSII does not support modification of limit orders in options contracts. Pending and unfilled market orders in stocks, ETFs and options contracts can be cancelled.
Stop-Limit Orders
A stop-limit order allows you to choose a stop price and a limit price. When the price of a security hits the stop price, your order will be executed at the limit price or better once marketable, and if there is sufficient liquidity. Stop-limit orders are often used to limit losses. Stop-limit orders are permitted for stocks, ETFs, and options.
Specific Instructions
When the client gives specific instructions relative to the execution of their order, WSII will execute in accordance with these instructions. Instructions may include setting a limit price, order duration or condition for when an order should be executed. Certain order instructions may impact the execution quality received or cause the order to be rejected by WSII.
Executing Brokers
Orders routed to WSII’s Executing Brokers are subject to the order handling and routing practices of that Executing Broker. WSII’s Canadian Executing Brokers are all registered investment dealers and members of CIRO, and like WSII, are required to have in place policies and procedures designed to achieve best execution. Our U.S. Executing Brokers are all registered broker-dealers and members of the Financial Industry Regulatory Authority. U.S. Executing Brokers may apply different criteria when assessing execution quality due to local rules and regulations but are similarly subject to best execution obligations.
WSII conducts recurring assessments of the execution quality provided by all of its Executing Brokers. In addition, at least annually, WSII reviews and obtains certifications from each of its Executing Brokers, attesting that the Executing Broker has complied with and tested its best execution policies and procedures in accordance with Part C of Rule 3100 of CIRO’s Investment Dealer and Partially Consolidated Rules.
Additional information on our Executing Brokers and/or their policies and procedures related to best execution are available upon request.
Foreign Organized Regulated Markets
Certain stocks and ETFs are “inter-listed”, which means they are listed on an exchange in both Canada and a foreign jurisdiction (usually the United States). In certain cases, when handling a client order in an inter-listed stock or ETF, WSII’s Executing Broker may decide that all or part of the order could be transacted outside of Canada. In such cases, WSII’s Executing Brokers are required to consider the available liquidity domestically and in the foreign market, any pricing or foreign exchange considerations in the foreign market as well as any clearing or settlement issues before deciding to transact outside of Canada. Any resulting trade would be executed through the Executing Broker on a Foreign Organized Regulated Market. This ensures that trades conducted outside of Canada are conducted on a market that provides substantially the same standards as found in Canada for both regulatory monitoring and public data dissemination.
Technical Issues
In cases where a client is having trouble accessing their account or placing an order(s), Investment Representatives are available to receive manual orders during the regular trading session (9:30am and 4:00pm ET). Staff may be further available for assistance before and after these hours. Investment Representatives will accept market day orders, but no special instructions. Prior to calling, you should have the necessary account information and order details prepared. Our Investment Representatives cannot provide you with any recommendations or investment advice.
Auto-Exercising of Options
Long option contracts that are in-the-money are automatically exercised at expiration, provided that sufficient settled cash or assets are available in the account to afford the exercise. If the client has sufficient settled cash or assets available to exercise some but not all of the in-the-money option positions held in their account, WSII will exercise option contracts based on the order the position was opened (FIFO). The client must have enough funds or shares to fully exercise all the contracts within a position. WSII does not support partial exercise. If an account does not have sufficient settled cash or assets, the in-the-money option contract will not be exercised and expire.
Auto-Sell of Options
Long option contracts that are in-the-money can be auto-liquidated at 3:30pm EST on expiry day if there is insufficient cash and/or assets in the clients accounts to auto-exercise, and clients have opted into WSII's auto-sell service. Clients must also ensure to not have a pending limit sell on their contracts as this will prevent the auto-sell service from attempting to liquidate the position as to not interfere with a client's instructions. WSII will attempt to automatically liquidate their option positions to prevent the contracts expiring worthless.
Conflicts of Interest Relating to Best Execution
WSII considers a conflict of interest to be any circumstance where the interests of different parties, such as the interests of a client and those of WSII, are inconsistent or divergent. WSII takes reasonable steps to identify all existing and potential material conflicts of interest, and those we would reasonably expect to arise with regards to fulfilling our best execution obligation. For more information, please refer to our Conflicts of Interest Disclosure.
Use of Market Data
WSII provides real-time quotes on the Wealthsimple mobile app and snapshot access to real-time quotes in the Wealthsimple web app. However, WSII does not provide market data as a service. The price that is displayed in the app for a stock, ETF or options contract may have changed by the time you place an order, and the price or quote information provided by WSII may not reflect the consolidated quote for the stock or options contract. Trading with incomplete or delayed trading data can reduce your ability to see available orders on every marketplace. WSII’s Executing Brokers consider real-time prices from all marketplaces when executing our client orders, regardless of the pricing information displayed in the Wealthsimple apps.