Sanditon Site Masthead

Pillar III Disclosure

 

1. Introduction

Sanditon Asset Management Limited (“SAM” or “Firm”) is authorised and regulated by the Financial Conduct Authority (“the FCA”). In the United Kingdom the FCA is responsible for the implementation of the 2006 Capital Requirements Directive of the European Union (“the Directive”), which set up the regulatory capital framework for the financial services industry. The framework consists of three pillars:

  • Pillar 1 specifies the minimum capital resources that SAM is required to carry to cover business risks;
  • Pillar 2 sets out the supervisory risk review process to be used by SAM and the FCA to determine whether additional capital should be maintained against any other risks not covered under Pillar 1; and
  • Pillar 3 specifies the disclosures which SAM is required to make of its capital, risk exposures and risk management processes.

The Directive created a regulatory framework across Europe, governing how much capital must be retained by financial services firms. In the United Kingdom the Directive is implemented by the FCA, which has created rules and guidance, set out in the General Prudential Sourcebook (“GENPRU”) and the Prudential Sourcebook for Banks, Building Societies and Investment Firms (“BIPRU”), which are volumes of the FCA Handbook. Additional information is available from SAM’s Compliance Officer.

2. Risk Management

Credit Risk

As a Limited Licence BIPRU Investment Firm, the Firm neither holds client money nor assets nor lends money, and is, therefore, not exposed to Credit Risk in its traditional sense. The Firm’s direct exposure to Credit Risk is the risk that investment management fees cannot be collected and the exposure to banks where revenue is deposited. The Firm’s Credit Risk Appetite is low and the Firm holds all cash with banks assigned high credit ratings. Credit Risk, for the purpose of Pillar 2, is assumed to be that calculated at Pillar 1.

Market Risk

As a Limited Licence BIPRU Investment Firm, the Firm does not have a Trading Book. The only potential direct exposures are Non-Trading Book Exposures, i.e. to Foreign Currency held on deposit and assets or liabilities held in Foreign Currency, such as Debtors, on the Firm’s Balance Sheet. The Firm’s appetite for Market Risk is low and, for the purposes of Pillar 2, is assumed to be that calculated at Pillar 2.

Operational Risk

The Firm undertakes Operational Risk identification. Any risk deemed to be unacceptable to the Firm is addressed as a priority – and is either resolved or has Pillar 2 capital allocated to it.

Business Risk

As a BIPRU Limited Licence Investment Firm, the Firm has assessed Business Risks and set out appropriate actions to manage them. Business Risk is modelled using stress testing.

Liquidity Risk

The Firm is subject to the FCA’s Liquidity Rules at BIPRU 12 and has in place systems and controls which include the management of Liquidity Risk. Liquidity Risk is modelled using stress testing.

3. Capital Resource Requirements

The Firm’s Pillar 1 capital requirement is calculated as the higher of:

1. The Base Capital Requirement €50,000.

or

2. The sum of:
     a. Credit Risk Capital Requirement (£100,000); and
     b. Market Risk Capital Requirement (0).

or

3. The 13 Weeks Fixed Overheads Requirement (£412,000).

In the opinion of the Directors, the higher of these three is likely to be the Fixed Overheads Requirement plus additional Pillar 2 capital requirements and therefore the other two measures are deemed immaterial to the Firm. The Firm has calculated its capital needs in accordance with the relevant FCA regulations. The Firm has a surplus of regulatory capital over its Pillar 1 capital on a solo basis.

4. Remuneration

The Firm is classified a proportionality level three firm under the UK Remuneration Code, which allows the Directors to adopt a simplified approach to the code. The Firm has disapplied various requirements under SYSC19C as allowed by the European Commission Recommendation 2009/384/EC of 30 April 2009 (on remuneration policies in the financial services sector).

5. Best Execution

Set out below is information on Best Execution in accordance with the MIFIDII RTS 28 regulations in relation to Sanditon Asset Management Limited (“SAM”). All orders reported below were placed in accordance with SAM’s Best Execution policy. SAM confirms that:

  • it gives appropriate relative importance to the main execution factors including price, cost, speed and likelihood of execution when assessing the quality of execution. The execution factors are set out in our Order Execution Policy. Execution factors may consist of any considerations relevant to the order and the importance of each factor is subjective to each trade unless otherwise specified by the client. Factored in to price will be transactional costs, however, given that price tends to be the key driver of total cost, price has generally taken precedence over transactional costs. The speed and likelihood of execution also played a role, albeit smaller relative to the aforementioned factors;
  • there are no close links, conflicts of interests or common ownerships with respect to any execution venues used to execute orders;
  • other than standard commissions and other charges (such as borrowing fees) paid by SAM, there are no specific arrangements with any execution venues regarding payments made or received, discounts, rebates or non-monetary benefits received;
  • there has been no change in the list of execution venues listed in the firm’s execution policy;
  • order execution does not differ according to client categorisation; and
  • SAM uses an internal system to monitor best execution. It has internal procedures which record transactions performed for clients. This gives the firm the capability to review trades both periodically and on an ad-hoc basis to assess whether there are any common themes developing with specific venues/brokers. SAM uses their own processes in addition to the periodic reports (i.e. RTS-28) to assess the quality of execution.

Equities

Top five execution venues ranked in terms of trading volumes Proportion of orders executed as percentage of total in that class Proportion of volume traded as a percentage of total in that class Percentage of passive orders Percentage of aggressive orders Percentage of directed orders
BAML
GGDZP1UYGU9STUHRDP48
44% 32% N/A N/A N/A
ITG
213800EEC95PRUCEUP63
32% 30% N/A N/A N/A
GS
W22LROWP2IHZNBB6K528
13% 27% N/A N/A N/A
KBW
213800BVEFNZ8UYPKL03
4% 6% N/A N/A N/A
Jefferies
S5THZMDUJCTQZBTRVI98
2% 2% N/A N/A N/A

Swaps (execution of underlying)

Top five execution venues ranked in terms of trading volumes Proportion of orders executed as percentage of total in that class Proportion of volume traded as a percentage of total in that class Percentage of passive orders Percentage of aggressive orders Percentage of directed orders
BAML
GGDZP1UYGU9STUHRDP48
55% 45% N/A N/A N/A
ITG
213800EEC95PRUCEUP63
38% 43% N/A N/A N/A
GS
W22LROWP2IHZNBB6K528
3% 5% N/A N/A N/A
Jefferies
S5THZMDUJCTQZBTRVI98
1% 2% N/A N/A N/A
CENKOS
DL6FFRRLF74S01HE2M14
1% 3% N/A N/A N/A

Futures

Top five execution venues ranked in terms of trading volumes Proportion of orders executed as percentage of total in that class Proportion of volume traded as a percentage of total in that class Percentage of passive orders Percentage of aggressive orders Percentage of directed orders
BAML
GGDZP1UYGU9STUHRDP48
56% 72% N/A N/A N/A
GS
W22LROWP2IHZNBB6K528
44% 28% N/A N/A N/A

Bonds

Top five execution venues ranked in terms of trading volumes Proportion of orders executed as percentage of total in that class Proportion of volume traded as a percentage of total in that class Percentage of passive orders Percentage of aggressive orders Percentage of directed orders
GS
W22LROWP2IHZNBB6K528
70% 75% N/A N/A N/A
BAML
GGDZP1UYGU9STUHRDP48
30% 25% N/A N/A N/A

FX forward

Top five execution venues ranked in terms of trading volumes Proportion of orders executed as percentage of total in that class Proportion of volume traded as a percentage of total in that class Percentage of passive orders Percentage of aggressive orders Percentage of directed orders
NT
6PTKHDJ8HDUF78PFWH30
100% 100% N/A N/A N/A