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Status: You are viewing the version of the handbook as on 2005-06-30.

COB 7.4 Customer order priority

Application

COB 7.4.1R

This section applies to a firm when executingcustomer orders in designated investments.

Purpose

COB 7.4.2G

Principle 6 (Customers' interests) requires a firm to pay due regard to the interests of its customers and to treat them fairly. Principle 8 (Conflicts of interest) requires a firm to manage conflicts of interest fairly. This section is therefore designed to ensure that a firm acts fairly in executing both own account orders and customer orders and manages any conflict of interest accordingly.

Dealing fairly and in due turn

COB 7.4.3R

A firm must execute customer orders and own account orders in designated investments fairly and in due turn.

COB 7.4.4G

COB 7.4.3 R does not preclude a firm from, for example:

  1. (1)

    executing:

    1. (a)

      a prior own account order ahead of a subsequent current customer order in the same designated investment or a related designated investment; or

    2. (b)

      a current customer order when the person dealing for the customer neither knew nor ought reasonably to have known of an earlier unexecuted current customer order;

  2. (2)

    postponing execution of a current customer order when the firm has taken reasonable steps to ensure that execution of another customer order ahead of that customer order is likely to improve the terms on which the current customer order is executed (in which case the firm should ensure that the customer whose customer order is being executed ahead of that other customer order is also being treated fairly);

  3. (3)

    treating the life fund as if it were a customer to the extent that the firm is an insurance company dealing for the account of its life fund;

  4. (4)

    treating the investment trust or scheme as if it were a customer to the extent that the firm is dealing for the account of an investment trust or a collective investment scheme that is a body corporate, which in either case is in the same group as the firm;

  5. (5)

    treating an employee (or close relative) of the firm or of its associate, or a trustee acting on his behalf, as if he were a customer; or

  6. (6)

    treating the firm'soccupational pension scheme as a customer to the extent that the firm is dealing for the account of its occupational pension scheme.

COB 7.4.5G

MAR 1.4.26 C (Trading information) clarifies that behaviour based solely on information about another person's intention to deal will not constitute market abuse. Firms are reminded, however, that it may constitute a breach of COB 7.4.3 R.