Open-ended investment company and Payment for Order Flow: Difference between pages

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(OEIC).  
(PFOF).


A limited company listed on a stock exchange whose sole aim is to invest in securities issued by other entities.
Payment for order flow is defined by the UK [[Financial Conduct Authority]] (FCA) in FG12/13 [http://www.fca.org.uk/your-fca/documents/finalised-guidance/fsa-fg1213], originally issued by the former [[FSA]], as an arrangement whereby a [[broker]] receives payment from [[market maker]]s, in exchange for sending order flow to them.


Unlike an investment trust, there is no limitation on the number of shares that can be issued (it is an open-ended structure).
The FCA sees such arrangements (whatever called) as creating potential conflict of interest and pressing against best execution of orders for clients and, accordingly, compromising observation of its best execution rule.


The value of the shares is determined by the OEIC’s underlying assets; however, there is no bid-offer spread.
More generally in the European Union, such payments may fall foul of the EU's [[MiFID]] rules on "inducements" reflected in the FCA's Handbook ([[http://fshandbook.info/FS/html/FCA/COBS/2/3]] at 2.3.1).


OEICs can be the underlying structure for a single fund or the umbrella fund for a family of sub-funds. 
[[Category:Compliance_and_audit]]
 
 
== See also ==
* [[Bid-offer spread]]
* [[Security]]
* [[Undertaking for collective investments in transferable securities]]

Revision as of 08:02, 13 December 2016

(PFOF).

Payment for order flow is defined by the UK Financial Conduct Authority (FCA) in FG12/13 [1], originally issued by the former FSA, as an arrangement whereby a broker receives payment from market makers, in exchange for sending order flow to them.

The FCA sees such arrangements (whatever called) as creating potential conflict of interest and pressing against best execution of orders for clients and, accordingly, compromising observation of its best execution rule.

More generally in the European Union, such payments may fall foul of the EU's MiFID rules on "inducements" reflected in the FCA's Handbook ([[2]] at 2.3.1).