Order Handling - Retail Market Making

Please note the US securities exchanges do not accept or execute AON orders. UBS accepts AON orders, but only for execution over-the-counter. Given their special handling terms and liquidity requirements, AON orders may not receive the same execution priority as equivalent-priced market and marketable limit orders.

To fulfill our best execution obligation, we use reasonable diligence to ascertain the best market for customers' orders so that the resultant price is as favorable as possible under prevailing market conditions. When handling and executing customer orders, we consider a number of factors, such as: the customer's order objectives and constraints, customer instructions, our understanding of the current order book, security price, order size, trading characteristics of the security, speed of execution, the expected cost and difficulty of executing an order in a particular market, transaction costs, the potential for price improvement, and the reliability of and our historical experience routing to liquidity sources.

UBS has sole discretion when determining whether to provide additional price improvement and/or liquidity to an individual order by internalizing all or part of that order, or whether to extend principal capital to further price improve a trade execution provided by an external dealer.

UBS monitors the quality of internal and external liquidity sources when accessing external liquidity from the broader marketplace. UBS operates an ATS ("UBS ATS") for crossing orders in U.S. equities and generally preferences UBS ATS as a routing destination when consistent with the Firm's best execution obligation. The UBS ATS (registered with the SEC) facilitates the matching of non-displayed orders in National Market System securities, which includes retail and institutional orders, orders from UBS Trading Desks, as well as order flow from other broker dealers, market makers and other active traders (Sometimes referred to as High Frequency Traders ("HFT")). If you wish to apply crossing restrictions to your orders in the UBS ATS or opt out of trading in the UBS ATS, please contact your UBS Salesperson. Additional information about the UBS ATS, including FAQs, Specifications, and Form ATS-N, can be found on the UBS ATS website. If you would like more information about the UBS ATS, please contact your UBS Salesperson.

When using or interacting with UBS as broker-dealer with respect to a securities transaction, clients must not:

1. Employ any device, scheme, or artifice to defraud;
2. Make any untrue statement of a material fact or to omit to state a material fact; or
3. Engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person in connection with the purchase or sale of any security.

Activities prohibited by the securities anti-fraud statutes and regulations include, but are not limited to: wash sales, "naked" short selling, self-trades, illegal prearranged trades, marking the close, marking the open, non-bona fide activities to induce others to trade, painting the tape, spoofing, layering, index manipulation, and disseminating fictitious quotations.

UBS Securities LLC is responsible for maintaining and carrying out business continuity plans in the event of disruptions. These plans enable the Firm to continue performing critical business functions, such as the facilitation of customer transactions and other capital markets activities, in the event of localized or industry-wide crises, emergencies, pandemics or other events that result in adverse or extreme market conditions. Examples of actions the firm may undertake in such circumstances include, but are not limited to, the following:

1. Relocating personnel to designated recovery locations and/or permitting certain personnel to work remotely from home;
2. Implementation of bespoke controls and supervisory protocols reasonably designed to ensure compliance with applicable rules and regulations; and
3. Deployment and reallocation of personnel and resources depending on the nature of the event and its impact to the Firm's various business lines.

While the Firm has taken significant steps to carefully develop and implement these plans, we cannot guarantee that the Firm's systems will function at normal capacity during a disruption or the Firm will be capable of processing the volume of activity during the then-existing market conditions. As a result, increased latency and other factors may negatively impact execution quality and the ability of the Firm to accept certain types of orders, but the Firm will continue to use reasonable diligence to satisfy its regulatory obligations, including its duty of best execution.

If the Firm believes the quality of execution provided to customers will be affected during extreme market conditions, customer orders will be handled and executed according to applicable Firm procedures, and customers will be provided details concerning the securities and activities impacted.

For more information on the Firm's business continuity plans, please visit our Business Continuity Planning website.

If a transaction is eligible for review under FINRA Rule 11890 and related equities and options exchange rules, UBS will contact its client to confirm an obvious error for any term of the underlying order, such as price, number of shares or other unit of trading, or identification of security, prior to filing. UBS will file a Clearly Erroneous petition where the Firm has a factual basis for believing the trade is clearly erroneous and the execution price is outside the clearly erroneous price bands.

Our SmartEx technology requires all of the below affirmative indicators before it commences trading post the market opening:

1. Notification that the market has opened (electronic market open message);
2. a print for the stock that is deemed to be the opening print; and
3. a valid exchange NBBO.
4. A quote from the primary exchange generated after market open message;
5. a valid LULD band (if applicable).

UBS deems all received orders as "day" orders unless otherwise designated, and any unfilled portion of an order will expire at the end of the trading day (4:00 p.m. EST). UBS accepts good-till-date ("GTD") orders and good-till-cancelled ("GTC") orders. GTD and GTC orders will remain open until executed, cancelled by the client that placed the order, or cancelled by UBS, or for GTD orders upon expiration. UBS maintains GTC orders in equities on file for one year only. If a GTC order has not been executed or cancelled during this period, it will automatically expire at the conclusion of the trading session of the one-year anniversary of the order's original entry date.

“Extended hours” are those hours before and after the official market hours of the primary listing exchange. If you would like your order to be executed during this time period (typically 4:00 a.m. to 9:30 a.m. and 4:00 p.m. to 8:00 p.m. (Eastern Times))., the order must be specifically designated to indicate it is eligible for execution during extended hours. UBS trades in the extended hours sessions on an agency only basis. Please contact your UBS Salesperson to ensure you are set up to transact in the extended session, and for information on the times UBS systems are operational during these sessions. The following risks should be carefully considered when engaging in extended hours trading:

1. Risk of Lower Liquidity

Liquidity refers to the ability of market participants to buy and sell securities. Generally, the more orders that are available in a market, the greater the liquidity. Liquidity is important because with greater liquidity it is easier for investors to buy or sell securities. As a result, investors are more likely to pay or receive a competitive price for securities purchased or sold. There may be lower liquidity in extended hours trading as compared to regular market hours, thus, your order may only be partially executed, or not at all.

2. Risk of Higher Volatility

Volatility refers to the changes in price that securities undergo when trading. Generally, the higher the volatility of a security, the greater its price swings. There may be greater volatility in extended hours trading than in regular market hours. As a result, your order may only be partially executed, receive no execution, or may receive a price that is inferior to the price it may have received during regular market hours.

3. Risk of Changing Prices

The price of securities traded in extended hours trading may not reflect the prices either at the end of regular market hours, or upon the opening of the next morning. As a result, you may receive a price that is inferior to the price you may have received during regular market hours.

4.Risk of Unlinked Markets.

Depending on the extended hours trading system or the time of day, the prices displayed on a particular extended hours system may not reflect the prices in other concurrently operating extended hours systems dealing in the same securities. Accordingly, you may receive a price that is inferior to the price you may have received during regular market hours.

5. Risk of News Announcements.

Normally, issuers make news announcements that may affect the price of their securities after regular market hours. Similarly, important financial information is frequently announced outside of regular market hours. During extended hours trading, these announcements may occur without a halt in trading. Without the benefit of a market halt, and in combination with the lower liquidity and higher volatility than during normal market hours, your order may be significantly impacted by an exaggerated and unsustainable effect on the price of a security.

6. Risk of Wider Spreads.

The spread refers to the difference in the available prices at which you can purchase or sell a security. Lower liquidity and higher volatility in extended hours trading may result in wider than normal spreads for a particular security.

7. Risk of Lack of Calculation or Dissemination of Underlying Index Value or Intraday Indicative Value ("IIV").

For certain Derivative Securities Products, an updated underlying index value or IIV may not be calculated or publicly disseminated in extended trading hours. Since the underlying index value and IIV are not calculated or widely disseminated during the pre-market and post-market sessions, an investor who is unable to calculate implied values for certain Derivative Securities Products in those sessions may be at a disadvantage to market professionals.

FINRA 5270 prohibits a broker-dealer from trading for its own account while taking advantage of knowledge of an imminent customer block transaction. There are exemptions to this prohibition, one of which permits UBS to trade for its own account for the purpose of fulfilling or facilitating the execution of a customer's block transaction. This trading activity may coincidentally impact the market prices of the securities or financial instruments the customer is trying to buy or sell, however UBS endeavors to conduct this trading in a manner designed to limit market impact and consistent with its best execution obligations.

Client orders will be handled as "held" unless the client instructs otherwise (i.e., client identifies and instructs the order as a "not held" order). A "held" order is one for which the client instructs UBS to immediately submit the order for execution at the best available market prices, subject to size and limit price constraints. A "not held" order is one in which the client gives UBS discretion as to the time and price at which to execute the order. When handling a "not held" order, UBS uses professional judgment to seek the best quality of execution under the circumstances in accordance with the order instructions. UBS considers factors such as the order size, potential market impact and current market conditions such as depth and liquidity, when exercising trading discretion.

As stated in UBS's Code of Conduct, UBS will only share customer details with personnel who have a bona fide business "need to know" (as defined by UBS policy) to serve customers' best interests.

All orders routed through the UBS Electronic Trading Infrastructure are monitored by personnel on the UBS Electronic Trading Desk to ensure the Firm's algorithms and Smart Order Router ("SOR") operate effectively. The Electronic Trading Desk also monitors for orders paused or rejected by UBS market access and other risk management controls.

A Large Trader is an entity having discretionary control over transactions in NMS securities equal to or exceeding: (1) 2 million shares or US $20 million during any calendar day; or (2) 20 million shares or US $200 million during any calendar month. If a client is a Large Trader, the client must provide UBS with its Large Trader Identification Number(s) ("LTID(s)") and identify its related accounts. UBS is required to assign its client an Unidentified LTID if UBS determines that the client qualifies as a Large Trader based on trading activity effected through UBS but has not provided the firm with an LTID.

UBS maintains a Limit Order Display (“LOD”) utility for equity securities that immediately displays non-marketable limit orders upon receipt. UBS’s general procedures are as follows:

1. LOD displays orders in a manner designed to ensure representation in a fast moving market.
2. Orders are displayed and executed in accordance with applicable SEC and FINRA rules.
3. UBS reserves the right to principally execute all or part of an order for its own account at any time.
4. Non-marketable limit orders of block size may be displayed in whole, in part, or not displayed in accordance with Limit Order Display Rule (Rule 604 of Reg NMS).
5. Orders will be executed at customers limit or better; orders not displayed are at risk of not being executed.
6. Monitoring tools and procedures are in place to ensure adherence to all applicable display regulations and procedures.
7. The RMM Best Execution Forum monitors routing and display decisions as part of its monthly review process.
8. Where orders are routed and displayed is subject to UBS discretion. We may display orders at any and all NMS exchanges, including MEMX, which is an exchange that UBS has a minority stake in.

UBS is not a market maker in OTC Securities. UBS will accept OTCBB, & Pink Sheet order flow upon customer request, but will handle such flow in an agency only capacity by externally routing the flow to firms engaged in OTC market-making.

UBS is prohibited from accepting held market orders for the purchase of shares issued in an initial public offering ("IPO") of a security until secondary market trading in that IPO security has commenced. Clients may submit to UBS "held" limit orders and "not held" orders before and after secondary trading for the IPO security has commenced.

The OTC Markets Group has established three different markets for quoting OTC securities (i.e., OTCQX, OTCQB, and OTC Pink) based on the quality and quantity of information the companies make publicly available. Within the OTC Pink market, depending upon the level of information available to investors, OTC equity securities are further classified as:
            (i) OTC Pink – Current Information;
            (ii) OTC Pink – Limited Information; and
            (iii) OTC Pink – No Information.

UBS has identified certain categories of microcap and low-priced securities² within the universe of OTC securities to pose a higher risk for market manipulation and/or where the sale of such securities could result in an unregistered offering. UBS has elected to systematically block and reject transactions in microcap securities that fall within "high risk" categories, such as:

1. OTC Pink securities (including Pink Current Information³ , Pink Limited Information⁴ , Pink No Information⁵ );
2. "Caveat Emptor" securities, as defined by OTC Markets Group⁶ which designates a symbol as such when there is a public interest concern associated with the company, security, or control person which may include but is not limited to a spam campaign, questionable stock promotion, investigation of fraudulent or other criminal activity, regulatory suspensions, or disruptive corporate actions;
3. “Shell” company, as defined by OTC Markets Group⁷, is a company other than an asset-backed issuer with no or nominal operations and either (1) no or nominal assets; (2) assets consisting of cash and cash equivalents; or (3) assets consisting of any amount of cash and cash equivalents and nominal other assets.
4. "Grey Market" securities are not currently traded on the OTCQX, OTCQB or Pink Markets. Broker-dealers typically do not publicly quote Grey Market securities because of a lack of investor interest, unavailable company information or because of regulatory compliance considerations; and
5. Securities on the DTC's Deposit Chill or Global Locks lists and securities suspended by the SEC pursuant to Section 12(j) or 12(k) of the Securities and Exchange Act of 1934.

As part of UBS' due diligence review of client orders in microcap or low-priced securities, the Firm may reach out to the client for more information about the client's transaction, the client's relationship with the issuer (e.g., insider/affiliate), as well as how and when the client acquired the security. The "high risk" categories above are not exhaustive. UBS may at its discretion block transactions in microcap and low-priced securities that do not fall within the categories identified above but display other factors that indicate the transaction and/or the security may be higher risk.

²"Microcap securities" is a term used to describe securities issued by companies with low or "micro" market capitalizations, meaning the aggregate market value of such companies' publicly held stock is small. Typically, these companies have a total market capitalization of less than $250 or $300 million, and in some cases it may be as low as $50 million (i.e., "nanocap" securities). "Low-priced" securities or "penny stocks" are securities that trade below $5 per share. A microcap security can also be a low-priced security; a low-priced security, however, may not necessarily qualify as a microcap. For purposes of UBS policy, both are referred to as "Microcap Securities."
³“Pink Current Information” is a term used to describe companies that provide adequate current information pursuant to the International Reporting Standard, the Bank Reporting Standard, the Alternative Reporting Standard, or are current in the SEC reporting obligations.
⁴“Pink Limited Information” is a term used to describe companies that have posted limited financial information through the OTC Disclosure & News Service or are late in their filing obligations with the SEC.
⁵“Pink No Information” is a term used to describe companies that are unable or unwilling to provide disclosure to the public or to any regulator, exchange or the OTC Markets Group.
⁶See https://www.otcmarkets.com/learn/caveat-emptor
⁷See https://www.otcmarkets.com/glossary

Under Rule 605, market centers are required to publicly disclose monthly execution quality statistics for National Market System (NMS) securities based on specified requirements. UBS's Rule 605 statistics for covered orders are available at https://www.ubs.com/global/en/investment-bank/ib/sec_reports.html. Please note that the statistics prepared under Rule 605 only capture a subset of flow handled and executed by the Retail Market Making desk as a market maker.

UBS is required to publicly disclose its order routing practices for in-scope NMS equity and option orders on a quarterly basis. More information and the quarterly reports are available at https://www.ubs.com/global/en/investment-bank/ib/sec_reports.html. Non-broker dealer customers are eligible to request additional order routing information concerning their orders handled by UBS over the preceding six months. These on-demand routing reports will include standardized metrics about the routing and execution of orders, including the venues to which your orders were routed.

UBS relies on a vendor to produce SEC Rule 606 statistics, which include exchange transaction fees and rebates. Such fees and rebates are updated by national stock exchanges from time to time. UBS's rates for fees and rebates may not be readily available for the most recent month of your request period, in which case UBS may instead provide an on-demand report for the previous six months that are available. See SEC Release No. 34-84528, FN 209.

For more information or other requests regarding SEC Rule 606 reporting, please reach out to your Sales coverage.

The Order Protection Rule requires trading centers to have procedures to prevent the execution of trades in NMS securities at prices inferior to protected quotes (i.e., "trade-throughs"), subject to certain exceptions. One exception allows firms to use an Intermarket Sweep Order ("ISO") to attempt to access protected quotes when executing at a price that would trade through such protected quotes. When UBS sends ISOs in the course of handling client orders, UBS will provide the client with the benefit of any better priced ISO executions UBS receives.

UBS does not accept PFOF from other broker-dealers. UBS accepts payment in the form of rebates from market centers that use either the "Maker-Taker" or inverted fee model. These payments generally offset fees for accessing orders or for other services provided by market centers. From time to time, the amount of rebates/credits that UBS receives from an exchange may exceed the amount of fees that UBS is charged by such exchange. In these limited circumstances, the receipt of net payments from an exchange would constitute payment for order flow. Any net payments are retained by UBS and are used to reduce overall expenses in providing services to clients. UBS makes routing decisions based on the quality of execution and not on the receipt of payments. However, UBS considers costs, including rebates and fees, in comparing market centers with comparable performance. Where possible, we seek to objectively estimate the value expected to be realized when routing to any of the eligible venues under prevailing conditions. Value is highly correlated with the order placer’s desired outcome, such as enhanced execution quality while minimizing the dollar cost of executing a transaction. The value we assign to each eligible venue is based on a statistical analysis of past performance under similar conditions and it carries an inherent degree of uncertainty given that we cannot know for sure which venue will produce the best outcome in advance of routing. Our designated measure of uncertainty is represented by the standard deviation of the distribution of outcome values and is used to determine which venues are statistically comparable. We compute comparability using an overlap of the venue with the best expected value compared with other eligible venues, measured by a factor of the standard deviations. The set of venue options where the expected values plus/minus the standard deviation factor overlap is considered the comparable set. When selecting a destination venue from within a statistically comparable set of eligible venues, UBS can exercise its reasonable discretion when routing customer orders for execution, such as by favoring a venue offering a higher rebate or the UBS ATS.

Consistent with UBS' regulatory obligations, UBS records phone conversations of certain personnel, including personnel who may be handling client orders. Please note that your participation in these calls constitutes consent to recording where consent is required under applicable law.

UBS subjects all orders to certain financial and regulatory risk management controls before submitting them to market centers in compliance with the SEC Market Access Rule. UBS's pre-trade controls include, but are not limited to: credit & capital threshold checks, price checks, and erroneous and duplicative order controls. If a customer order triggers one of these pre-trade controls, UBS may either reject or execute the subject order on a delayed basis after further review. Where UBS reviews your order, a UBS employee may contact you to request more information about your transaction to verify that the transaction was not erroneous.

UBS provides order information to third parties to the extent required to process, settle or clear client transactions or for purposes of complying with regulatory obligations. Consistent with its practice of cooperating with regulators, UBS provides information on client activities to regulators upon request, where validly made in connection with inquiries, investigations or examinations, or as otherwise required by law or regulation. UBS also provides information when required or subpoenaed, as part of administrative, civil or criminal proceedings.

UBS reserves the right at its sole discretion to modify, suspend, or cancel any of its order handling protocols, without notice, when adverse market conditions exist, as determined by UBS.

UBS participates as a "Retail Member Organization" (RMO) that has the capability to route "Retail Orders" to SRO Retail Platforms. In order for UBS to utilize these Retail Platforms we must obtain your prior written representation that substantially all of your orders qualify as "retail orders" under applicable SRO rules or you may alternatively indicate that individual orders are "retail orders" by setting the relevant FIX tag. The market centers operating these Retail Platforms require UBS to obtain an annual written representation, and the attestation must be executed between UBS, as the RMO, and your firm.

In some limited cases, UBS may request that a client route a stock away in the event of a regulatory restriction, system outage or irregular trading behavior.

1. Order Marking. Rule 200 of SEC Regulation SHO requires every sell order must be marked as "long," "short" or "short exempt." It is the client's responsibility to properly mark sell orders sent to UBS to comply with Rule 200. In accordance with Reg SHO, sell orders may only be marked "long" to the extent of the seller's net long position. Furthermore, when placing sell long orders with UBS, the client represents that the client owns the security and can be reasonably expected to deliver that security no later than settlement date.
2. Locate Requirement. Rule 203 of SEC Regulation SHO prohibits UBS from accepting a short sale order in any US equity security unless it has been documented that there are reasonable grounds to believe that the full quantity of the security can be borrowed by settlement date to make delivery (i.e., a "Locate"). For short sale orders sent to UBS, the client must obtain and indicate in their order instructions a Locate source for the full order quantity. Where deemed necessary, UBS may require additional information regarding the client's Locate source. A Locate provided by UBS is not a confirmation or guarantee that UBS has borrowed or will be able to borrow the security to make delivery on the required settlement date.
3. Mandatory Buy-In. Under Regulation SHO Rule 204, UBS may be required to effect a buy-in of any short or long sale transaction that results in a fail to deliver on settlement date. Should UBS execute a buy-in on a client's short or long sale, the client's trading activity in the subject security either executed or cleared through UBS on that trade date must end the day either net flat or net long.

Clients may designate whether their stop and stop limit orders are to be triggered off the quote or the last sale ("stop price"). When the stop price for a stop order is triggered, a market order is generated and sent to the RMM trading system for execution. When the stop price for a stop limit order is triggered, an appropriately priced limit order is generated for handling and potential execution.

While a client may receive a prompt execution of a stop or stop limit order, during volatile market conditions the execution price may be significantly different from the client’s specified stop price if the market is moving rapidly. The price of a stock can also move significantly in a short period of time during volatile market conditions and trigger the execution of a stop order. Clients should understand that if their stop orders are triggered under these circumstances, they may sell at an undesirable price even though the price of the stock may stabilize during the same trading day.

The activation of sell stop orders may add downward price pressure on a security. If triggered during a precipitous price decline, a sell stop order also is more likely to result in an execution well below the stop price.

Placing a limit price on a stop order may help mitigate some of these risks. By using a stop limit order instead of a regular stop order, a client may receive additional certainty with respect to the price received for the stock if the stop is triggered. However, clients should understand that, because UBS cannot sell for a price that is lower (or buy for a price that is higher) than the limit price selected, there is a possibility the stop limit orders will not be executed at all.

Any material system outage is communicated to clients via telephone and/or email. UBS will make reasonable efforts to inform customers when the issue has been resolved.

FINRA Rule 5320 generally provides that a broker-dealer handling a customer order in an equity security is prohibited from trading that security on the same side of the market for its own account at a price that would satisfy the customer order, unless the firm immediately executes the customer order up to the size of its own order at the same or better price. However, Rule 5320 also provides exemptions that permit broker-dealers to trade for their own account provided certain conditions are met. UBS may trade for its own account while handling a customer's order without providing price protection where the order is from an "institutional account" (as defined in FINRA Rule 4512(c)) or where the order is large-sized (i.e., 10,000 shares or more and greater than $100,000 in value). You may opt-in to Rule 5320 protections with respect to all or any portion of your order, or on an order-by-order basis, by providing UBS with written notice of your objection to UBS trading while handling your orders. Please specifically state your execution preference and any related instructions.

Additionally, Rule 5320 permits UBS to trade for its own account provided the principal trading desk has "no knowledge" of a customer order that would trigger price protection. Consistent with the "no knowledge" exemption under Rule 5320, UBS has implemented internal controls, including information barriers, to prevent principal trading desks from obtaining knowledge of orders outside of their trading unit.

UBS offers clients the option of reporting all off-exchange trades to either the FINRA/NASDAQ Trade Reporting Facility ("TRF") or the FINRA/NYSE TRF. Unless an alternative agreement exists with individual clients, UBS defaults trade reporting to the FINRA/NASDAQ TRF. We have the ability to manually switch from FINRA/NASDAQ TRF to FINRA/NYSE TRF if needed. We encourage all customers to have clearing agreements in place for both facilities. Please contact your UBS Sales Representative for additional information.

Generally clients have the option to receive a venue's MIC, where registered and available; if the MIC is unknown, UBS sends "XOFF" as noted below. 

UBS executed trading volume is generally advertised on a post-trade basis via Bloomberg, Autex and other service providers. UBS adheres to the relevant guidelines issued by these service providers, and advertisements are non-directional and aggregated at the symbol level. Furthermore, these advertisements include client flows across UBS business lines. Clients may opt out of having their executed order flow advertised. Upon direction from clients, UBS may distribute client data to client vendors for the purpose of broker reviews, execution analysis and related services. UBS provides aggregated data relating to client activities to industry ranking services like McLagan and Coalition.

If a client transacts in a foreign equity security and chooses to settle the transaction in a currency different than the currency in which the transaction was executed, UBS will effect a foreign currency transaction for that client's account to facilitate settlement of the transaction unless instructed otherwise. The foreign currency transaction is generally executed by a UBS affiliate on a principal basis and the affiliate stands to earn a profit from the foreign currency transaction in the form of a spread.