Best Execution and Fair Pricing Disclosure

Last updated: June 28, 2022

1. Purpose of this document

   This document describes the arrangements put in place by Flahmingo Investments Inc. (“Flahmingo”, “we”, or “us”) intended to provide best execution and fair pricing for customers’ orders.

2. Scope of the document

   This document applies to Flahmingo customer orders for U.S. equities or fractions thereof that are not dually listed on a Canadian exchange (e.g. stocks and Exchange-traded Funds (ETFs)) (collectively referred to as “Equities”).

   Flahmingo is a non-clearing firm and does not perform any type of clearing function for itself or others. Flahmingo does not hold customer funds or securities. We are an order execution only (OEO) venue that accepts and enters orders. For the purchase or sale of listed equities, Flahmingo directs customer orders for execution to our executing broker, Alpaca Securities LLC (“Alpaca”, “they”, or “their”). Customer transactions are sent through Alpaca to a third-party execution venue, which executes our orders. The third-party venue then sends the trade execution reports to Alpaca. Alpaca compares, allocates, clears, and settles our customers’ trades.

3. Best execution obligation

   Best execution means obtaining the most advantageous execution terms for a customer order that are reasonably available. This is defined as National Best Bid and Offer (“NBBO”). NBBO is a regulation by the United States Securities and Exchange Commission (“SEC”) that requires brokers to execute customer trades at the best available ask price when buying securities, and the best available bid price when selling securities, as governed by Regulation National Market System (“NMS”).

   Flahmingo is a restricted dealer with our principal regulator being the Alberta Securities Commission. We are obligated to establish policies and procedures that are designed to achieve best execution when acting for a customer. These policies and procedures must take into consideration factors such as price, speed of execution, certainty of execution, and the overall cost of the transaction when costs are passed on to customers. Flahmingo monitors the best execution of its customers’ orders for the Equities listed on our platform.

4. Governance and oversight

   The Ultimate Designated Person (UDP) has responsibility for applying Flahmingo’s Best Execution and Fair Pricing policies.

   Flahmingo undertakes to oversee our executing broker’s fulfillment of their best execution and fair pricing obligations on behalf of Flahmingo’s customers’ orders. This includes a review of their publicly available customer disclosure and order routing practices.

   Flahmingo will obtain annual attestations from our executing broker that they have complied with and tested their best execution policies and procedures. Flahmingo is also committed to reviewing the clearing services provided by the executing broker and will raise any perceived deficiencies identified in the course of its review.

5. Flahmingo customer order flow

   Flahmingo has entered into an order routing and services agreement with Alpaca. As a member of Financial Industry Regulatory Authority (“FINRA”) and the Securities Investor Protection Corporation (“SIPC”), Alpaca is subject to similar best execution obligations. Alpaca provides Flahmingo order routing services for U.S. equities to market centres 1 with which Alpaca has order execution arrangements.

   Alpaca is responsible for the execution of Flahmingo’s customers’ U.S. Equities. These orders are handled using Alpaca’s broker application programming interface (“Broker API”).

6. Inter-listed equities

   The securities of certain reporting issuers listed on Canadian and U.S. marketplaces will not be made available to customers.

7. Best execution practices

   Alpaca is required to seek best execution on their client orders per FINRA and SEC requirements. Further, Alpaca works with multiple market centers for end-to-end control over orders in an effort to provide the highest speed and quality of execution.

   Orders where the entire order is filled principally, from Alpaca’s inventory, Alpaca is providing the at or better than NBBO pricing. For orders routed to market makers, Alpaca sets expectations on how orders are to be handled based on the order size (bucket). Alpaca provides market makers their standards and then grades venues based on how they perform in each order bucket size against Alpaca’s established benchmark. Alpaca has three categories of benchmarks:

   1. Effective/quoted spread - Effective spread is the price a customer paid compared to the midpoint of the NBBO multiplied by two. The quoted spread is the difference between the NBBO at time of order receipt. Effective spread over quoted spread (EFQ) results in a percentage representing how much price improvement an order received. 100% EFQ indicates an order was executed at bid for a sell order or at ask for a buy order. A 0% EFQ indicates that the order received the midpoint between the bid and offer.

   2. Price improvement (“PI”) - Price improvement (PI) occurs when your orders are executed at better prices than NBBO. This benchmark is the average amount of net price improvement per order, calculated as: Price improved dollars minus amount executed outside the NBBO divided by number of orders executed. This is also measured as a percentage of shares executed at a price better than the NBBO.

   3. Orders filled at or better NBBO - A measure of the percentage of orders executed at or better than the National Best Bid or Offer (NBBO). This measures how frequently your order is filled at or better than the NBBO you see at the time you entered it, even if your order is bigger than the displayed size.

1 Market centre is an order fulfillment point. For the securities industry, the market centres are comprised of the floor of a stock exchange (via a specialist), market makers and electronic communication networks.