Wolverine Execution Services, LLC (WEX or the Firm) is a registered broker with the Securities and Exchange Commission (SEC) as well as several self-regulatory organizations, including the Financial Industry Regulatory Authority (FINRA). As a client, we would like to provide you with some important disclosures as required by our regulatory authorities as well as certain policies and procedures WEX has adopted as part of our business practices. Please note that this document is provided for informational purposes only and is meant to apply to multiple aspects of the Firm’s business. Therefore, not every disclosure will be applicable to every WEX client receiving this notice. WEX may amend the notices and disclosures herein as needed. Any such amendments shall be available on the Firm’s website (www.tradewex.com).
To help the government fight the funding of terrorism and money laundering activities, Federal law requires financial institutions to obtain, verify, and record information that identifies each person who handles transactions on behalf of others. Upon applying for the services of the Firm, WEX is required to collect (at a minimum) the following information from its clients:
Clients may also be asked to show driver’s licenses, corporate documentation, or other identifying documents. A corporation, partnership, trust, or other legal entity may need to provide information such as its principal place of business, local office, employer identification number, certified articles of incorporation, government-issued business license, partnership agreement, or trust agreement.
WEX developed its Business Continuity Plan (BCP) to provide reasonable assurance that WEX can maintain business continuity in the event that there are disruptions of normal business operations. The plan anticipates various types of potential disruptions to ensure that the Firm can react in an appropriate and timely manner. However, no contingency plan provides absolute assurance that an interruption will not occur or that a disruption of normal operations will result from a disruptive event. WEX may periodically update the plan in an effort to maintain as comprehensive of a plan as possible.
WEX provides agency execution services only. Accordingly, the Firm’s plan focuses on identifying potential risks that may inhibit the Firm’s ability to provide execution services and implement the processes that are to be followed in order to reestablish business operations. The plan details actions and alternatives for the Firm’s systems, networking, applications, market data feeds, vital records, regulatory reports, relocation sites, and employee tasks.
Should there be a serious business disruption, WEX clients are encouraged to access information via the WEX website (www.tradewex.com) or contact us at (888) 313-0664 for further information.
Prior to buying or selling an option, investors must be provided with a copy of the Options Disclosure Document (ODD), which explains the characteristics and risks of exchange traded options. WEX encourages all of its clients to read the full ODD and any related supplements. A copy of the most recent ODD, which includes all supplements, may be found on The Options Clearing Corporation website at: https://www.theocc.com/about/publications/character-risks.jsp. Please note that a Supplement to the ODD was released in October 2018.
A copy of the ODD may be obtained from WEX upon request. If you have any questions, please contact us at (888) 313-0664 or email@example.com.
WEX would like to remind its clients of their responsibility to mark orders properly when sending them to WEX for execution. Where applicable, clients must receive a locate or pre-borrow of stock for any sell orders marked “short,” and comply with long/short order marking provisions of Regulation SHO and all other relevant exchange and SEC rules, regulations, or related orders.
Similarly, clients must mark all terms of their options orders correctly, which includes using the proper order origin code for each order. This includes, but is not limited to, the correct marking of professional customer orders, or orders for any client that had an average of more than 390 orders per day during any month of the prior calendar quarter. Further information about this requirement may be found, among other places, in ISE Regulatory Circulars 2014-007, 2011-011, and 2009-06, available at www.nasdaqtrader.com.
Pursuant to SEC Rule 606, WEX makes available a summary of all “non-directed orders” for NMS securities and provides this summary to the public through our website: www.tradewex.com. Additionally and upon request, WEX will make available to any client the identity of the venue(s) to which the client’s orders were routed for execution during the previous six months. Requests for this information must be made in writing or submitted electronically to 606_Reports@tradewex.com and should include specific details regarding the trades or orders in question.
WEX is an indirect subsidiary of Wolverine Holdings, L.P., which owns several trading and investment entities under common control, some of which execute orders on a principal basis as a specialist or market maker in equity securities, options and futures.
Wolverine Trading LLC, and Wolverine Securities, LLC (collectively “Affiliates”) are registered market makers or specialist on U.S. options and equity exchanges. WEX frequently sources liquidity for certain client orders in stocks or options directly from these Affiliates by using exchange price improvement auctions and other mechanisms (collectively, “PIMs”), as well as using manual or electronic quote requests, electronic order routing, or by routing client orders to exchanges on which the Affiliates have a higher likelihood of trading with the order. The Affiliates’ trading decisions are made in an effort to maximize its profitability. Accordingly, when routing to exchanges, WEX typically uses order types that preference the Affiliates. Because the Affiliates stand to profit by trading as principal with or against WEX client orders, WEX has an incentive to seek executions with the Affiliates over other exchange participants when doing so is otherwise consistent with its best execution obligations. Conversely, WEX if it is able to do so will attempt to avoid routing client orders to exchanges on which the Affiliate has a higher likelihood of trading with the order in instances where WEX has determined that it would likely be unprofitable for the Affiliate to trade with the order, again provided that doing so is otherwise consistent with its best execution obligations. Conversely, WEX has an incentive to avoid routing client orders to exchanges on which the Affiliate has a higher likelihood of trading with the order in instances where WEX has determined that it would likely be unprofitable for the Affiliate to trade with the order, again provided that doing so is otherwise consistent with its best execution obligations.
WEX receives order flow payments, or “rebates,” in varying amounts from U.S. equity and option exchanges and also from U.S. options specialists and/or market makers pursuant to the exchange sponsored marketing fee programs, which have been adopted by the exchanges and approved by the SEC. In many cases these rebates are netted against fees charged by the exchanges for order executions and other services. The net rebate (if any, after exchange fees) for any given order varies depending on several factors including, but not limited to, the security, the bid/ask spread, the size of the order, its marketability, and whether the order takes or provides liquidity. During any given month or quarter, the net value of rebates received will fluctuate depending upon the total number of eligible shares or option contracts executed at the various exchanges and the rebated rates offered by those exchanges and/or other liquidity providers. WEX receives the net rebates after month or quarter end, after the settlement of trades. Depending on each client’s negotiated agreement with WEX, it will keep or pass on to its clients the fees or rebates associated with the executions.
WEX uses many different criteria in making order routing decisions. If multiple exchanges are quoting at the National Best Bid and Offer (NBBO) for an order and WEX has discretion as to where to route the order (or a portion of it), WEX will route the order to the venue which the Firm believes will deliver the best execution. In certain circumstances, this routing decision will result in the order being sent to a preferred venue from which WEX receives payment. WEX preferences certain options orders to the Firm’s affiliated options market maker, and to third party market makers for execution. Order routing decisions are based on fulfilling the Firm’s obligation to provide best execution of customer orders, and this obligation will not be compromised or influenced by the payment WEX receives for directing orders to a particular market. As described further in this notice, for some orders WEX can receive remuneration from an unaffiliated broker-dealer in consideration of such broker-dealer’s willingness to interact with a given order.
WEX considers the security of the information our clients provide to us to be of the utmost importance. In order to provide brokerage services and maintain compliance with securities regulations, WEX may receive certain personal, non-public information from its clients from the following sources:
WEX may use the personal, non-public information that the Firm collects to provide services to its clients, which includes qualifying clients for trading various products and using the services available through the WEX system. The information may also be necessary to execute and confirm transactions executed by WEX on behalf of its clients. In doing so, WEX may share such information with employees, agents, and affiliates. WEX restricts access of personal, non-public information to those employees, agents and affiliates who need to know that information in order to provide products and/or services to WEX clients.
To protect clients’ personal non-public information WEX maintains physical, electronic, and procedural safeguards. For example:
Only authorized WEX personnel can access the WEX system. In addition, WEX’s Internet-based systems include multiple security measures.
WEX does not disclose personal, non-public information to any parties that are not affiliated with WEX, except as required by law or upon request by exchange or other self-regulatory organization rules. WEX will only disclose or report such information where necessary to authorize, effect, administer, or enforce transactions that clients request or authorize in order to: maintain and administer clients’ accounts, provide clients with transaction confirmations, statements and records; maintain appropriate archive records; where WEX believes that disclosure is required by applicable law, rules or regulations to cooperate with law enforcement, or regulatory or self-regulatory organizations enforce client and other agreements, meet our obligations to third party service providers, or to protect WEX’s rights and property.
When handling an order of 500 contracts or more on your behalf, WEX may solicit other parties to execute against your order and may thereafter execute your order using the Chicago Board Options Exchange’s (Cboe’s) AON AIM Solicitation Mechanism. This functionality provides a single-priced execution, unless the order results in price improvement for the entire quantity, in which case multiple prices may result. For further details on the operation of this mechanism, please refer to Cboe Rule 5.39, which is available at https://www.cboe.com/aboutcboe/legal-regulatory.
When handling an order of 500 contracts or more on your behalf, WEX may solicit other parties to execute against your order and may thereafter execute your order using the Nasdaq International Securities Exchange’s (ISE’s) Solicited Order Mechanism. This functionality provides a single-price execution only, so that your entire order may receive a better price after being exposed to the Exchange’s participants, but will not receive partial price improvement. For further details on the operation of this Mechanism, please refer to Section 11(d) of the Nasdaq ISE Rules, which is available at https://nasdaqise.cchwallstreet.com/.
When handling an option order of 500 contracts or more on behalf of a client, WEX may buy or sell a hedging stock, security futures, or futures position following receipt of the option order, but prior to announcing the option order to the trading crowd. The option order may thereafter be executed using the Cboe’s tied hedge procedures. These procedures permit the option order and hedging position to be presented for execution as a net-priced package subject to certain requirements. For further details on the operation of the procedures, please refer to Cboe Rule 5.87.10, which is available at https://www.cboe.com/aboutcboe/legal-regulatory.
When executing block transactions on behalf of its clients, WEX can source liquidity from a number of providers, including, but not limited to, affiliated broker-dealers and market-makers, in an effort to improve execution quality. Such liquidity providers may engage in hedging or other transactions to fulfill or facilitate the execution of the client’s order, which will occur prior to or at the same time as the execution of the client’s order(s). The purpose of these transactions will be to source liquidity for WEX’s client at the best available terms, including price, speed of execution, and minimization of market impact.
Generally, penny stocks are low-priced shares of small companies that are not traded on an exchange or quoted on NASDAQ. Penny stocks generally are traded over-the-counter, such as on the OTC Bulletin Board or Pink Sheets, and are historically more volatile and less liquid than other equities. For these and other reasons, penny stocks are considered speculative investments and customers who trade in penny stocks should be prepared for the possibility that they may lose their entire investment, or an amount in excess of their investment if they purchased penny stocks on margin. Before investing in a penny stock, you should thoroughly review the company issuing the penny stock. In addition, you should be aware of certain specific risks associated with trading in penny stocks.
There are a number of risks of trading penny stocks, including but are not limited to the following:
Further information concerning penny stocks and the risks involved in trading them is available on the SEC's website at https://www.sec.gov/investor/pubs/microcapstock.htm.
When handling orders on your behalf, WEX will take all reasonable steps to obtain the best possible execution based on the specific instructions of each order. WEX’s best execution obligations are separate and independent from any best execution obligations that its clients owe to their customers. While WEX has a general duty of best execution on the orders it handles and executes, it has not accepted from its clients the delegation of any of their own best execution obligations, nor has WEX agreed to guarantee any of the best execution obligations of its clients. WEX applies pre-trade checks to all orders that it receives and, in its discretion, can reject any order back to a client. Unless a client has instructed WEX to route its order to one or more designated exchanges (i.e., a directed order), when making a determination regarding how best to fill an order, the Firm will consider a variety of factors, including but not limited to price, the need for timely execution, the liquidity of the relevant market, the size of the order, the trading characteristics of the security involved, the costs paid or rebates received by WEX, and the anticipated profitability with respect to the routed order(s). The Firm attempts to obtain best execution by filling an order in the over-the-counter market, by routing orders on your behalf to market centers, including national securities exchanges, alternative trading systems, electronic communications networks, and other broker-dealers.
The Firm will always take into account all specific instructions provided on an order. However, all orders directed to the Firms algorithms, smart order router, and trading applets are treated as not-held orders. In the absence of express instructions from a client, all orders routed to WEX will be deemed not held, and the Firm will exercise its own discretion based on its professional expertise with regard to the execution of the order which can include the timing, execution venue, and/or pricing of any such orders.
Order size is a key factor when determining how to achieve best execution for an order. Because there is typically a correlation between the size of an order and its impact on the execution price of a security, orders in large size and/or less liquid products may not be filled at the quotes displayed by market data services (which typically apply only to orders of a limited size), or can be worked over a period of time so as to not exert undue pressure on the price of the security in question. WEX clients and its brokers have the ability to work large orders using WEX’s suite of routes and algorithms that each have unique order handling characteristics. Please see tradewex.com for more information about WEX algorithms.
WEX can use available exchange-provided functionality, including various order types, exchange auction mechanisms, attributed orders, and preferenced orders, in addition to soliciting requests for quotes from one or more affiliated or unaffiliated market makers in order to provide best execution and, when available, price improvement relative to the published markets. In some instances, WEX will solicit Wolverine Trading, an affiliated market-maker or other unaffiliated broker-dealers, to provide liquidity for orders routed to WEX. Absent a specific written agreement with a client, WEX is not obligated to route any client order to PIMs or to provide price improvement to any client order.
WEX clients can select from a number of order routing and execution options, based on each client’s needs and preferences. A brief description of the currently available services follows:
WEX clients can license the Firm’s proprietary WEX Trading Platform (WTP) in order to direct the routing of their orders to a number of liquidity providers and market centers. The WTP offers functionality for clients to enter orders in equities, options and futures. Clients may choose to utilize functionality which, based on user-determined parameters, permits trading in spreads and/or baskets as well as automated hedging and volatility trading.
WEX clients may submit orders via phone and/or email to brokers on the Firm’s upstairs agency trading desk or on various options exchange trading floors. WEX brokers can solicit one or more affiliated or unaffiliated liquidity providers in order to seek to obtain the best price for any such order(s).
WEX clients may enter orders via a third-party front end application in order to route such orders via FIX connection to multiple dynamic proprietary algorithms offered by the Firm. These applications will route orders in equities, options, and futures based on the needs and preferences communicated to WEX by each individual client, including, but not limited to, minimization of fees, minimizing market impact and price slippage, immediacy of order execution, market volatility, user-provided option delta, and time-weighted or volume-weighted (TWAP/VWAP) functionality.
WEX purchases orders from broker-dealers that aggregate individual orders from their end-clients. For these purchased orders, WEX solicits contra-side interest from another broker-dealer which can provide liquidity for the purchased order. This solicitation is typically of Wolverine Trading, LLC (“WT”), an affiliated broker-dealer that is an options market-making firm. If WT is willing to interact with an order, WEX can submit a paired order for both the initiating broker-dealer client and WT to an options exchange PIM, where additional price improvement can be received from exchange member auction participants. For certain option classes, WEX may solicit an unaffiliated broker-dealer, in an attempt to source liquidity on a confidential basis if WEX reasonably believes that superior execution quality can be obtained. If the unaffiliated broker-dealer is willing to interact with an order, WEX can submit a paired order for both the initiating broker-dealer client and the unaffiliated broker-dealer to an options exchange auction mechanism, where additional price improvement can be received from exchange member auction participants. Any such paired order will be routed on a confidential basis via automated means in order to avoid information leakage. In such instances, WEX typically receives remuneration from such unaffiliated broker-dealer in consideration of such broker-dealer’s willingness to interact with a given order. WEX does not exercise discretion over whether WT or the unaffiliated broker-dealer is willing to provide liquidity for a WEX client order or the price at which such liquidity provider is willing to interact. This willingness depends on many factors, including, but not limited to: its existing inventory positions, risk appetite, market conditions, the particular client and client economics, its theoretical value calculation for the option and can change with or without notice. When WEX pairs an order, it will do so at the NBBO or better, and the ultimate execution price for the order will be determined by the exchange auction process (which will often be different from the solicited broker-dealers theoretical value calculation). The determination of whether and to what extent WEX will route client orders to any exchange PIM is in WEXs’ sole and absolute discretion. An interaction between WEX and an unaffiliated broker-dealer, as described above, is contingent upon WEX’s determination that such broker-dealer has the means to provide superior execution quality in a given option class as well as procedures in place that are reasonably designed to prevent information leakage. WEX regularly monitors and compares execution quality for orders paired with WT or unaffiliated broker-dealers and will adjust its routing practices for various option classes in order to ensure that superior execution quality is consistently achieved for its clients.
For orders where WEX does not submit a paired order to an auction, such option orders are routed to a U.S. option exchange using a variety of routing methods where such orders can post to or trade in the exchange’s displayed order book or other exchange system. Some of these routing methods include routing the order to an exchange that is quoting at the national best bid or offer (“NBBO”). If more than one exchange is quoting at the NBBO, WEX will generally select the exchange that is most favorable to WEX. Subject to best execution considerations, by routing an order to an exchange that is not currently posting at the NBBO, but which may be willing to “step up” to execute the order at the NBBO (with a “flash” mechanism) or induce other market participants to improve the market. Generally, WEX does this to reduce transaction costs associated with order execution on a higher cost exchange. While this can benefit the order by offering access to more size than is displayed at the exchange(s) posting at the NBBO, this can result in not obtaining an immediate execution at the prevailing market price for a marketable order, which can result in the order not executing or slippage in the order’s execution price. WEX can also display the order (including a market order) as a non-marketable limit order at a price at or inside the NBBO for a period of time, unless the order was received with a time-in-force modifier that would prohibit this routing method. WEX does this to potentially provide price improvement to the order. While this can benefit the order by providing price improvement, it could also result in the order not obtaining an immediate execution at the prevailing market price for a marketable order, which can result in the order not executing or slippage in the order’s execution price. Finally, WEX anticipates that, in certain instances, an unaffiliated broker-dealer may solicit WEX to source liquidity in certain option classes where such broker-dealer reasonably believes that WEX may provide superior execution quality in such option classes.
Subject to the requirements of relevant laws, rules, and regulations, a written specific agreement to the contrary, or a specific restriction imposed by WEX (e.g., an information barrier), WEX can share information regarding client orders and/or executions (i.e., symbol, size, fill price, and fill quantity) with Affiliates or other liquidity providers. The recipient can use that information in connection with both their own market making activities and determining whether to provide liquidity to a WEX client order (in whole or in part), the price at which to provide liquid an order (including whether to provide price improvement) and in connection with any other trading or business.
WEX’s RFQ System allows clients to solicit pre-trade RFQs from their desired pool of multiple liquidity providers, and to control the terms of those RFQs, including the time allowed to respond and whether liquidity providers must respond with a one- or two-sided market.
The following section contains a high-level description of some of the many the order types accepted and/or used by WEX. This is not a complete list. If you require more information about order types supported by WEX, please contact firstname.lastname@example.org.
WEX accepts not held orders which allow WEX to use its discretion in the execution of the order which includes: the price, time, and execution venue. All orders directed to a WEX algorithm, WEX trading application, or WEX broker are considered not held. Additionally, if a client order indicates the quantity of a specific security to buy or sell but leaves the time, price, or manner of execution to WEX’s discretion these orders will also be considered not held. WEX may have a trader manually handle not held orders or use an algorithm to do so. The particular manner of order handling utilized by WEX will affect the speed and price at which a particular order is executed (if at all) and presents the risk of the order not executing or slippage in the orders execution price. However, especially for orders larger than the NBBO quote size or in illiquid options classes, allowing WEX to “work” an order on a not held basis permits WEX to seek to minimize the market impact of the order.
Smart Router Orders: Orders sent to WEX for execution via its options smart order router are considered smart order router orders (“SOR Orders”). The WEX smart order router is designed to seek best execution for client orders. SOR Orders will be handled by WEX in a manner that include, but is not limited to: soliciting pre-trade price improvement from our affiliate market maker, Wolverine Trading, or other unaffiliated market maker, routing paired orders to exchange auction mechanisms, taking liquidity on exchanges, posting nonmarketable limit orders at prices superior to a parent order's limit price in order to attract contra-side liquidity, or otherwise working orders on an automated basis in the marketplace in order to obtain the best price possible for each order. The precise handling of a SOR Order depends on the options class, the size of the order, market conditions and the perceived likelihood of finding contra-side liquidity, among other factors. The effort to achieve price improvement for SOR Orders at times can result in not obtaining an immediate execution at the prevailing market price for a marketable order, which can result in the order not executing or slippage in the order’s execution price. However, especially for orders at or below the NBBO quote size, WEX’s experience is that using SOR Orders achieves on average the best overall execution quality, considering both speed of execution and possibility of price improvement.
Clients that route orders to WEX’s electronic trading platform have the ability to specify all material terms of an order which includes the specific destination to which the orders will be routed. In these circumstances WEX will not exercise discretion over the routing of the order and will route the order to the market center specified by its client without modifying the terms of the order. Sending a directed order can provide the fastest execution (although it does not prevent the possibility of an order that was marketable when entered not being executed, especially in a fast-moving market), but it significantly limits WEX’s ability to seek price improvement for that order.
WEX accepts day orders, which are eligible for execution only during regular trading hours (generally 9:30am to 4:00pm, ET). WEX will cancel those day orders that are unexecuted at the close of the regular trading session of the subject option’s listing exchange. In the absence of specific time-in-force instructions, client orders generally will be considered and handled as day orders.
WEX accepts GTC orders, which remain open until the earlier of their full execution and their cancellation by the client. WEX also accepts GTD orders, which remain open until the earlier of their full execution, their cancellation by the client, and the end of regular trading hours on the date specified by the client.
GTC and GTD orders sent to WEX are executable only during regular trading hours. WEX maintains its own open order book, and generally does not leave displayed orders representing GTC or GTD orders with exchanges overnight. If any displayed orders are open at the end of the regular trading session for the particular options exchange, WEX will generally cancel the displayed order and resubmit it at the beginning of the next trading day, with such cancellation potentially resulting in the order losing its queue priority at the applicable exchange.
If the SEC, FINRA, an SRO, or any other regulatory body having jurisdiction over WEX determines that a previously-executed transaction is erroneous and, accordingly, should be adjusted or cancelled, WEX will be required to adjust or cancel, as applicable, that transaction and will be unable to honor the execution price or any other terms of that transaction.
WEX clients are responsible for the timely identification of potentially obvious error transactions to WEX. If a particular transaction contains an obvious error in the execution of its terms and also satisfies certain numerical thresholds contained in the applicable SRO clearly erroneous rules, a client may request WEX submit an obvious error filing on the client’s behalf, seeking to break the transaction. Any client request for WEX to submit an obvious error filing must be received in writing by WEX within ten minutes of the applicable filing deadline (generally, within 15 or 30 minutes of the transaction’s execution) to allow WEX adequate time to complete and submit the required filing. Notwithstanding the foregoing, WEX reserves the right to refuse to submit an obvious error filing at its sole and absolute discretion.
Pursuant to FINRA Rule 2265 and related exchange rules, all member firms must disclose to their customers any inherent risks should they choose to conduct trading activities outside of normal market hours, and that each customer should consider the following:
FINRA Rule 2267 requires WEX to provide the following information to its clients once every calendar year in writing (which may be in electronic format):
WEX is a member of the Securities Investor Protection Corporation (SIPC). Clients may obtain information about SIPC, including the SIPC brochure, by contacting SIPC via phone at (202) 371-8300 or e-mail at email@example.com or by visiting the SIPC website at www.sipc.org.
WEX is required to inform its clients about the National Futures Association’s (NFA) Background Affiliation Status Information Center (“BASIC”), which contains Commodity Futures Trading Commission (CFTC) registration and NFA membership information and futures-related regulatory and non-regulatory actions contributed by NFA, the CFTC and the U.S. futures exchanges. BASIC is available at https://www.nfa.futures.org/basicnet/welcome.aspx.
Should you have any questions regarding the materials provided by this notice, please contact us at (877) 310-8155 or firstname.lastname@example.org.
Should you have a complaint regarding WEX, including, but not limited to, any employee of the Firm or services you have received, please direct such complaint to:
Wolverine Execution Services, LLC
Attn: Compliance and Legal Department
175 W. Jackson Blvd., Suite 200
Chicago, IL 60604
Thank you for your continued business.