The purpose of this document is the presentation by Santander Bank Polska S.A. ("Bank") of selected aspects related to the techniques of hedging the Bank's own positions and the potential impact of such techniques on the relationship between the Bank and its clients ("Clients") in the execution of orders or transactions ("Transactions") made with the Clients.
As a potential counterparty to a Transaction and/or a transaction intended to hedge its own position (made either for its own business purposes and/or for market risk or liquidity risk management purposes), the Bank may use the information provided by the Clients (especially a request for quote or a request to enter into a Transaction submitted to the Bank) to improve or obtain internal or external liquidity when anticipating that a Transaction will be made partly or fully ("Pre-Hedging"). The Pre-Hedging used by the Bank may apply to transactions in the same or similar underlying assets as those indicated in the Client's order, to mitigate the risk associated with the anticipated Transaction. Such Pre-Hedging can be executed before, during or after the Bank receives an indication of interest, a pricing request or an order to enter into a Transaction from the Client.
Pre-Hedging is one of many risk management tools used by the Bank. It is intended to support the execution of Transactions (e.g. outside a regulated market - in OTC market where there is no guarantee of price continuity or liquidity at a specific price) through facilitating effective market-functioning and point-in-time market risk transfer to liquidity takers, including the Clients. The purpose of Pre-Hedging is to enhance the Transaction liquidity or the Bank's execution of an anticipated order in an integrated, orderly fashion, taking into consideration the risks the Bank is exposed to as a potential party to a Transaction. The Bank's use of Pre-Hedging provides no guarantee or assurance that a Transaction or order will be executed at a specific price which could be considered to be advantageous for liquidity takers, including Clients. More information about the Bank's steps taken to obtain the best possible result for Clients when executing client orders while considering the market environment and the conditions that reflect the price of the financial instrument as well as the Bank’s right to remuneration for the activities performed and risk taken, can be found in the Best Execution Policy.
Pre-Hedging may have a direct or indirect impact on the market and/or the conditions of a Transaction, including the reference price of the Transaction's underlying asset. The Bank's Pre-Hedging can be executed at a different price than the price of the Transaction, which may affect the price and/or timing of the Transaction and/or market liquidity. It cannot be excluded that in certain circumstances such activities could potentially disadvantage the Client.
Subject to applicable laws, when entering into hedging transactions for its own account, the Bank may, in certain circumstances, get an economic advantage fully attributable to it (e.g. lower transaction costs, improved conditions of the transaction, right to receive additional payments or remuneration). The Bank's use of Pre-Hedging may lead to a conflict of interests in certain circumstances. The Bank has policies and procedures that it applies, to the extent required by law, to identify and manage conflicts of interests in order to prevent a situation in which either party's interest could be compromised. More information about COI management can be found in the document: Conflict of Interest Prevention Policy of Santander Bank Polska S.A.
When using Pre-Hedging, the Bank (as a potential party to a Transaction) shall act fairly, consistently, with respect to market rules, laws, and guidelines issued by regulators or any other competent authorities and while supporting the functioning of the market. The Bank uses Pre-Hedging exclusively for risk management purposes and never to manipulate the market, cause a disadvantage to the Client, affect the reference price of the underlying asset or of the Transaction, or to have a significant market impact. In assessing whether it is appropriate to use Pre‐Hedging , the Bank considers its own position, the nature and type of the anticipated Transaction and the prevailing market conditions (such as market liquidity and depth).
The content of this document: (i) is for information purposes only; (ii) should be considered and interpreted in the context of the entire relationship between the Bank and the Client, in particular, including the provisions of any agreements or rules relating to the execution of Transactions; (iii) is presented subject to any other, precise arrangements between the Bank and the Client or any information provided by the Bank which is or may prove to be more precise, accurate or relevant in certain circumstances; (iv) has been developed by the Bank with due care to ensure that it is not incorrect, false or misleading; (v) does not constitute and cannot be construed as an offer or invitation to make a contract within the meaning of the Civil Code; (vi) is not intended to be contrary to any law, ruling, guidelines of competent authorities.
Should you require further information on Pre-Hedging and Bank’s techniques in this respect, please contact your account manager.