SAGE Electronic Order Router Trading Practices

September 2019

SAGE Electronic Order and SAGE Order Router Trading Practices

The Following Electronic Trading Practices and Disclosures of SageTrader, LLC (“SAGE” or the “Firm”) pertain to Electronic Orders and the SAGE Electronic Order Router (“SAGE-OR”) and its compliance with applicable Securities and Exchange Commission (“SEC”) regulations and Self-Regulatory Organization (“SRO”) trading rules.

Unless otherwise approved by SAGE, all Client orders inclusive of IOC orders are handled on a “NOT HELD” basis. This means orders received and acknowledged by SAGE will be handled using SAGE's discretion to manage Client instructions orders. While a Client, in its sole discretion, may choose, direct, and deliver approved orders to SAGE to be routed to a specific Market Center these orders may otherwise be routed on behalf of the Client to those Market Centers to which SAGE offers equity routing including access to SAGE developed proprietary routes via the SAGE smart router as well as access to SAGE Net Trading. SAGE may execute any order at its discretion and may act in more than one capacity on a given order. Unless explicitly provided by the client, all client orders will be considered received in an agency capacity.

SAGE Electronic Trading

When customers or broker-dealer clients send orders electronically to SAGE, the Firm's Order Management Systems receive, and the order will go through an electronic review for financial and regulatory risk compliance. The order may be sent to the SAGE Order Routing System (“SAGE-OR”), another broker, or directly to the marketplace (DMA). Orders sent to the SAGE-OR may go through additional pre-trade surveillance analysis through its filters and then determine the order destinations based on both client intent and the SAGE-OR logic for the specific targeted route or execution strategy.

Orders sent to SAGE will be subject to the Firm's applicable controls and filters as required under SEA Rule 15c3-5 (“Market Access Rule”) and thus can be rejected or canceled without solicitation at the discretion of the Firm's Market Access controls and filters.

Orders sent to SAGE-OR may provide clients with access to national securities exchanges, alternative trading systems, market makers, other market centers, and/or SAGE-developed proprietary routes to execute equity orders. These market access services are provided through FIX connectivity supported by SAGE's Order Management Systems and SAGE-OR Infrastructure. In handling orders, the systems trading and order router technology, may break down your order into smaller orders and route these smaller orders to one or more destinations according to SAGE-OR embedded routing logic.

SAGE may use broker/dealers or market centers that in turn trade the order as Principal (including Net Trading), Riskless Principal, or Agent. Additionally, SAGE may use other broker/dealers or market centers to route orders to other liquidity destinations. These broker/dealers or market centers can either further route the order or directly act as Principal (including Net Trading), Riskless Principal, or Agent. Routed orders will be marked in SAGE's capacity and not in the capacity that the contra or destination acted. Sage may also directly act in a Principal capacity, via Riskless Principal, and or perform a Net Trade with client orders. SAGE properly identifies its capacity on execution files.

SAGE-OR's routing technology analyzes information to improve liquidity and price discovery based on security, certain market conditions, and other predetermined fixed settings. The Firm's systems and router process individual order details and then the order is efficiently routed to the optimal destinations to reduce cost and increase liquidity capture.

SAGE Net Trading

Orders received by the SAGE-OR or by downstream destinations can be executed on an Agency, riskless principal, and/or Principal basis. SAGE may trade Principally on a Net Trading basis. Thus, SAGE may incur a profit (or sustain a loss) in its proprietary account as a result of such transactions. For orders traded on a net basis, clients will receive an execution at or better than the Client's limit price and will typically not have to pay additional explicit commission or exchange fees.

SAGE does not engage in any of the following activities: (1) at-risk proprietary trading; (2) market making; (3) capital commitment; and/or (4) establishing directional positions.

For transitions effected on a net basis, SAGE may buy or sell at a price different than the orders not-held limit price, and therefore SAGE will not typically charge explicit commissions or market center fees on that order other than a commission equivalent mark-up or mark-down. Orders will be filled at the NBBO or better consistent with the limit price and other characteristics of the market and the order. When trading on a net basis SAGE does not act as a market maker as defined under FINRA Rule 2124. However, SAGE at its sole discretion may require certain clients participating in Net Trading to affirm acknowledgment of Net Trading on an order-by-order basis or by a separate letter of consent.

If a client is an institutional customer as defined in FINRA Rule 4512(c), a registered broker-dealer under Section 15(b) of the Exchange Act, or a foreign regulated broker-dealer executing US securities and settling with a US domiciled custodian bank, provided the client does not decline, it will be deemed by SAGE that approval has been given for SAGE to execute the client's orders on a net basis. If the client does not wish to have orders executed on a net basis, the client shall notify SAGE in writing to or SageTrader LLC, 340 Pine Street, Suite # 501, San Francisco, CA 94104. All orders that are not transacted on a net basis may be subject to additional commission and pass-through charges.

Payment for Order Flow and Best Execution

SAGE may receive remuneration from market centers and market makers for the routing of certain customer and broker-dealer client orders in the form of discounts, rebates, reductions of fees, or credits. This remuneration does not alter the Firm's policy to route orders to the trading center where it believes customers and clients will receive the best execution, considering among other factors price, transaction cost volatility, market depth, quality of service, speed, and efficiency. SAGE-OR's systems are programmed to execute client orders at prices equal to or within the National Bid or Best Offer (“NBBO”). Please see the Firm's “Rule 606 Reporting” section for additional information surrounding the Firm's routing practices and payment for order flow.

Additional Order Handling Practices

SAGE only offers fully automated electronic trading with the following order-handling practices and limitations:

Non-Directed / Directed Orders: SAGE accepts non-directed and directed orders. All orders, non-directed and directed will be routed in accordance with SAGE's own discretionary order routing practices. While directed orders may designate a market center destination Sage cannot ensure that destination will be the ultimate executing market center.

Unsolicited Orders: All orders received by SAGE are unsolicited.

Orders Not Held: SAGE treats all orders as "not held". This means orders in SAGE systems will be handled using price and time discretion with the objective of achieving the best overall execution possible and according to the protocols of the selected routing or execution strategy. This includes Immediate or Cancel (IOC) orders.

Manual Orders: SAGE does not accept manual orders to be “worked” by individual traders.

Indications of Interest: SAGE does not accept or send out indications of interest (“IOIs”) from customers or broker-dealer clients or external market centers. Certain brokers or market centers that SAGE uses might provide and accept such indications of interest (“IOIs”).

Restricted Securities: SAGE does not accept orders to sell restricted securities subject to Rule 144 or 145(d) under the 1933 Securities Act, as amended, or other securities requiring a “Brokers Representation Letter”.

Conditional Orders: SAGE does not accept or send out conditional orders that set order triggers for stocks or options based on the price movement of stocks, indexes, or options contracts. Certain brokers or market centers that SAGE uses might provide and accept or send out Conditional orders.

Cancellation of Orders: SAGE customers and broker-dealer clients may request that any unfilled order (or unfilled portion of an order) be canceled. However, SAGE retains the discretion to grant or deny such cancellation requests. Circumstances under which SAGE may deny a cancellation request include when the Firm has executed all or part of the order or has routed a principal order to another market center to fill the order or when it is otherwise in the process of executing the order.

Clearly Erroneous Orders: SAGE reserves the right to cancel or price-adjust any trade that is deemed by a regulator or the Firm to have been the result of a clearly erroneous execution or an obvious error, including but not limited to, as to security, size and/or prices that are unrelated to the market. Bona fide errors can result from human error or system issues that affect the execution of an order. Such errors can occur at SAGE or can occur outside of the Firm at an exchange, an ATS, or at other market centers utilized by SAGE for execution of the order. Such errors also can result from general market volatility, communications system breakdowns, or other conditions over which SAGE has no control. When SAGE exercises this right, the Firm will employ commercially reasonable efforts to inform you timely to minimize the market impact of all concerned. Sage, at its sole discretion, will determine the necessity for and carry out the filing of Clearly Erroneous Execution requests and or documentation with exchanges/market centers.

Duration of Orders: All orders are deemed “DAY” or “IOC” orders, and any unfilled portions of orders will expire at the end of the regular trading day (or after the SAGE-OR completes a liquidity sweep) on the day the order was received that is generally 4:00 p.m. Eastern Time. Good-Till-Cancel (“GTC”) orders are not accepted by SAGE. Unless explicitly stated by the client, all client orders will be assumed they can be routed and executed during any trading session.

Corporate Actions Adjustments: SAGE does not provide any automated or manual methods to adjust or cancel orders related to corporate actions. Customers assume responsibility for corporate actions as they relate to their orders, executions, and clearing.

Sub-Penny Orders: Consistent with Rule 612 of SEC Regulation NMS, SAGE will not accept orders in NMS stocks priced in increments smaller than $0.01 if the order price is equal to or greater than $1.00 per share. SAGE will accept orders in NMS stocks priced in sub-pennies of up to four decimal places ($0.0001) if the order price is less than $1.00 per share.

Non-Normal Market Conditions

SAGE's automated execution protocols assume normal market conditions. SAGE reserves the right, at its sole discretion, with or without notice, to determine if and when market conditions are non-normal. Non-normal market conditions include, but are not limited to:

  • Locked or crossed market conditions.
  • Limit Up / Limit Down Trading Halts.
  • Markets, market data and/or market participants that are unusually volatile, unreliable and/or unresponsive for any one or more symbols or sectors.
  • Periods of order imbalances either at this Firm or at the stock's primary exchange.
  • Regulatory trading halts and Non-regulatory trading halts (beginning from the time of the last print on the stock's primary exchange before the exchange's declaration of the halt and ending when the stock's primary exchange ends the halt by resuming its normal quoting and printing operations).
  • Periods of time when an exchange places a stock in “non-firm quote” mode or similar quoting mode.
  • Periods of unusually wide spreads (in the inside market or by the stock's primary exchange).
  • Periods of time surrounding significant news (local or international, issuer, sector, or market related stories) (whether or not those news stories result in a regulatory halt of the stock).
  • Secondary trading of IPOs.
  • Periods of time affected by a communications or systems outage.
  • Regulation NMS Self Help Declarations.
  • Rule 201 of Regulation SHO Circuit Breakers.

When non-normal market conditions exist, when attempts are made to abuse or circumvent its system related limitations, or when SAGE otherwise deems appropriate, SAGE reserves the right, at its sole discretion to, modify, suspend, or cancel any of its order handling protocols (except those that are designed to ensure compliance with the Firm's regulatory obligations including, but not limited to, automated execution and price improvement, automated display of eligible client limit orders, automated limit/market order protection, without notice on a stock by stock or on a customer/client by customer/client basis.)

Permitted and Not Permitted Order Modifiers and Instructions

Market Orders: SAGE accepts marketable orders and attempts to execute at prices that are available in the market following receipt of the order until the order is completed or canceled or otherwise unable to be executed. SAGE reserves the right to reprice marketable orders at prices that will seek liquidity but reduce potential disruptive trading in the security.

Limit Orders: SAGE accepts limit orders as DAY or IOC orders.

IOC (Immediate-or-Cancel) Orders: SAGE accepts IOC orders and may at its discretion execute all or part of any IOC order. If the order is executed in whole or in part, the executed quantity will be executed at the current market in the case of a marketable IOC order or at the order's limit price in the case of a Limit IOC order. SAGE accepts Immediate or Cancel (IOC) orders and the Client agrees SAGE has the ability to source liquidity to various liquidity sources through the use of multiple orders (typically IOC) that align with any client customization and liquidity needs. Orders are treated as not held and may be filled in a Principal, Riskless Principal, or Agency capacity. Single orders can also be treated in a mixed capacity with fills coming in as Principal, Riskless, and or Agent. as DAY or IOC as as DAY or IOC orders.

Market-on-Close (MOC)/Limit-on-Close (LOC) Orders & Cancellations : SAGE handles client orders in NMS securities with MOC or LOC instructions by routing orders to the Primary Exchange, or via a broker offering such access. These orders are subject to the terms and conditions of the exchange, including the exchange's rule limiting the time that such orders may be entered (relevant “cutoff” time(s)), modified, or canceled. Accordingly, SAGE accepts electronically entered MOC/LOC orders from clients subject to the same terms and conditions as the Primary Exchange or broker accepting them.

Opening Only (OPG) Orders: Opening Only orders with an “OPG” qualifier are subject to the terms and conditions of the exchange, including the exchange's rule limiting the time that such orders may be entered (relevant “cutoff” time(s)), modified or canceled. OPG orders will be accepted up until the relevant cut-off time and will be eligible for execution based on the opening price/print on the stock's primary exchange on a best effort's basis. OPG orders received after the cut-off time will not receive execution. OPG orders, or the balance remaining of an OPG order, that was not executed at the opening, are deemed canceled and not eligible for execution in the continuous market. (Note: For IPOs and other circumstances in which the security opens at times later than the beginning of normal trading hours, the Firm may choose not to accept orders with an OPG instruction. In the event SAGE accepts an order with an OPG instruction, the Firm does not guarantee the execution of such orders).

Stop Orders and Stop Limit Orders: SAGE does not accept, or support stop orders and stop limit orders.

Good-till-Cancel (GTC) Orders: SAGE does not accept or support GTC orders.

AON (All-or-None) Orders: SAGE does not accept or support AON orders.

FOK (Fill-or-Kill) Orders: SAGE does not accept or support FOK orders.

Order Routing and Execution Information

SAGE's clearing firms provide daily confirmations in daily electronic trading reports to eligible customers.

In accordance with SEC Rule 606 under Regulation NMS, SAGE publishes its order routing and execution information on its website at . In addition, upon written request to the SAGE Compliance Department, the Firm will provide additional execution related detail on specified transactions of the customer or client during the six-month period prior to the request. Details regarding remuneration received by SAGE regarding payment for order flow on specific transactions of the customer or client can be provided upon written request to the SAGE Compliance Department.

If you have questions regarding these Practices and Disclosures, please contact your SAGE Account Executive or the SAGE Compliance Department at .