N.M. Admin. Code § 2.60.14.9

Current through Register Vol. 35, No. 21, November 5, 2024

Section 2.60.14.9 - BROKER/DEALER APPROVED LISTS

A. GENERAL - Brokers desiring to conduct business with the state investment council should contact the appropriate member of the investment staff. This could be the state investment officer, deputy state investment officer or the portfolio managers. The institutional firms will be evaluated on the breadth of their capabilities. Firms will be added to the approved list based upon the collective judgment of those investment staff members most affected. New Mexico based firms, defined, as a brokerage firm that maintains at least one active retail office in the state, should contact the state investment officer or the deputy state investment officer. New Mexico based firms must have the ability to execute institutional-sized orders.

B. EQUITIES - The approved list shall consist of institutional firms and New Mexico based firms. The list of institutional firms shall be limited to ten firms and shall receive approximately 90 percent of the commissions generated by equity trades. Those institutional firms that have offices in New Mexico will be included in the institutional list. The remaining commissions will be divided among those New Mexico firms that provide primarily retail coverage for individuals and that have indicated an interest in doing business with the SIC.

C. The primary focus of equity trading is to obtain the bet [sic] net price, consisting of both commission cost and execution cost. Considerations involved in selecting the brokerage firm with which to place the order include but are not limited to:

(1) Marketability of the stock. Some stocks are more liquid than others are.

(2) speed of execution necessary. A brokerage firm may be required to commit capital to accommodate the order.

(3) location of execution. OTC and international exchange trades tend to be more difficult than trades executed on national U.S. exchanges.

D. It is the SIC trader's responsibility to determine the difficulty of the trade and match it with the execution services necessary for best execution.

E. Frequently there may be several institutional brokerage firms that could provide best execution particularly related to liquid, large capitalization stocks. An additional factor in the selection of a brokerage firm to execute a trade is the value of the additional services provided to the SIC staff, such as input related to market strategy, research on individual companies, and quality of the sales coverage. The institutional brokerage firms shall be ranked according to the value-added to the SIC investment process. Semi-annually, the equity staff, including the state investment officer and the deputy state investment officer, shall individually rank the institutional firms in the categories of strategy, research, sales coverage, and trading. The results shall be tabulated and a list created for use by the trader for the following six months. The top half of the firms shall receive approximately 60 percent of the total commissions and the remaining firms shall receive approximately 30 percent. In no case will best net price be sacrificed.

F. FIXED INCOME - The approved list shall consist of both institutional firms and New Mexico based firms. The list of institutional firms shall be limited to ten firms. Trades shall be executed on a best efforts basis with any discretionary commissions (primarily new issue designation) being awarded to those firms who have added the most value to the SIC investment process.

G. COMPETITIVE GUIDELINES - Trades shall be executed on a competitive basis when it is practical in the judgment of the staff. The following rules shall be followed for competitive trades:

(1) A minimum of three firms will be included on each trade.

(2) A minimum of one New Mexico firm will be included on each trade.

(3) The winner on all trades will be included on the competing list for the following trade unless, in the judgment of the staff, the firm does not have good capabilities in the sector related the subsequent trade.

(4) In the event of a tie, the trade will be awarded to a firm with a New Mexico office if possible.

H. CORPORATE BOND TRADING RULES - New issue trades shall be conducted in the following manner:

(1) Securities will normally be purchased from the lead underwriter.

(2) Available designations will first be used to fulfill soft dollar commitments.

(3) Remaining designations may be used to compensate firms according to the value of services provided to the investment office.

I. BOND EXCHANGES - Bond exchanges will be managed under the following guidelines:

(1) Recognizing the value of original ideas proposed bond exchanges would not be shopped among other institutional firms.

(2) If uncertainty exists concerning the levels of the bid or offer prices on the proposed exchange, the level(s) should be checked with at least one other firm.

(3) If a higher bid or offer is found, the proposing firm shall be given the opportunity to improve their bid or offer. The proposing firm shall win any ties.

N.M. Admin. Code § 2.60.14.9

6/15/99; Recompiled 10/1/01