Example Governed Decision Record, Algorithmic Trading

GOVERNED DECISION RECORD

Record ID: omega-record/2024-10-17/algo-block-trade-bt-7762
Schema Version: omega/1.0
Domain: financial-services.algorithmic-trading.block-review

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CONTEXT

At 11:14 BST on 17 October 2024, the firm's
algorithmic trading system (Aurora, v6.2.1)
identified a candidate block trade in the equity
of a FTSE 250 issuer (ticker [REDACTED]) on
behalf of an institutional client. The candidate
trade was sized at 1.85 million shares with a
notional value of approximately £21.4 million at
the prevailing mid.

Aurora's pre-trade risk module rated the trade as
borderline against the firm's published block
trading policy. Two thresholds were close to the
limit:

  - The trade size represented 6.4% of the
    instrument's 20-day average daily volume,
    sitting against a 6.0% soft limit above which
    Senior Manager review is required.
  - The order sat against a single counterparty
    indication of interest, with no second venue
    sweep priced in, against a "two venue minimum"
    style guidance for trades above £20 million
    notional.

Aurora's policy is explicit: a trade flagged on
either threshold is not blocked, but must not
proceed until a named Senior Manager has reviewed
the case and recorded a decision. The system
paused order generation at 11:14 and prepared the
review packet.

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DECISION

Approve trade with two amendments:
  - Reduce target size from 1.85 million to
    1.55 million shares (5.4% of 20-day ADV).
  - Require a second venue sweep at venue B as
    well as venue A, with a maximum participation
    rate of 12% on each.

Approved notional after re-sizing: approximately
£17.9 million at the time of approval.

Decision time: 11:23 BST
Time elapsed from flag to decision: 9 minutes
Decision authority: James Whitmore, Head of
Equities Trading, Senior Manager Function SMF22
(Other Overall Responsibility), under SMCR
statement of responsibilities dated 2024-04-02.

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REASONING

The Senior Manager's reasoning was as follows.

The two policy thresholds exist for distinct
reasons. The ADV threshold exists to limit market
impact and information leakage. The two venue
guidance exists to satisfy best execution
obligations under MiFID II as applied in the UK
post Brexit, by ensuring that a single
counterparty cannot capture all of the firm's
flow on a given block.

On the ADV question, the Senior Manager judged
that 6.4% of ADV on this name was higher than
intended by policy and would carry signal risk
into a market that had been thin all morning.
A re-size to 1.55 million shares brought the
order inside the soft limit with margin.

On the two venue question, the original packet
priced execution on venue A only because the
counterparty had indicated firm size there.
The Senior Manager judged that the policy
intent was not to refuse the venue A leg but to
ensure that the firm independently tested venue B
liquidity before committing the whole order to a
single source. A 12% participation cap on each
venue preserves the policy intent while still
allowing the trade to execute in the available
window.

Alternative paths considered:

  1. Approve as proposed. Rejected: would push
     against both thresholds simultaneously and
     leave the firm exposed on a best execution
     review.
  2. Reject outright. Rejected: client order is
     legitimate, instrument is liquid, and full
     rejection would impose a delay cost on the
     client without addressing the underlying
     concerns.
  3. Approve with size reduction only. Rejected:
     would address ADV but not the single venue
     concentration.

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EVIDENCE AND ASSUMPTIONS

Evidence used:
  - Aurora pre-trade risk packet, generated
    11:14:08 BST, hash recorded
  - 20-day ADV calculation as of close
    2024-10-16 (1.85m shares = 6.4% of
    28.9m ADV)
  - Counterparty indication of interest from
    venue A, timestamped 11:09:42 BST
  - Real-time venue B order book snapshot at
    11:17 (visible top of book size 240k shares,
    depth to 30 bps consistent with venue B
    fee schedule)
  - Client mandate terms (size discretion clause,
    no urgency flag set)
  - Block trading policy v2024-Q3 (in force on
    decision date)
  - SMCR statement of responsibilities for
    James Whitmore, version 2024-04-02

Assumptions explicitly recorded:
  - Market conditions assumed to persist for the
    expected execution window (under two hours).
    The Senior Manager noted that a material
    move in the wider market or in the name
    itself would trigger re-review.
  - Counterparty indication is assumed firm to
    the indicated size; if it is filled or
    withdrawn before execution, the order falls
    back to a standard schedule sweep across
    both venues.
  - 20-day ADV is taken as published; no
    correction for known one-off prints in
    the lookback window was made.

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AUTHORITY

Decision authorised by: James Whitmore, Head of
Equities Trading.

Authority basis: SMCR Senior Manager Function
SMF22 (Other Overall Responsibility), with
specific accountability for algorithmic trading
operation under the firm's statement of
responsibilities dated 2024-04-02. Block trading
policy v2024-Q3 names this role as the required
approver for trades flagged on either the ADV
soft limit or the multi venue guidance.

Algorithmic system identification:
  - System name: Aurora
  - Version: 6.2.1
  - Model release record: model-record/2024-09-04
  - Pre-trade risk module configuration hash
    referenced in the trade packet
  - Authority schedule binding the system:
    block trading policy v2024-Q3

Second line presence: Compliance officer Maria
Cardenas observed the review under the firm's
"four eyes" pre-trade standard. Compliance role
is observer only; the decision authority and
the conduct accountability sit with the Senior
Manager.

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CONSTRAINTS CHECKED

The following constraints were evaluated before
the decision was committed:

  ✓ Client mandate permits the proposed size
    and the size reduction
  ✓ No restricted list entry on the issuer
    (checked at 11:19)
  ✓ No conflicting house position above the
    informational threshold
  ✓ Best execution policy can be satisfied at
    the proposed venues and participation rates
  ✓ Senior Manager identity verified via
    hardware key at the trading desk
  ✓ Compliance observer present and recorded

  ⚠ Order remains close to the ADV threshold
    after re-sizing (5.4% versus 6.0%). Flagged
    for inclusion in the firm's weekly
    algorithmic trading review.
  ⚠ Counterparty concentration on venue A is
    below the firm's hard limit but above the
    soft monitoring level. Flagged for the
    monthly counterparty exposure report.

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DISPUTES

One disagreement was recorded during this decision.

The covering trader (David Chen, certified
function) recommended approving the original
1.85 million share size on the basis that the
firm has executed similar size in this name
inside the last quarter without measured impact.

The Senior Manager considered this and disagreed:
the prior executions cited were on days with
markedly higher trading volume than the current
session, and the ADV soft limit exists precisely
to avoid relying on a "we did it before" test in
thinner conditions. The covering trader's view is
preserved in the record as a contemporaneous
disagreement.

Resolution: re-sized order approved by the
Senior Manager. No override of policy was
required because the Senior Manager was acting
inside their delegated authority.

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CONSENT

Client consent recorded for:
  - Execution within the firm's standard block
    trading methodology
  - Size discretion within the client's stated
    mandate
  - Disclosure of the order to the firm's
    compliance and audit functions in line with
    standard policy

Client consent NOT obtained for (and not required
for current decision):
  - Disclosure of the order to any external
    party other than the chosen execution venues
  - Use of the order as a marketing reference

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HARM TRACE

Anticipated harm chains evaluated:

If re-sized order proceeds (chosen path):
  - Risk: residual market impact at 5.4% ADV
  - Risk: minor slippage from venue B sweep
    relative to a single venue execution
  - Mitigation: participation caps, two venue
    coverage, client size discretion
  - Residual risk: low

If original order had proceeded (rejected path):
  - Risk: information leakage at 6.4% ADV in
    thin conditions
  - Risk: single venue concentration on a
    block above £20 million notional, exposing
    the firm to a best execution challenge
  - Residual risk if pursued: moderate, with
    regulatory and client exposure

If order had been rejected outright (rejected
path):
  - Risk: delay cost to the client
  - Risk: client relationship cost
  - Residual risk if pursued: moderate, with
    client harm but limited regulatory exposure

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OUTCOME

Recorded at 13:48 BST on 2024-10-17:

Order executed in two child orders across
venues A and B between 11:31 and 13:42 BST.
Final fill: 1.55 million shares, average price
within 8 bps of arrival mid, well inside the
firm's best execution policy band for this size
in this name. No fills above the 12% per venue
participation cap.

Compliance retained the trade packet, the
Senior Manager's decision record, and the
post-trade transaction cost analysis for the
standard 7 year retention window.

The decision is closed with outcome COMMITTED.
No retrospective review flagged at the time.

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REGULATORY ENQUIRY ADDENDUM

Addendum recorded: 2026-05-14, eighteen months
after the original decision.

The Financial Conduct Authority opened a thematic
review of block trading practice across the
sector and issued a section 165 request for the
firm's records on a sample of trades, including
trade ID bt-7762.

The firm provided this Governed Decision Record
in full. No additional reconstruction was needed.
The record contains, in the form in which it
existed on 2024-10-17:

  - The named Senior Manager who took the
    decision
  - The policy version and statement of
    responsibilities in force on the day
  - The Aurora packet, hashed and cryptographically
    sealed at decision time
  - The reasoning steps, including the rejected
    paths and the trader's recorded disagreement
  - The constraints checked, including the
    flags for follow-on review
  - The contemporaneous compliance observation

The firm noted that without this record, the
same response would have required reconstruction
from trader memory, fragmented chat logs, and
post-trade analytics that were not designed for
this purpose. The Senior Manager's personal
accountability under SMCR is supported by
contemporaneous, sealed evidence rather than
recollection.

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PROVENANCE

Content hash:
sha256:5b8a3c1e9f4d7b2a6c8e1f3d5a9b4c7e2f8d1a3c5b9e7f4a2d6c8b1e3f5a9d7c4b2e6f8a1c3d5b9e7f

Previous record hash:
sha256:2f9c4a7b1d5e8c3a6f2b9d4e1c7a5f8b3d6e2a1f9c4b7d5e3a8c1b6f4d2e9a5c7b1d3e6f8a4c2b9d5e
(preceding algorithmic trading review record in
the firm's pre-trade review chain)

Schema validation: passed (omega-contracts v0.2.2)
Cryptographic seal: valid (sealed 2024-10-17,
re-verified on enquiry response 2026-05-14)
Composition: pre_trade_review_records →
             omega_records (canonical envelope)
SMCR Senior Manager attestation: present, sealed
                                 by SMF22 hardware key