Kestrel Best Execution Committee — Q1 2026 Meeting Minutes

**Date:** Thursday, March 5, 2026, 10:00–12:30 ET **Location:** New York HQ, 42nd-floor conference room (with remote video for the Independent Quantitative Reviewer) **Meeting type:** Quarterly committee meeting under `Kestrel-Best-Execution-Policy` §3.2 and FINRA Rule 5310 Supplementary Material .02 (`FINRA-Rule-5310`)

Attendees

- Chief Compliance Officer (Chair) — present - Head of Equities Trading — present - Head of Options Trading — present - Head of Fixed-Income Trading — present - Head of Operations — present - Equities Desk Compliance Officer (EDCO) — present - General Counsel — present - Independent Quantitative Reviewer (external) — present (remote)

**Guests:** Head of Trading Technology (for §5 ETF/option discussion)

**Absent:** None.

Quorum satisfied.

Agenda

1. Approval of Q4 2025 minutes 2. Monthly monitoring recap (January–February 2026) 3. Q4 2025 regular-and-rigorous review (quarterly deep dive) 4. PFOF reconciliation — Q4 2025 5. New venue discussion (options — see §5 below) 6. Remediation status for FINRA 2025 Finding 1 7. Action items and close

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1. Approval of Q4 2025 minutes

Q4 2025 minutes as previously circulated approved unanimously.

2. Monthly monitoring recap

EDCO walked the committee through the January and February 2026 monthly monitoring dashboards. Headline metrics:

- Routed retail NMS share volume Jan–Feb 2026: ~48.3 million shares (+6% versus Q4 2025 monthly average). - Venue split (retail held market + marketable-limit NMS): - Venue A: 51.2% (range 49.1%–53.3% across the two months); - Venue B: 42.7% (range 41.3%–44.1%); - Exchange routers (NYSE/Nasdaq/Arca/BZX combined): 6.1%. - Per-share price improvement (weighted across categories): - Venue A: $0.0051 (-8% vs. Q4); - Venue B: $0.0048 (roughly flat vs. Q4). - NBBO worsening rate (share of marketable orders filled at a price worse than NBBO at receipt): 0.21% across all venues combined, stable.

No alert threshold under `Kestrel-Best-Execution-Policy` §4.4 was triggered by the Jan–Feb data. Committee noted the -8% Venue A PI deterioration — not yet at the 25% threshold, but warrants attention. Action: continue monthly monitoring; if the deterioration persists or widens in March, escalate to ad-hoc committee meeting rather than waiting for Q2.

3. Q4 2025 regular-and-rigorous review

EDCO presented the Q4 2025 analytics pack. The pack was prepared in accordance with FINRA Rule 5310 Supplementary Material .02 and covers price improvement, dis-improvement, effective and realized spread, speed of execution, fill rates, and NBBO comparison on a per-venue, per-order-type, and per-order-size basis.

Key observations:

- Venue A continues to provide superior price improvement in the 100–499 and 500–1,999 share buckets for market orders in NMS stocks, but its advantage narrowed during Q4 relative to prior quarters. - Venue B provides superior speed of execution and slightly different (larger) PI characteristics in the 2,000–4,999 share bucket. Venue B's price-dis-improvement rate in marketable limit orders increased modestly (from 0.18% to 0.22%) — not a material change under the §4.4 thresholds. - Exchange routers were used for residual flow and for all customer-directed orders. Execution quality for exchange-routed flow is within the expected range.

The Independent Quantitative Reviewer ("IQR") presented an independent analysis using the same raw order and execution data, normalized to a per-100-share basis and regressed against order-size and order-type fixed effects. The IQR's findings broadly corroborated EDCO's analysis but highlighted that Venue A's PI advantage in small-size market orders has declined approximately 15% year-over-year. IQR recommends increased monthly attention to this segment.

**Committee conclusion:** Routing practices remain consistent with best-execution obligations under FINRA Rule 5310. No change in routing shares is warranted on the Q4 evidence alone. The committee will conduct enhanced monitoring of Venue A PI in the small-size market-order segment through Q1 2026 and will reconvene for an ad-hoc decision if PI deterioration widens.

4. PFOF reconciliation — Q4 2025

Operations presented the Q4 2025 PFOF reconciliation.

- Total PFOF received Q4 2025: (figure on file, audited by Operations against the wholesale market-maker tier reports); YoY +4%. - Per-100-share economics by venue: consistent with the public Rule 606(a) disclosures (`17 CFR 242.605-606`). - Routing-share vs. execution-quality ranking: for the Q4 period, the routing share allocated to each venue is within 300 bp of the execution-quality-ranked allocation that would have resulted from the IQR's independent model. This convergence is an intentional design feature of the post-2025 process.

General Counsel confirmed that the Rule 606(a) "material aspects" disclosure language remains current; no update is warranted.

5. New venue discussion — listed options

Head of Options Trading proposed adding an additional options market-making counterparty to increase routing optionality in low- liquidity single-name listed options. The committee reviewed the proposed counterparty's Rule 605 statistics (where applicable for listed options, bearing in mind the 2024 Rule 605 amendment scope changes (`17 CFR 242.605-606`)), connectivity and capital posture, and any affiliations.

**Committee decision:** approve a 90-day pilot with a routing cap of 5% of retail held options flow, subject to monthly monitoring. EDCO to incorporate the pilot venue into the monthly monitoring dashboard and into the Q2 2026 quarterly pack.

6. FINRA 2025 Finding 1 remediation status

General Counsel confirmed that the following Finding 1 remediation items are now operational and evidenced in this meeting's record:

- Committee chair is the CCO (independent of trading and of PFOF negotiation) — in effect since September 15, 2025 (`Kestrel-Best-Execution-Policy` §3.1). - IQR is engaged, participates in monthly monitoring and quarterly review, and issues an independent written analysis — see §3 above. - Analytics pack is prepared on a security/type/size basis per Supplementary Material .02 — see §3 above and pack file. - Minutes capture substantive considerations, data reviewed, findings, conclusions, and action items — this document is illustrative of the format adopted. - Alert thresholds are defined and applied to monitoring (§4.4 of the policy).

General Counsel also noted that a closing letter from FINRA is anticipated in Q2 2026 based on post-remediation evidence. The General Counsel will coordinate a post-Q1 response package to FINRA before April 30, 2026.

7. Action items

| # | Action | Owner | Due | |---|---|---|---| | 1 | Enhanced monthly monitoring of Venue A PI in small-size market orders | EDCO | ongoing through Q1 2026 | | 2 | Prepare FINRA post-remediation response package (Finding 1) | General Counsel | 2026-04-30 | | 3 | Onboard new options venue under 90-day pilot; incorporate in dashboards | Head of Options Trading; Head of Trading Technology | 2026-04-15 | | 4 | Confirm annual legal review of Rule 606(a) "material aspects" disclosure language | General Counsel | 2026-05-31 (no changes required at this time; scheduled confirmation) | | 5 | Run back-test of the proposed options venue under IQR's model post-pilot | IQR | 2026-07-31 |

**Next meeting:** Thursday, June 11, 2026, 10:00 ET.

Meeting adjourned 12:30 ET.

*Minutes prepared by the EDCO and approved by the Chair (CCO) on March 13, 2026.*

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References

- FINRA Rule 5310, including Supplementary Material .02 and .07 (`FINRA-Rule-5310`) - 17 CFR 242.605-606 (`17 CFR 242.605-606`) - 17 CFR 240.17a-4 (records retention) (`17 CFR 240.17a-3, 240.17a-4, 240.15c3-5`) - Kestrel-Best-Execution-Policy - Kestrel-FINRA-Exam-Letter-2025 - Kestrel-WSP-Equities