ESMA on the execution of orders outside authorised trading platforms – implications for crypto-asset service providers

The European Securities and Markets Authority (ESMA) has published a new clarification (Q&A 2711) on the scope and practical application of Article 78(5) of the Markets in Crypto-Assets Regulation (MiCA).

This provision requires crypto-asset service providers (CASPs) to obtain the client’s prior explicit consent before executing an order outside a trading platform, where the order execution policy allows for such execution.

What does ESMA consider to be a “trading platform” within the meaning of MiCA?

ESMA clearly interprets the term “trading platform” in Article 78(5) as referring only to platforms that have been authorised under Article 59 MiCA to provide the service of operating a crypto-asset trading platform, in line with the definition set out in Article 3(1)(18) MiCA.

When is customer consent required to execute an order outside the MiCA platform?

If a CASP’s order execution policy allows for orders to be executed outside such an authorised trading platform, the client must be informed of this and must give their prior explicit consent. 

This consent may be given either as a general consent within the contractual terms or on a transaction-by-transaction basis.

Such execution venues include, in particular:

• over-the-counter (OTC) trading,
• third-country platforms not subject to MiCA,
• decentralised exchanges (DEXs).

In these cases, the level of regulatory oversight may be lower than that applicable to EU-authorised trading platforms.

By contrast, where client orders are executed on trading platforms operating in compliance with MiCA (i.e. platforms holding the relevant EU authorisation), no additional client consent is required, as this does not constitute “execution outside a trading platform” within the meaning of Article 78(5) MiCA.

Exception: customer consent is not required for orders placed on platforms authorized in the EU

The purpose of this clarification is to strengthen investor protection and transparency in the way CASPs handle client orders. ESMA notes that execution outside authorised trading platforms may involve a lower level of supervisory oversight and a potentially reduced level of client protection. Clients must therefore be made aware of this and give their consent before their orders are executed under such conditions.

The practical implications for CASPs include the need to appropriately adapt their order execution policies, onboarding documentation, contractual provisions and client disclosures so as to ensure compliance with the requirement of prior explicit consent within the meaning of Article 78(5) of MiCA, as interpreted by ESMA.

Do you need support in obtaining a MiCA licence?

Our law firm assists CASPs in obtaining MiCA authorisations and in aligning their internal documentation with the requirements of the Regulation. We do not merely interpret regulatory guidance but, above all, translate it into practical, compliant and secure business solutions.Feel free to contact us!