Article 78 Execution of orders for crypto-assets on behalf of clients

Summary What does Article 78 of the MiCA regulation say?

This article establishes a "best execution" obligation for crypto-asset service providers (CASPs) that execute orders on behalf of clients.

It is the crypto-asset equivalent of the best execution framework familiar from traditional financial services regulation.

The core duty is to achieve the best possible result for clients when executing orders, weighing up factors such as price, costs, speed, likelihood of execution and settlement, size, and the nature and custody conditions of the crypto-assets involved.

The article then sets out the operational infrastructure required to support this duty: CASPs must establish and implement an order execution policy, disclose it to clients, obtain their prior consent, and regularly monitor whether the policy is actually delivering best results.

CASPs must also be able to demonstrate compliance both to clients on request and to competent authorities.

Important points:

Establish and implement an order execution policy that achieves the best possible result for clients, covering factors including price, costs, speed, and likelihood of execution and settlement.
Obtain prior client consent to the order execution policy, and if orders may be executed outside a trading platform, obtain prior express client consent specifically for that.
Regularly monitor the effectiveness of your execution arrangements and notify clients of any material changes to the policy.

Springlex's summary of the article, a reading aid, not a substitute for the legal text.

1. Crypto-asset service providers executing orders for crypto-assets on behalf of clients shall take all necessary steps to obtain, while executing orders, the best possible result for their clients taking into account factors of price, costs, speed, likelihood of execution and settlement, size, nature, conditions of custody of the crypto-assets or any other consideration relevant to the execution of the order.
2. Notwithstanding the first subparagraph, crypto-asset service providers executing orders for crypto-assets on behalf of clients shall not be required to take the necessary steps as referred to in the first subparagraph in cases where they execute orders for crypto-assets following specific instructions given by its clients.
1. To ensure compliance with paragraph 1, crypto-asset service providers executing orders for crypto-assets on behalf of clients shall establish and implement effective execution arrangements. In particular, they shall establish and implement an order execution policy to allow them to comply with paragraph 1. The order execution policy shall, amongst others, provide for the prompt, fair and expeditious execution of client orders and prevent the misuse by the crypto-asset service providers’ employees of any information relating to client orders.
1. Crypto-asset service providers executing orders for crypto-assets on behalf of clients shall provide appropriate and clear information to their clients on their order execution policy referred to in paragraph 2 and any significant change thereto. That information shall explain clearly, in sufficient detail and in a way that can be easily understood by clients, how client orders are to be executed by crypto-asset service providers. Crypto-asset service providers shall obtain prior consent from each client regarding the order execution policy.
1. Crypto-asset service providers executing orders for crypto-assets on behalf of clients shall be able to demonstrate to their clients, at their request, that they have executed their orders in accordance with their order execution policy and shall be able to demonstrate to the competent authority, at the latter’s request, their compliance with this Article.
1. Where the order execution policy provides for the possibility that client orders might be executed outside a trading platform, crypto-asset service providers executing orders for crypto-assets on behalf of clients shall inform their clients about that possibility and shall obtain the prior express consent of their clients before proceeding to execute their orders outside a trading platform, either in the form of a general agreement or with respect to individual transactions.
1. Crypto-asset service providers executing orders for crypto-assets on behalf of clients shall monitor the effectiveness of their order execution arrangements and order execution policy in order to identify and, where appropriate, correct any deficiencies in that respect. In particular, they shall assess, on a regular basis, whether the execution venues included in the order execution policy provide for the best possible result for clients or whether they need to make changes to their order execution arrangements. Crypto-asset service providers executing orders for crypto-assets on behalf of clients shall notify clients with whom they have an ongoing client relationship of any material changes to their order execution arrangements or order execution policy.

Relevant recitals

Recital 86 Best execution, policies, and inducement bans

Crypto-asset service providers that execute orders for crypto-assets on behalf of clients should draw up an execution policy and should always aim to obtain the best possible result for their clients, including when they act as a client’s counterparty. They should take all necessary steps to avoid the misuse by their employees of information related to client orders. Crypto-asset service providers that receive orders and transmit those orders to other crypto-asset service providers should implement procedures for the prompt and proper sending of those orders. Crypto-asset service providers should not receive any monetary or non-monetary benefits for transmitting those orders to any particular trading platform for crypto-assets or any other crypto-asset service providers. They should monitor the effectiveness of their order execution arrangements and execution policy, assessing whether the execution venues included in the order execution policy provide for the best possible result for the client or whether they need to make changes to their execution arrangements, and should notify clients with whom they have an ongoing client relationship of any material changes to their order execution arrangements or execution policy.

Recital 87 Distinguishing execution from proprietary exchange

When a crypto-asset service provider executing orders for crypto-assets on behalf of clients is the client’s counterparty, there might be similarities with the services of exchanging crypto-assets for funds or other crypto-assets. However, in exchanging crypto-assets for funds or other crypto-assets, the price for such exchanges is freely determined by the crypto-asset service provider as a currency exchange. Yet in the execution of orders for crypto-assets on behalf of clients, the crypto-asset service provider should always ensure that it obtains the best possible result for its client, including when it acts as the client’s counterparty, in line with its best execution policy. The exchange of crypto-assets for funds or other crypto-assets when made by the issuer or offeror should not be a crypto-asset service.

Table of contents

Springlex and this text is meant purely as a documentation tool and has no legal effect. No liability is assumed for its content. The authentic version of this act is the one published in the Official Journal of the European Union.