ESMA publishes new MiCA Q&A on the shared order book model

ESMA has published a new MiCA Q&A on the shared order book model. Its conclusion is clear: an EU trading platform may not pool its order book with a non-EU platform operated by an entity that is not authorised under MiCA.

The Q&A is particularly relevant to international crypto groups that use a global order book to provide their EU and non-EU clients with access to the same liquidity.

What has ESMA clarified?

A shared order book model allows two or more platforms to combine their buy and sell orders in a single order book. Orders submitted by clients of the participating platforms can consequently be matched against each other.

Under Article 3(1)(18) MiCA, operating a trading platform for crypto-assets includes managing a multilateral system that brings together multiple third-party buying and selling interests in a manner that results in a contract. ESMA considers the management of an order book to be a fundamental part of operating such a system.

According to ESMA, each entity operating an order book that forms part of the shared order book therefore provides the regulated service of operating a trading platform. Each operator must consequently be authorised under Article 63 MiCA or, where applicable, have submitted a notification under Article 60 MiCA.

An EU-authorised CASP cannot therefore share its order book with a non-EU platform if the operator of that platform is not authorised or notified under MiCA. Such an arrangement would breach Article 59 MiCA and would result in the non-EU entity providing the service of operating a trading platform in the EU without the required authorisation.

Why does this matter in practice?

Many international crypto groups use a shared or global order book to concentrate liquidity across different entities and jurisdictions. ESMA’s interpretation means that an EU platform cannot participate in such an arrangement merely because the EU-facing entity itself holds a MiCA authorisation.

The relevant question is who is involved in managing the shared order book. If an unauthorised non-EU entity operates one of the connected order books and orders from its clients can be matched with orders submitted through the EU platform, the model is not permitted.

The fact that the entities belong to the same group does not change this conclusion. Nor can the issue necessarily be resolved by describing the non-EU entity as a technology or liquidity provider if that entity is, in substance, involved in operating the shared order book.

The practical consequence may be significant. A CASP using a global order book may need to separate its EU order book from the order books operated by non-EU group entities. This can reduce the liquidity available through the EU platform and may require changes to its matching engine, order routing and group operating model.

What should trading platforms do?

CASPs operating, or applying for authorisation to operate, a trading platform should establish:

• whether orders submitted through the EU platform are included in an order book shared with non-EU platforms;
• whether clients of different platforms can trade against each other through that shared order book;
• which entities manage the order book, matching process and applicable trading rules; and
• whether every entity involved in operating the shared order book is authorised or notified under MiCA.

Where an unauthorised non-EU entity participates in managing the shared order book, the CASP will need to change the arrangement. In practice, this may require the EU platform to maintain a separate order book managed solely by an appropriately authorised or notified entity. The CASP should ensure that its technical architecture, contractual arrangements and MiCA application documentation accurately reflect that separation.

ESMA does not conclude that every form of shared infrastructure or liquidity arrangement is prohibited. The Q&A specifically addresses a model in which order books operated by an EU CASP and one or more unauthorised non-EU entities are merged. ESMA also expressly states that it has not assessed whether other types of shared order book arrangements comply with MiCA. Such alternative models therefore require a separate assessment.

Closing thought

ESMA’s Q&A places a clear regulatory limit on the use of global order books. An EU-authorised trading platform cannot share an order book with an unauthorised non-EU operator, because each entity managing the shared order book is itself considered to be operating a trading platform.

CASPs that rely on global liquidity should therefore determine whether their EU order book must be separated and, where necessary, adapt their platform architecture before commencing or continuing their MiCA-regulated services.