DAC8 Compliance for Crypto Brokerages

Crypto brokerages — entities that execute trades on behalf of clients, often routing orders to multiple exchanges or liquidity providers — occupy a specific position in the DAC8 framework.

Brokerage-Specific Considerations

Brokerages typically do not hold client assets directly but facilitate transactions by routing orders to execution venues. Under DAC8, the brokerage is the reporting entity because it maintains the client relationship and facilitates the reportable transaction.

The key compliance challenge for brokerages is obtaining complete transaction data from their execution venues to compile accurate DAC8 reports. When a brokerage routes an order to a third-party exchange, it must ensure that the execution details — including fair market value, exact timing, and transaction amounts — are captured and retained for reporting purposes.

Best Execution and Reporting

MiCA's best execution requirements oblige brokerages to obtain the best possible result for their clients when executing orders. The data collected to demonstrate best execution compliance — including execution prices, timestamps, and venue information — substantially overlaps with the data needed for DAC8 reporting.

Client Asset Segregation

Brokerages that use omnibus accounts at execution venues must be able to attribute specific transactions to specific clients for DAC8 reporting purposes. This requires robust internal record-keeping that links each client order to its corresponding execution, even when multiple orders are batched or netted.

Conclusion

Brokerages must ensure that their order routing and execution processes generate the detailed transaction data needed for DAC8 reporting. Integration between order management systems and DAC8 reporting infrastructure is essential.