[ESMA70-460-189 - Heading 8 - Question 1]

Answer provided by the European Commission in accordance with article 16b(5) of the ESMA Regulation.

The DLTR does not require that a DLT MTF organises trading of DLT financial instruments on the blockchain (on-chain), which is a type of distributed ledger. Indeed, Article 2, point (6), DLTR defines DLT MTFs as a multilateral trading facility that only admits to trading DLT financial instruments. Article 2, point (11), DLTR defines DLT financial instruments as financial instruments that are “issued, recorded, transferred and stored using distributed ledger technology”. That definition does not entail that DLT financial instruments are to be traded using DLT, but rather that the DLT are to be used for maintaining accounts and records pertaining to the title over a financial instrument and to facilitate the transfer of such titles between market participants.

Since a DLT MTF is allowed to organise trading off-chain, it is free to operate its matching engine using technology that does not leverage DLT.

Disclaimer in relation to the answers provided by the European Commission in accordance with Article 16b(5) of the ESMA Regulation: these answers clarify provisions already contained in the applicable legislation. They do not extend in any way the rights and obligations deriving from such legislation nor do they introduce any additional requirements for the concerned operators and competent authorities. The answers are merely intended to assist natural or legal persons, including competent authorities and Union institutions and bodies in clarifying the application or implementation of the relevant legal provisions. Only the Court of Justice of the European Union is competent to authoritatively interpret Union law. The views expressed in the internal Commission Decision cannot prejudge the position that the European Commission might take before the Union and national courts.