Coinbase Order Execution Policy

This Order Execution Policy (the “Policy”) sets out the arrangements that have been established to enable Coinbase Luxembourg S.A. (“CB Lux”, “we”, “us” and “our”) to comply with the provisions of the Markets in Crypto-Assets Regulation (EU) 2023/1114 (“MiCA”) relating to effective execution arrangements, which requires us to take all necessary steps to obtain the best possible result when executing orders for crypto-assets on your behalf, taking into account the Execution Factors (as defined and detailed at Section 3 below). This obligation is referred to, in this Policy, as CB Lux’s obligation of “best execution”.

By accepting the User Agreement, including all addendums, you are entering into an agreement with us for the provision of the services specified in the User Agreement. Such services may include CB Lux executing orders on your behalf, and by accepting the User Agreement, you consent to an application of this Policy where such services are being provided.

This Policy will be made available through the User Agreement, the Coinbase app and website.

This Policy applies where we execute orders for crypto-assets on your behalf. This includes executing orders as an intermediary broker on the Coinbase Exchange, as well as other execution venues (i.e., exchanges, platforms and LPs) operated by fully independent third parties outside the Coinbase Group. As would be the case for any broker, when we execute orders on an execution venue (whether that is the Coinbase Exchange or another venue), we do so without involvement in the matching of orders or the operation of the venue. This separation is crucial to maintaining market integrity, as it ensures that we are not in a position to influence or manipulate the matching process.

Where we execute orders, we have an obligation to take all necessary steps to obtain, while executing orders on your behalf, the best possible result for you 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. In taking all necessary steps, we look to achieve the best balance across a range of Execution Factors (as defined at Section 3 below). This does not mean that every individual order will receive the best outcome, but rather that we put in place arrangements intended to achieve the best possible overall outcome that can reasonably be expected for your orders, as set out in this Policy.

The obligations established in this Policy extend to transactions executed with or through CB Lux only. This Policy does not apply to other Coinbase entities.

Please note that we reserve the right to, at any time and at our discretion, without giving any notice or explanation, decline or refuse to transmit or arrange for the execution of any order as stated in the User Agreement.

Our goal is to provide a simplified summary of how your crypto asset orders on Coinbase are executed. You should read this policy in full, but below are the key highlights and some helpful links:

Where we execute an order on your behalf, CB Lux will take all necessary steps to ensure that order is promptly and properly transmitted and/or executed promptly, fairly and expeditiously (as applicable). Subject to any Specific Instructions you give us (as defined at Section 9 below), we will take all necessary steps to obtain the best possible result for you by taking into account relevant execution factors (together, the “Execution Factors”) including but not limited to:

The relative importance of each of the Execution Factors will be determined by reference to the following criteria (together, the “Execution Criteria”):

Determining the relative importance of the Execution Factors is a dynamic process and may depend on several variables. In the absence of your Specific Instructions (see Section 9), as well as taking the Execution Criteria into account, we will apply our commercial judgement, expertise and experience in light of the prevailing market conditions, for the purpose of providing you with best execution.

While the obligation to deliver best execution applies to all crypto-assets that fall within scope of MiCA, the differences between such crypto-assets means that it is necessary to apply the best execution obligations in a manner that takes into account the different circumstances associated with the execution of orders related to particular types of crypto-assets. In the majority of cases, total consideration will merit a high relative importance and are generally prioritised by us in obtaining best execution. It should be noted, however, that best execution is broader than the ‘best total consideration’ value for clients as this may not offer the best result for you when considering the other Execution Factors. Accordingly, where we execute your order (in the absence of Specific Instructions), in order to achieve the best possible result for you, we will attribute appropriate weight to applicable Execution Factors which will vary between client types.

Where you are using the Simple Trade or Advanced Trade services, when executing orders and assessing execution quality, we will generally prioritise Execution Factors as follows: (1) total consideration; (2) likelihood of execution; (3) likelihood of settlement; (4) speed; (5) market impact; (6) nature of order; (7) order size; (8) operational and technical risk; (9) counterparty and credit risk; (10) conditions of custody; and (11) reputation. We will also assess venues against a range of qualitative factors in accordance with our best execution ongoing monitoring process. For institutional trading and Prime clients, in addition to the factors above, we also place the highest priority on our ability to execute an order in accordance with any specific instructions provided (we are aware that such clients are less likely to be placing significant reliance on these Execution Factors, and will often monitor pricing themselves, and therefore not be looking to us for this).

We have implemented robust policies and procedures to prevent any misuse of information relating to your orders by employees of CB Lux. These arrangements include strong security controls to limit access to systems containing customer trading data (see here for further details) and robust information barrier policies which prohibit inappropriate sharing or misuse of client trading data held by CB Lux. This includes regular training of employees on market abuse policies, procedures, and applicable regulations, including the consequences of trading on any material non-public information. Coinbase has further deployed a sophisticated market surveillance programme that continually monitors all orders and transactions executed by both CB Lux customers and employees on the Coinbase platform, identifies anomalies, and detects potential market abuse. We also require employees to disclose all personal crypto trading accounts, whether at Coinbase or elsewhere, to allow greater oversight. Coinbase uses a holistic transaction monitoring and investigation programme which leverages, among other tools, real-time alerts, market monitoring, targeted investigations, and blockchain analytics to help detect and identify indications of market abuse. Finally, Coinbase monitors the voice and electronic communications of certain identified employees to flag potential market abuse risks, including, e.g., the potential misuse of information relating to client orders.

As detailed in this Policy, we have considered the best execution quality that can be obtained for you in light of your level of sophistication and the nature of orders you submit, and have implemented appropriate order execution arrangements and execution strategies based on the Execution Factors and Execution Criteria. As part of this process, we have tailored the complexity and speed of our order execution arrangements and execution strategies in a way that accounts for your characteristics.

We regularly monitor the effectiveness of this Policy and our order execution arrangements (including the Execution Factors and the Execution Criteria) for obtaining best execution to identify and, where appropriate, correct any deficiencies. This is done by us on a periodic basis monitoring key execution quality statistics in aggregate and by venue or execution quality achieved by us against comparable third-party venues. When doing this, generally we first compare the available execution venues on execution price, liquidity considerations, and costs directly related to the execution. As appropriate, execution venues providing the best quality are compared with respect to the remaining factors. This ensures we appropriately reflect the prioritisation of the Execution Factors, per Section 3.

In addition, we have implemented governance arrangements to ensure that any management information gathered as part of the process set out above, and any other relevant information, is reviewed by CB Lux management. Where CB Lux’s management identifies significant issues with execution quality, we will strive to fix the issue expeditiously.

Our Authorised Managers, working with our Operations function (as appropriate), are responsible for elements of the above described best execution monitoring on an ongoing basis. This will include reviewing and responding to best execution monthly data sets, in particular to determine whether there are any trends or indications that we are not fulfilling or are at risk of not fulfilling best execution obligations. If best execution monthly data sets cause concerns that best possible outcomes for our clients are not being reliably obtained, the Authorised Managers, working with our Operations function (and any other relevant teams, as applicable) – coordinating with the Board – will identify and push forward recommended changes to the approach, such as a cost-benefit analysis of changes to execution methods if requested by the Board, determining whether additional guidance or requests should be sent to any of the execution venues, and/or additional engagement with or modification of market-making programmes, to ensure a sufficient balance of access to liquidity, competitive pricing, asset safety and user experience.

We formally review both this Policy and our order execution arrangements (including the Execution Factors and the Execution Criteria): (i) at least annually; and (ii) when a material change occurs which affects our ability to continue to deliver best execution to you.

We consider feedback from you. Further details on our complaints handling process can be found at https://help.coinbase.com.

Advanced Trade

The selection process for execution venues includes both quantitative and qualitative analyses to examine whether the incremental value of an additional venue is materially beneficial for clients.

On request from the Head of Operations, or other appropriate personnel, CB Lux will generate a quantitative review process using data received from our affiliate CB Inc. A summary of this is then shared with the Head of Operations.

If venues quantitative analyses warrant further review, qualitative diligence may be performed by our management and Operations team to determine the costs and benefits of other comparable venues.

If a venue is considered appropriate following both the quantitative and qualitative review stages, our management and Operations team will proceed to onboard the applicable venue following appropriate internal coordination. We will communicate any applicable changes to you, as set out in section 1.1.

Institutional Trading and Prime

We continually evaluate the performance of venues integrated for client trade routing as well as potential additional venues. Any decision to offer an additional venue to clients will be based on: (i) incremental client value; (ii) added operational and technical complexity; and (iii) a robust diligence process.

We evaluate potential client impact through both quantitative and qualitative analyses, including client demand, feedback and market dynamics, to examine whether the incremental value of an additional venue is materially beneficial.

Venues must pass an extensive diligence process covering a range of areas (such as security, credit and legal). Venue responses to diligence questions are reviewed, followed-up and signed off by relevant responsible individuals. If satisfactory answers, and internal approvals, are received the relevant venue is approved for integration and activated for client trades. This diligence process is then refreshed on a periodic basis.

We also continually assess the performance of integrated venues and will disable a venue if they no longer meet our standards or if there are material changes to the original diligence responses, which are periodically refreshed.

Our execution model is not to simply route or execute all client orders through a single affiliate-operated venue by default. Instead, we utilise the Coinbase Exchange to the extent that we consider it appropriate – and also leveraging price improvement and additional liquidity from multiple other third-party venues (LPs, exchanges, and platforms) as needed to achieve the best possible outcomes for you.

If you are a client using Simple Trade (a “Simple Trade client”), we will execute your orders through a competitive routing process to maximise total consideration (provided through our affiliate CB Inc.’s exchange for crypto-assets (the “Coinbase Exchange”) and the RFQ auction process described below). This structure enables CB Lux to obtain results for Simple Trade clients that meet or exceed the results that can be reasonably expected from using alternative execution venues. We have selected the Coinbase Exchange and RFQ process because of their ability to deliver best execution for such clients taking into account the Execution Factors and Execution Criteria. The RFQ process will not apply to certain non-marketable limit orders. As part of this analysis, we considered that Simple Trade client order sizes are typically smaller than other CB Lux clients (on Advanced Trade, Prime, etc), and accordingly such clients value reliable and quick execution and price certainty over other Execution Factors.

Subject to the RFQ price improvement process described below, we employ an execution strategy for Simple Trade orders whereby all orders, with the exception of limit orders, submitted and executed are “fill or kill” orders, meaning that each order is either entirely filled immediately upon acceptance or it is cancelled. On Coinbase Exchange, submitted orders that can immediately trade (taker orders) will match against resting orders in the order book using price priority, starting from the best price first, trading at the price of the resting order until reaching the price or quantity constraints of the submitted order. If multiple resting orders exist at the same price, then matching occurs using time priority (based on the time the resting order was submitted to the order book).

We have implemented the following two additional measures to provide Simple Trade clients with the possibility of additional price improvement on qualifying orders, including market orders and marketable limit orders (but excluding non-marketable limit orders):

(a) Simple Trade price improvement: The Simple Trade service will allow you to access liquidity with certainty of executed pricing, mitigating risk of price slippage, which can otherwise occur in agency trading contexts, subject to certain thresholds we may set from time to time. To provide this pricing certainty, we apply a disclosed “spread” to the crypto-asset prices we quote to you. As a result, when we place an order on your behalf, if the price has moved in a way which is unfavourable to you (as compared with the price at the time of quoting), we may absorb the pricing difference up to the amount of the applicable spread and commission, thereby ensuring that you do not incur any additional costs as compared to the originally quoted price. Spread and commission will be used as a buffer to absorb the impact of the price movements which would otherwise be disadvantageous to you, ensuring that you are not disadvantaged due to the impact of slippage. We will also pass on price improvement in excess of our disclosed spread and commission which occurs when executing orders. Where the price at which an order is executed is more favourable as compared with the price available at the time of the original quote, we will return the difference back to you. As a result, in such circumstances where the realised execution price is more favourable to you than the price when quoted, you will receive back an amount equivalent to the price improvement which occurred after you received your quote. This amount will be credited to your account post trade, ensuring that in addition to being insulated from potential negative price movement you will also benefit from price improvement. Accordingly, you will benefit not only from pricing certainty and be protected from downside execution risk, but also receive the upside of any execution price improvement.

(b) RFQ price improvement: When accessing Coinbase Exchange, CB Lux client orders will leverage a competitive execution path to seek best execution on behalf of clients, accessing an RFQ process in addition to the Coinbase Exchange order book. The RFQ process is an automated price auction separate from the Coinbase Exchange order book that places multiple LPs (as additional execution venues) in price-competition on an order-by-order basis, which can provide price improvement over the Coinbase Exchange order book. All qualifying Simple Trade orders will be submitted to the RFQ process, where each order initiates an anonymised RFQ message to participating LPs, who can respond with a firm quote to buy, sell, or exchange the crypto-asset(s) specified on the RFQ. At the end of the RFQ process, the best bid or offer received from the RFQ auction is automatically compared against the best price available on the Coinbase Exchange order book, and your order will be executed on the execution venue (i.e., the Coinbase Exchange order book or against another LP) that provides the best execution. Any price improvement resulting from the RFQ process will also be passed on to you, as for any price improvement occurring on the Coinbase Exchange order book as described in paragraph (1) above. Accordingly, Simple Trade users receive the possibility of additional price improvement beyond that available on the Coinbase Exchange, and with no impact on the certainty or latency of order execution.

We have undertaken analysis to consider whether there are other execution venues which are comparable to the Coinbase Exchange and RFQ process on the basis of the Execution Factors. In performing this analysis, we have benchmarked the execution quality achieved by executing orders on the Coinbase Exchange and through the RFQ process as compared with other execution venues (using the two stage model set out at section 6.2 above). The results of this analysis provides us with assurance that the Coinbase Exchange and RFQ process are well placed to achieve best execution for Simple Trade clients. In all cases where we route orders to affiliated exchanges (such as the Coinbase Exchange) conflicts of interest are considered as required. See the Conflicts of Interest Statement for further detail. We may route Simple Trade orders to exchanges other than the Coinbase Exchange and RFQ process going forwards, but any decisions to do so will be subject to consideration of best execution requirements.

On the Advanced Trade platform, you can interact, through CB Lux, with the applicable crypto-asset order book(s) on the Coinbase Exchange to place market, limit, and stop-limit orders, to buy, sell, or exchange crypto-assets. CB Lux will place your orders and enter into the trade on your behalf. We employ an execution strategy for Advanced Trade orders whereby all orders submitted, with the exception of limit orders, are processed on a first-in first-out basis. This applies where orders are executed on the Coinbase Exchange (which will execute on a “fill or kill” basis) or through the RFQ process (as set out below, which will execute at the best price available).

Advanced Trade also leverages a competitive execution path to seek best execution on your behalf, accessing both the Coinbase Exchange order book as well as an additional price improvement process which may source quotes from a number of LPs in response to client orders, and execute against them where these offer price improvement as compared with the price available on the order book. As a result, this process can provide price or liquidity improvement over the Coinbase Exchange order book.

As with Simple Trade, all qualifying orders - including market orders or marketable limit orders placed through Advanced Trade – will be submitted to the price improvement process on an order-by-order basis. Each order initiates an anonymised RFQ message to participating LPs, who can respond with a firm quote to buy, sell, or exchange the crypto-asset(s) specified on the RFQ. At the end of the RFQ process, the best bid or offer received from the RFQ auction is automatically compared against the best price available on the Coinbase Exchange order book, and your order will be executed through the path that provides the best execution. Although this is enabled for all Advanced Trade clients by default, there is configurability to disable the price improvement process and provide a Specific Instruction to execute the order exclusively on the Coinbase Exchange order book.

Advanced Trade orders may be partially filled. Upon execution, CB Lux will be automatically notified, and we will deposit the applicable crypto-asset into your crypto wallet (where you have bought or exchanged one crypto-asset for another crypto-asset). Fiat proceeds will be deposited into your fiat wallet with CBIE (where you have sold a crypto-asset for fiat currency).

By providing you with access to Advanced Trade services, you may benefit from the Advanced Trade execution model and achieve best execution, particularly for larger and more complex orders which are executed through Advanced Trade, and from prioritising different Execution Factors as compared to Simple Trade. As set out above, on Advanced Trade, you are provided with information about the Coinbase Exchange order book allowing you to have greater control in relation to the timing and other parameters of your trades. Given this increased optionality, you will often be providing Specific Instructions (see Section 9) to us in relation to certain order parameters, for example in relation to execution time.

You are provided with the ability to opt-in to Advanced Trade and accordingly provide Specific Instructions to us to process your orders in accordance with the order execution model set out in this paragraph. In addition, we may in certain circumstances prompt you to consider using Advanced Trade based on your order profile. In all cases, you will retain the ability to instruct us to continue processing your orders in accordance with the Simple Trade execution model. We undertake the analysis described at Section 7.1 in relation to our Advanced Trade service.

We execute trades for institutional trading clients through a variety of venues and execution models. The particular venue for an institutional trade will be in part determined on the basis of the crypto-asset and order size that is the subject of the trade, and in accordance with the Execution Factors and Execution Criteria. Where you, as an institutional trading client, agree and provide Specific Instructions (see Section 9) to us for execution on a specific venue, we will respect the Specific Instruction sent on the order message, which will take precedence over all or parts of the Order Execution Policy.

Prime DMA: If you are an institutional trading client (e.g. a market-maker), we may provide you with certain direct electronic access brokerage services based on your specific instruction, which will enable you to have low latency direct access to the order books of specific execution venues instructed by you, including the Coinbase Exchange and the Coinbase International Exchange. As a Prime DMA client, you must agree to certain additional terms of service for low latency direct access, which may stipulate that, unless agreed otherwise in writing by us, all orders placed via DMA shall be treated by us as Specific Instructions. We may also request you to send a Specific Instruction on each individual order message for the specific venue that you would like to have the order access; thus, you have full control over your transactions and are only using our infrastructure to facilitate the execution of those transactions. As such, we have no discretion over the execution of such orders and you do not place any legitimate reliance on us in respect of such orders. Such trades are, therefore, considered to be out of scope of best execution obligations.

OTC, Blocks, RFQs: As an institutional client, we may also provide you a range of additional execution services, including OTC, RFQ and Block trades (“Blocks”). OTC, Blocks and RFQ trades may involve you dealing with CB Lux on the basis of firm quotes, or on the basis of CB Lux acting in an agency capacity to execute the order. For some of these order types, we may reach out to market makers on your behalf with a request for a price quote to buy/sell a desired asset and amount. These order types often constitute Specific Instructions and so are out of scope of best execution obligations.

We may place retail Advanced Trade, Institutional trading and Prime orders through our smart order router(s) that utilise proprietary algorithms to systematically send buy and sell orders to connected execution venues. Such execution venues include the Coinbase Exchange, as well as third-party venues and select market makers. We may alter the execution venues to which we will route orders at our discretion and in order to deliver best execution to you. The algorithms that control the smart order router(s) are designed to prioritise the best price and/or liquidity for you taking into account Execution Factors and Execution Criteria. Smart order routers may be used for trades executed on an agency or matched principal basis.

For orders that do not constitute Specific Instructions (see Section 9), orders are placed on venues either as: (i) resting limit orders, placed at the orders limit price or pegged to optimal price levels at or better than the limit price; or (ii) marketable limit orders. We will make a range of execution strategies available via our sophisticated smart order router(s) and related algorithms (such as VWAP and TWAP), which may be utilised on your orders.

Certain additional factors are important to note when considering the design of our smart order router(s):

Before we execute any orders on your behalf, new clients will be required to provide prior express consent for us to execute orders outside of a trading platform.

To provide prior express consent to such execution, you are required to affirmatively confirm (via pop- up notification, or similar functionality) this when it is presented to you, and that confirmation constitutes your affirmative consent to us being able to execute your orders outside of a trading platform.

You may request that we provide you with additional information about the consequences of this means of execution.

Where you provide us with a specific instruction in relation to the execution of an order on your behalf, we will execute the order in accordance with those instructions so far as reasonably possible (“Specific Instructions”).

In following those Specific Instructions, or a specific aspect of an order, we will be deemed to have taken all necessary steps to provide best execution in respect of the order or of that part of the order. In respect of the aspects of the order not covered by Specific Instructions, we will apply this Policy. Any Specific Instruction you give may prevent us from obtaining the best possible result for the execution of those orders (or the elements covered by those instructions) in line with the steps that we have designed and implemented with this Policy.

We will not receive remuneration, discount or non-monetary benefit from an execution venue for routing, transmitting or executing your orders on that venue. This applies both when CB Lux is routing your orders to the Coinbase Exchange, or to any other execution venue.

Where we are providing services of exchange of crypto-assets for funds or exchange of crypto-assets for other crypto-assets, and unless stated otherwise, we will generally be acting on a matched principal basis. When acting on a matched principal basis, we may split up client orders and make use of multiple venues in order to fill them. When doing so, we will generally do this in accordance with the process set out below.

On receiving your order, we will review the consolidated order books across venues we have access to and determine where to execute the matching leg in accordance with Execution Factors and Execution Criteria, but generally prioritising price. Where you submit an order, we will provide a price feed to show the consolidated order book across the execution venues we have access to.

Any orders you submit which are executed on a matched principal basis are interconditional with the separate matching leg Coinbase enters into on an execution venue, such that your order will not be executed until it has been separately and completely matched by us (and vice versa). Accordingly, your order will only be deemed final when our corresponding matched trade at the execution venue is final. The final price for a trade will derive from the price at which that trade was filled at the chosen venue, unless otherwise stated (and costs will be applied in accordance with relevant terms between you and us). By executing your order on a matched principal basis, we would not be deemed to have exercised any discretion in applying such methodology for determining price. Instead, the price of the trade is determined by virtue of the matching leg.

Generally, we will engage in matched principal trading in relation to the provision of Prime services, when executing orders on venues that require us to trade with them as a principal (rather than as an agent).

We keep records to demonstrate our compliance with this Policy and MiCA best execution requirements, in accordance with our Recordkeeping Policy, and MiCA requirements.

You are entitled to send us a reasonable and proportionate request for information about our policies and arrangements, and evidence of how an order was executed in line with this Policy through the communication methods set out in the User Agreement.

We are also obliged to demonstrate compliance with MiCA best execution requirements on request from the CSSF. Where such a request is received, this will be directed in the first instance to the Head of Operations, who will coordinate with other personnel as required, to provide relevant information and meet any timelines set by the CSSF. Our recordkeeping policies ensure that we are always able to demonstrate compliance to the CSSF on request.

As set out in Section 7 above, the execution venues available for the execution of your orders will vary depending on what services we provide to you. The below comprises a non-exhaustive list of venues which may be used for execution of your orders, and which may be updated from time to time.

The crypto-assets available to clients will be subject to our listing policy. However, we note that we select venues in accordance with ongoing selection processes based on various criteria including availability and liquidity of relevant crypto-assets.