FRANCE Law and Practice Contributed by: Sylvain Clavé and Germain Chaux, Clavé Avocat
6.5 Order Handling Rules Order handling rules in France require ISPs to take all sufficient steps to obtain the best possible result for their clients, considering various factors such as price, costs, speed, and likelihood of execution. While this “best execution” obligation is comprehensive, ISPs must prioritise specific client instructions, which override general policy for the relevant parts of the order. For a retail client, the best possible result is determined by the total cost, which includes the price of the financial instrument and all execution-related expenses (fees, settlement costs). To meet these requirements, ISPs must establish a policy that identifies the specific venues used for each asset class and the factors influencing their selection. This policy must be communicated clearly to clients, and their prior consent is required before it can be applied. Finally, ISPs are subject to an ongoing trans - parency duty, meaning they must be able to demon - strate to their clients, upon request, that their orders were executed in full compliance with the established “best execution” policy. 6.6 Rise of Peer-to-Peer Trading Platforms So far, the rise of peer-to-peer (P2P) trading platforms has had limited direct impact on the core business of traditional trading venues, which remain focused on MiFID-regulated financial instruments. P2P platforms, which facilitate direct transactions between users, ini - tially appeared to sit outside this scope by operating on a bilateral basis. In 2023, ESMA clarified that a system is considered multilateral if it allows multiple third-party trading interests in financial instruments to interact within the same facility, regardless of whether the specific transaction at a given moment is bilateral. This broad interpretation ensures that P2P platforms cannot bypass MiFID II regulation simply by virtue of their direct-matching architecture. 6.7 Rules of Payment for Order Flow The AMF’s “Guide to best execution” defines pay - ment for order flow (PFOF) as “the granting of mon - etary or non-monetary benefits by some execution venues to their clients/members in exchange for order flows” – those benefits taking diverse forms such as non-public price reductions, the provision of techni - cal tools, or free share allocations. Such payments
(fiat/crypto or crypto/crypto exchange, custody, operation of a trading platform) must be licensed with the AMF (with ACPR oversight for AML/CFT), failing which they risk criminal sanctions, and are subject to fit‑and‑proper, organisational, security and AML/CFT requirements. They must also comply with prudential rules and the MiCAR market abuse regime. Decentralised exchanges (DEXs) occupy a more com - plex space, as they are not subject to any specific regime under French law. In theory, MiCAR exempts services provided in a fully decentralised manner – without intermediaries. This exemption is strictly con - ditional on a substance-over-form assessment by the regulators to ensure that no single person or group exercises any kind of influence over the protocol. The specific criteria for qualifying for such decentralisation (eg, technical architecture, governance, etc) remain subject to further regulatory clarification. Please also refer to 10.5 Regulation of Blockchain Under French law, trading venue operators must maintain clear and transparent rules setting out the objective criteria used to determine which financial instruments may be admitted to trading. In addition, regulated markets must ensure that their rulebooks guarantee fair, orderly and efficient trading conditions. While each operator defines its own specific listing rules, they generally rely on the issuer’s compliance with applicable European and domestic legislation, and on the quality and reliability of the information made available to investors. The EU Listing Act has further harmonised listing standards across the Union, notably by simplifying prospectus requirements and streamlining ongoing disclosure obligations. In parallel, under MiCAR, cryp - to-asset trading platforms must ensure that any digital asset admitted to trading is backed by a compliant White Paper and meets stringent technical, govern - ance and security standards. Beyond these binding rules, industry standards often entail higher require - ments for ESG disclosures and corporate governance, which have become de facto prerequisites for attract - ing institutional investors in the French market. Asset Trading Platforms . 6.4 Listing Standards
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