You are viewing CRYPTOPRU 4.7 K-factor requirement for cryptoasset client orders (K-CCO) as it appeared on 25/10/2027. The current version of CRYPTOPRU 4.7 K-factor requirement for cryptoasset client orders (K-CCO) was last updated on 25/10/2027.

CRYPTOPRU 4.7 K-factor requirement for cryptoasset client orders (K-CCO)

25/10/2027R

The K-CCO requirement of a CRYPTOPRU firm is equal to 0.1% of its average CCO.

25/10/2027G

The definition of CCO includes cryptoasset orders that a firm handles:

  1. (1) when providing the following services:
    1. (a) reception and transmission of cryptoasset orders; or
    2. (b) execution of orders on behalf of clients; or
  2. (2) solely in its capacity as the qualifying CATP operator.

Execution of cryptoasset orders in the firm’s own name

25/10/2027R

A firm is not required to include a cryptoasset order executed by it in its own name (including where the firm executes an order in its own name on behalf of a client) in its measurement of CCO.

25/10/2027G

Where a firm executes a cryptoasset order in its own name (irrespective of whether the order is ultimately for the benefit of a client), the order is included within the firm’s measurement of its CTF under CRYPTOPRU 4.8 (K-CTF requirement) and not within its measurement of CCO under this section.

Introduction to an authorised person

25/10/2027G

Arrangements that are solely arrangements under which persons will be introduced to an authorised person authorised to carry on a regulated cryptoasset activity specified in chapter 2B of the Regulated Activities Order do not need to be included in the measurement of CCO.

Arrangements which do not bring about transactions

25/10/2027G

Arrangements which do not, or would not, bring about the transaction to which the arrangements relate do not need to be included in the measurement of CCO.

Interaction between client orders in CRYPTOPRU and MIFIDPRU

25/10/2027G

A firm may handle transactions involving both qualifying cryptoassets and financial instruments. In this case, it may be subject to both CRYPTOPRU and MIFIDPRU, and may be required to calculate a K-CCO requirement under this section (K-CCO) in respect of the qualifying cryptoasset, and a K-COH requirement under MIFIDPRU 4.10 (K-COH) for the financial instrument. Its total K-factor requirement will be the sum of all applicable parts of the K-factor requirement in those sourcebooks (COREPRU 4.4.1R).

25/10/2027G

The basic definition of CCO includes:

  1. (1) cryptoasset orders that the firm executes when providing execution services for a client;
  2. (2) cryptoasset orders that the firm has received from a client and transmitted to another entity for execution; and
  3. (3) cryptoasset orders that a firm handles solely in its capacity as a qualifying CATP operator.

Calculating CCO

25/10/2027R

A firm must calculate its K-CCO requirement:

  1. (1) on the first business day on which CRYPTOPRU applies to the firm; and
  2. (2) thereafter, on the first business day of each month.
25/10/2027R

A firm must calculate the amount of its average CCO by:

  1. (1) taking the total CCO as measured throughout each business day over the previous 9 months;
  2. (2) excluding the daily values for the most recent 3 months; and
  3. (3) calculating the arithmetic mean of the daily values of the remaining 6 months.
25/10/2027R
  1. (1) When measuring its CCO, a firm must use the sum of the absolute value of each buy order and sell order.
  2. (2) The value in (1) is the amount paid or received on the order at the time at which it is executed, unless the firm has applied the approach in CRYPTOPRU 4.7.13R.
  3. (3) A firm may calculate the value of a cryptoasset order by deducting any transaction costs to reflect the consideration paid or received by the client for the relevant cryptoasset order, provided that the transaction costs are not paid separately to the firm by the client.
25/10/2027G
  1. (1) Under the general approach in CRYPTOPRU 4.7.11R(2), a firm determines the gross value of an order by multiplying the market price of the qualifying cryptoasset by the quantity of the qualifying cryptoasset being purchased or sold.
  2. (2) However, CRYPTOPRU 4.7.11R(3) permits (but does not require) a firm to calculate the value of a cryptoasset order by reference to the consideration paid or received by the client for the cryptoasset order (ie, net of transaction costs), provided that the transaction costs are included in the gross value of the order and are not paid by the client to the firm separately.
  3. (3) For example, Firm A executes a cryptoasset order on behalf of a client. The total cost, including transaction costs, is £100. The client receives qualifying cryptoassets worth £88, after Firm A uses £12 to cover transaction costs. Under the standard approach in CRYPTOPRU 4.7.11R(2), Firm A may record the value of the cryptoasset order in its CCO as £100 (ie, the gross cost of the order). The firm may, for example, choose this approach for reasons of simplicity and administrative convenience.
  4. (4) Alternatively, in the example in (3) the firm may apply the approach under CRYPTOPRU 4.7.11R(3) to record the value of the cryptoasset order in its CCO as £88 (ie, net of transaction costs paid by the client in relation to the transaction).
  5. (5) However, a firm cannot rely on CRYPTOPRU 4.7.11R(3) to reduce the value of a cryptoasset order by transaction costs that are paid separately by the client to the firm.
  6. (6) For example, Firm B executes a cryptoasset order to buy 100 qualifying cryptoassets. The total cost of the cryptoasset order is £100. The client additionally pays £12 to Firm B for transaction costs. In this case, Firm B must record the net value of the cryptoasset order under CRYPTOPRU 4.7.11R(2) in its CCO as £100 (and not £88), as the transaction costs have been paid separately.
25/10/2027R
  1. (1) By way of derogation from CRYPTOPRU 4.7.11R(2), a firm that receives and transmits an order that is a cryptoasset order may apply the approach in this rule to determine the value of that order for the purposes of measuring CCO.
  2. (2) Where a firm applies the approach in this rule, the value of the cryptoasset order is determined by reference to:
    1. (a) for an order which specifies a fixed price or limit price at which the order should be executed, that price; or
    2. (b) for an order which does not specify a price, the market price of the relevant order at the end of the day on which the order is transmitted by the firm.
  3. (3) A firm that applies the approach in this rule must apply it either:
    1. (a) in relation to all cryptoasset orders that the firm receives and transmits; or
    2. (b) only in relation to cryptoasset orders that the firm receives and transmits where it does not receive timely information from the executing entity about the terms on which the order was executed.
  4. (4) A firm that applies the approach in this rule must document which basis in (3) applies.

Firms with less than 9 months of data on CCO

25/10/2027R

Where a firm has been handling cryptoasset orders constituting CCO for less than 9 months, it must calculate its average under CRYPTOPRU 4.7.10R as follows:

  1. (1) During the first month in which it is handling cryptoasset orders constituting CCO, the firm must:
    1. (a) make a best-efforts estimate of expected CCO for that month; and
    2. (b) use that estimate as its average CCO.
  2. (2) During the subsequent 8 months, the firm’s average CCO must be calculated in accordance with CRYPTOPRU 4.11.1R(2).
Point In Time
25/10/2027