Introduction

Zero Hash Europe BV ("ZHEU") operates a trading platform for the trading of CLOB Supported Crypto Assets. This document establishes the Operating Rules for the ZHEU trading platform under MiCAR. It applies to all activities and operations of ZHEU related to the trading of Crypto Assets in the CLOB, defined below.It addresses the Order types and Execution conditions available, the price and priority rules for trading and the various trading phases. It also addresses cancellation procedures, trading safeguards (pre-trade risk controls) and other trading conditions.

The following set of trading rules governs Orders placed via these markets.

Definitions

Account

The account set up in an End Customer's name for use in relation to the Exchange, created when an End Customer’s request for access to and use of the Exchange is granted. Each End Customer's Account may have the following under their Account:

(a) Fiat currency balance reflecting the End Customer's fiat currency balance(s); and

(b) Crypto-Asset position reflecting the End Customer's sellable amount of Crypto-Asset

AFM

The Dutch Authority for the Financial Markets (Autoriteit Financiële Markten), the competent regulator of ZHEU in the Netherlands.

Aggressor

An aggressor is a trader who initiates a trade by placing an order to buy or sell a Crypto-Asset at a specific price. In a buy or sell order on a CLOB, the aggressor is the trader who placed the incoming order that will match with a Passive trader’s Order.

BBO Midpoint

A reference price that is the midpoint value between the current best buy (bid) and best sell (ask) price.

CLOB

Central Limit Order Book, subject to the rules laid down hereunder.

Closing Price

The price of a Crypto-Asset at the end of a trading day in the ZHEU CLOB Segment. The end of day is at 00:00 UTC.

Crypto-Asset

A CLOB Segment supported MiCAR crypto-asset as made available from time to time on the website of ZHEU here: [link to supported Crypto Assets on ZHEU website]

End Customer

Any end customer of a Platform Operator granted a right of access to and use of the Exchange, and whose access or use has not been terminated

Exchange

The CLOB operated by ZHEU

Execute or “Executed” or “Execution” 

Effecting a Trade where Orders have been matched by debiting and crediting the available balance in the relevant End Customer's accounts

Instrument

This refers to the tradable symbol which is a Crypto-Asset and fiat grouping. e.g. BTC/EUR.

Liquidity Provider

Market participant and intermediary who ensures that there is an adequate supply of assets for active trading in Crypto Assets, contracting with ZHEU.

Maker

Trader or Orders that add liquidity to a market by placing orders to buy or sell Crypto-Asset's that are not immediately matched with an opposing order. A Maker or Maker Orders are always the Passive side of an Execution. Makers are also sometimes referred to as "Market Makers" or “Liquidity Providers”

MiCAR

Markets in Crypto-Assets Regulation, Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on markets in crypto-assets

Operating Rules

The rules set out in these operating rules

Order

An Order to buy or sell a quantity of a Crypto-Asset which may be;

(a) a bid Order, being an offer to buy; or

(b) an offer Order, being an offer to sell

Passive

A Passive trader responds to an Aggressor's Order by placing an opposing Order at the same price. The Passive trader is taking a reactive role in the trade and is looking to fill their order with the Aggressor's order.

Platform Operators

As defined under Clause 4

Settlement Price

The price at which a Crypto-Asset positions are valued. The settlement price will be the last trade price on the CLOB or the ZHEU Index price if there has been no Executions for a period of 5 minutes or greater.

Side

Indicates if an Order is a buy or sell

Taker

Refers to a trader or Order that removes liquidity from a market by filling orders that are already in the order book. A Taker or Taker Orders are always the Passive side of an Execution.

Time In Force

In respect of an Order, the duration applicable to the Order. Further details available below.

Trading Sessions

ZHEU operates the CLOB 24/7 so the Trading Sessions can be;

• ‘Pre-Open’ which means the Instrument is available for Order entry but Executions can’t occur; 
• ‘Continuous Trading’ which means the Instrument is available for trading. Order activity is available or only temporarily restricted;
• ‘Close’ which means the Instrument is unavailable for trading for an extended period of time with no scheduled re-opening or permanently.  

Trading States

This refers to the status of a Crypto-Asset Trading Symbol and the status will impact how Orders are handled when sent to the CLOB.

ZHEU

Zero Hash Europe BV

ZHLS

Zero Hash Liquidity Services LLC

ZHEU Index

ZHEU makes use of a professional third-party data provider to source index values for a wide range of asset pairs.ZHEU uses transaction data from a sample of top exchanges in its calculation. Those exchanges are Bitfinex, Bitstamp, Coinbase Pro, Gemini, HitBTC, Huobi Pro, itBit, Kraken and OKCoin.

For each exchange that has trading volume, ZHEU calculates the volume-weighted average price (VWAP) over the preceding hour and then takes the arithmetic mean of this value across all exchanges. If there is no trading activity on any exchange during this period, ZHEU will utilize the last index value.

Status

The latest version of these Operating Rules is published in the English language on the website of ZHEU [link].The Operating Rules are part of the agreement entered into by the End Customer and ZHEU and must be accepted by an End Customer before accessing the CLOB.

Trading Platform

ZHEU partners with third party platform operators ("Platform Operators") to offer Crypto Assets to their End Customers. ZHEU facilitates the buying and selling of Crypto Assets by obtaining Crypto-Asset prices from various Liquidity Providers. The ZHEU order book is then displayed to the End Customer on the Platform Operator’s front end (website or mobile app). Any placing or Orders and trading is subject to the terms and rules set out in these Operating Rules.

Participating on the trading platform

5.1 Objective criteria for admission to trading

Both Platform Operators and End Customers must be accepted as clients in accordance with ZHEU Acceptance, Pricing and Transaction Disclosure available here [link].

5.2 How to apply

End Customers can sign up through a Platform Operator's interface (usually a website or mobile app), and agree to ZHEU’s User Agreement and the Platform Operator’s Agreement. Either ZHEU itself collects End Customer KYC data, risk rating and geolocation data and reviews and tests it based on risk factors or the Platform Operator collects End Customer KYC data, risk rating and geolocation data, which validates it using a ZHEU-approved vendor and passes the information to ZHEU, which further reviews and tests it based on risk-indicators.

5.3 Obligations

Obligations for Platform Operators and/or End Customers are:

• Accept and adhere to the ZHEU Acceptance, Pricing and Transaction Disclosure Policy.
• Compliance with these Operating Rules and the terms and conditions in the User Agreement.
• Platform Operators and End Customers must provide any information ZHEU reasonably needs and promptly update any changes to their personal or business information.
• End Customers must engage in transactions with honesty and integrity.
• Platform Operators are charged a monthly technical support fee, depending on the scale of the Platform Operator.

CLOB

The CLOB at ZHEU allows End Customers of Platform Operators that have enabled the CLOB for their end customers to buy or sell specific Crypto Assets using various Order types.

To place an Order on ZHEU’s CLOB, the End Customer account must have enough available funds to cover the total value of the transaction. Orders may be subject to minimum and maximum Order size requirements, varying per trading pair, to be set by ZHEU at its own discretion, as indicated in the trading environment of the relevant trading pair.

Fees and costs for trading on the CLOB are applicable and are set out in the ZHEU's Acceptance, Pricing and Transaction Disclosure Policy.

The CLOB matches Orders whenever buyers and sellers' Orders overlap: e.g. a Liquidity Provider Order is matched with a Client Order or two different Client Orders are matched. Where there are multiple Orders entered at the same price, the CLOB will implement its Price/Time priority algorithm aimed at prioritizing Orders in a fair and objective way. Matching Orders is prioritized based on 1) the best price, and then 2) the time in which those Orders were submitted.

ZHEU has multiple Liquidity Providers in order to provide quality pricing to End Customers as well to ensure redundancy and consistent trading availability. Order size does impact the ultimate price that the trade is executed at: on a buy Order, larger Orders that exceed the first pricing level quantity are typically filled at an average weighted price that is less than the first pricing level and vice-versa for sells Orders.

6.1 Order Types

Limit Order

An Order to buy or sell an Instrument at a specific price or better. A buy limit Order can only be executed at the specified limit price or lower, and a sell limit Order can only be executed at the specified limit price or higher. Limit Orders entered during the continuous trading session are Executed either fully or partially, as market conditions permit.

If the execution of a limit Order is not immediately possible and the Time In Force is Good Til Cancel (GTC) or Good Til Time (GTT), it is placed in the Order book in descending buy-price Order or ascending sell-price Order (the price priority principle) and joins the queue of Orders at the same price (the time priority principle).

Market To Limit Orders

An Order to buy or sell a Crypto-Asset immediately. This type of Order guarantees that the Order will be executed if there is liquidity but does not guarantee the Execution price.

If the market to limit Order fill all the open liquidity, the remainder quantity of the market to limit or will rest on the CLOB as an open limit Order with the price set at the last filled price of the Order.

If no matching Order is available, the Order will be rejected. Unmatched Orders will be rejection immediately with no predetermined wait time in the Order book if there is no matching supply for the Order.

Stop Limit Order

An Order to buy or sell an Instrument that is triggered once the price of the Crypto-Asset reaches a specified price through its last trading price or Settlement Price, known as the stop price. When the stop price is reached, a stop limit Order becomes a limit Order at the specified Order quantity and Order price.An End Customer can specify the reference price they want the stop price to trigger based of.

6.2 Time in Force and Order Validity

Good till Cancelled (GTC)

This is an Order to buy or sell a Crypto-Asset that lasts until the Order is fully filled or cancelled.

Immediate or Cancel (IOC)

This is an Order to buy or sell a Crypto-Asset that attempts to Execute all, or part immediately and then cancels any unfilled portion of the Order.

Good till Time (GTT)

This is an Order to buy or sell a Crypto-Asset in respect of which the End Customer selects an expiration date and time up until which the Order will remain in force; or cancel unexecuted Orders at the specified expiration date.

6.3 Order Protections

ZHEU has implemented pre-trade risk controls for all incoming Orders. These controls are applicable to all End Customers.The following checks are currently set in place and are configured in the firm’s market surveillance system:

Wash Trade Check

A self-trade prevention mechanism is in place to prevent End Customers from Executing against their own Order.

Maximum Order Notional Value

A prevention mechanism that restricts an End Customer from placing an Order over a notional value.The Max Order Notional is 500,000 Euro.

Minimum Order Notional Value

A prevention mechanism that restricts an End Customer from placing an Order below a notional value.The Minimum Order Notional is 1 Euro.

6.4 Order Book Matching

Price Time Priority

The CLOB matches Orders whenever buyers' and sellers' Orders overlap. Where there are multiple Orders entered at the same price, the CLOB will implement its price/time priority algorithm aimed at prioritizing Orders in a fair and objective way. Matching Orders is prioritized based on 1) the best price, and then 2) the time in which those Orders were submitted.

Process of trading on the CLOB

1. Liquidity Providers submit intent to transact Crypto-Asset to the CLOB, specifying basic information such as prices, quantities, and direction of their intent (buy or sell)
2. The CLOB collects all of these active Orders into an Order book.
3. The CLOB then organizes and publishes the Order book to all of its users.
4. In order to consummate a transaction, another party (a Taker) must accept the prices and quantities available on the Order book. The CLOB operator matches the taker's acceptance with the corresponding Orders in the Order book that fulfill the taker’s Order at the currently available best prices.