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Intragroup exemption under MiFID II - Article 2(1)(b)




Intragroup exemption provided for in Article 2(1)(b)) of the MiFID II Directive represents, MiFID II ancillary activity exemption,exemption for EU ETS operators, and dealing on own account exemption notwithstanding, potentially one of the most widely used MiFID II easements.


Article 2(1)(b) has been transferred from MiFID I into MiFID II effectively in the same wording (the same applies to MiFID I Recital 11), however, its interactions with other MiFID II provisions rise certain doubts (see, for example, remarks on the matched principal trading).


MiFID II Directive does not apply to:


persons providing investment services exclusively for their parent undertakings, for their subsidiaries or for other subsidiaries of their parent undertakings


(MiFID II Article 2(1)(b) - Intragroup exemption)



Under the said provision persons providing investment services exclusively for their parent company, their subsidiaries and those of their parent company. This means that providing investment services for the benefit of group companies must be the only investment service that is undertaken.


However, companies buying and selling financial instruments for ourselves are still able to use the group exemption. This is on account of the group exemption applies to investment services and not investment activities.


So, as long as your own account dealing does not involve you providing an investment service (to which MiFID applies) to non-group entities, you can still rely on the group exemption in respect of the services you provide solely to other group companies (FCA, The Perimeter Guidance Manual, Chapter 13, Guidance on the scope of MiFID and CRD IV, p. 21).


The above-mentioned FCA Guidance Manual also refers to the issue of exemptions cumulation under MiFID I: "[s]o far as your own account dealing is concerned, you may be able to rely upon the exemption in article 2.1(i) if you meet the relevant conditions. The ability to combine reliance on article 2.1(b) and article 2.1(i) could be relevant to companies performing group treasury functions."



MiFID II recital 28: 


"Persons who do not provide services for third parties but whose business consists in providing investment services solely for their parent undertakings, for their subsidiaries, or for other subsidiaries of their parent undertakings should not be covered by this Directive."



Requirements not covered by the exemption 



Even if intragroup traders are exempt under Articles 2(1)(b) of MiFID II, they will have to comply with the following MiFID II requirements:


1) position limits (only positions held by or on behalf of non-financials which are objectively measurable as reducing risks directly relating to commercial activity will not count towards the limits if the approval is granted by the competent authority),


2) reporting obligations,


3) Article 17(1) to (6) of MiFID II on algorithmic trading apply to members or participants of regulated markets and MTFs,


4) in accordance with Article 1(3) MiFIR, Title V of the MiFIR, (encompassing requirements for derivatives, in particular, the trading obligationclearing obligationindirect clearing arrangements as well as portfolio compression) apply to all financial counterparties and to all non-financial counterparties above the clearing threshold (EMIR Article 10(1)(b)).



Last Updated on Friday, 28 April 2017 21:33


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