|MiFID II ancillary activity exemption - the procedure's summary|
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The MiFID II framework aims at reclassifying large non-financial commodities traders as financial counterparties.
MiFID II puts in place an 'ancillary activity test' that determines how much non-hedging (or speculative) commodity derivative or emission allowances derivative trading non-financial firms (NFCs) can conduct before this activity is no longer deemed 'ancillary to the main business' of the firm and the firm be obliged to seek a MiFID authorisation (MiFID II ancillary activity exemption).
Hence the largest NFCs active on commodity derivative or emission allowance derivative markets will need to seek a MiFID authorisation.
Two thresholds are used in MiFID II:
- one based on the value of contracts traded by the firm as a percentage of the overall EU market size for that commodity derivative or emission allowance derivative (the market share test), and
- one based on whether commodity derivative or emission allowance derivatives make up more than 10% of the firm's business (the main business test).
Both tests need to be passed to keep the exemption, however, the main business test has two, alternative, options:
a) the trading test, and
b) the capital employed test.
There is also the backstop mechanism to correct the results.
All the above tests are to be calculated based on activities undertaken in the European Union.
The only exceptions are:
- the denominator of the trading test,
which are to be calculated on a world-wide group basis.
Such stance is shared by Bundesverband der Energie- und Wasserwirtschaft (BDEW), European Federation of Energy Traders (EFET), EURELECTRIC, Energy UK, EUROGAS, Futures Industry Association (FIA) and International Oil and Gas Producers association (IOGP) in the document of 16 February 2017 "Joint associations' Questions & Answers (Q&A) on Regulatory Technical Standard (RTS) 20 of the Markets in Financial Instruments Directive (MiFID II)".
Commission Delegated Regulation (EU) 2017/592 of 1 December 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the criteria to establish when an activity is considered to be ancillary to the main business
Commission Delegated Regulation (EU) of 1.12.2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the criteria to establish when an activity is considered to be ancillary to the main business C(2016) 7643 final
|Last Updated on Tuesday, 11 July 2017 20:52|