May 31, 2016
The European Securities and Markets Authority (ESMA) issued yesterday an Opinion in response to a letter sent by the European Commission (Commission) asking to amend its draft RTS 20 under the Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR). RTS 20 provides criteria to establish when a non-financial firm’s commodity derivatives trading activity is considered to be ancillary to its main business.
The Commission requested ESMA to include in its RTS a capital-based test to determine when trading activity is considered ancillary to the main business. ESMA’s RTS 20 had designed quantitative tests, a trading activity and a business activity test and maintains that they are in line with the objectives pursued by the exemption for ancillary activities contained in MiFID II. Despite this ESMA has stated that they are prepared to move forward with the development of a capital-based test if the Commission requires. If a capital test is introduced they also recommend that entities be allowed to choose between the two tests based on the size of their trading activity such that small and medium size businesses are not disadvantaged.
The opinion and related documents can be found on the ESMA website here.