Article 2(1)(j) of MiFID II exempts firms trading in commodity derivatives, emission allowances and emission allowance derivatives from authorisation as a MiFID investment firm if they fulfil certain criteria. Firms are required to perform the “market share test” and the “main business test” (set out in UK MiFID RTS 20) to demonstrate if they satisfy such criteria.
The “market share test” requires the calculation of the aggregate notional value of all trades in commodity derivatives, emission allowances and emission allowance derivatives traded on, or outside, trading venues across the European Union (which included the UK prior to Brexit) but the test has been removed by the European Securities and Markets Authority (ESMA) in February 2022 and ESMA no longer produces consolidated figures for trading across the EU.
The FCA will also cease publishing this data in light of the change.
However, Article 72J of the FSMA Regulated Activities Order (RAO) enables firms seeking to rely on the UK ancillary activities exemption to carry on their business without obtaining authorisation if there is no data from an EU institution or a regulator to enable them to perform the “market share test”.
In the meantime, the FCA is consulting on clarifications to PERG and UK RTS 20 until 11 April 2022 to make clearer that performing the “market share test” is not a necessary condition to benefit from the ancillary activities exemption. Firms otherwise meeting the criteria may rely on Article 72J of the RAO where they cannot perform the calculations the test requires.