Further update to ancillary activities exemption for commodity derivatives

The Financial Conduct Authority, FCA, has published a statement to provide a further update on the market share test that is required by firms engaged in commodity derivatives trading to determine whether or not registration as a MiFID investment firm is needed, that is whether or not they can (continue to) rely on the ancillary activities exemption pursuant to Article 2 of the Retained Commission Delegated Regulation (EU) 2017/653 (RTS 20).
In a previous statement in March 2022 and in Handbook Notice 99, the FCA noted that firms do not have to perform the market share test and may use the 2018 through 2020 figures to conduct the remaining business test calculations, respectively, to determine their eligibility to benefit from the ancillary activities exemption for 2022-2023 – provided that they meet the conditions for the exemptions set out in the The Perimeter Guidance manual (PERG) of the FCA (Question 44).
As currently legislation is on its way to remove the quantitative thresholds for performing the tests in an effort to ease burdens on firms engaged in derivatives trading on an ancillary basis, but as this legislation is not expected to take effect until the end of the year 2023, the FCA now states that it “will continue to apply the approach described in Handbook Notice No 99 enabling firms to continue using the ancillary activities exemption for the year ahead (2023-2024) where they were able to rely on the exemption for 2022-2023 based on trading relating to the last previous published information (2018 to 2020) and maintain the additional flexibility enabling firms alternatively to have regard to their daily trading activity of the previous 3 years (2020-2022) for the purposes of continuing to rely on the ancillary exemption.”