Further update to ancillary activities exemption for commodity derivatives (2024-2025)

The Financial Conduct Authority, FCA, has published a follow-up 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) 2017/592 (RTS 20).
In a previous statement in January 2023, the FCA noted that it “will continue to apply the approach described in Handbook Notice 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“ (EventID 19273).
As the HM Treasury has just consulted on proposed regulatory changes 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 (CP23/27) and as these proposed changes are not expected to come into force until January 1, 2025, the FCA now confirms that firms may continue to rely upon the exemption, if they have done so in the year before based upon the trading information from 2018 to 2020 or their daily trading activity of the previous 3 years (2021-2023).