The Financial Services and Markets Act 2000 (Commodity Derivatives and Emission Allowances) Order 2023

The Financial Services and Markets Act 2000 (Commodity Derivatives and Emission Allowances) Order 2023 was published on legislation.gov.uk, UK’s Statute Law Database publicizing legal documents. The order modifies the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544) and the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 (SI 2017/701) to implement first steps to „streamline the process for determining when a firm trading commodity derivatives or emission allowances needs to be authorized as an investment firm“ and is subsequently subject to the commodity position limit regime pursuant to the ancillary activity test. Specifically, the order will
1. no longer require firms to annually notify the Financial Conduct Authority, FCA, of their exempt status following the performance of corresponding calculations within the ancillary activity test to determine such exempt status (exempt from authorization and position limits);
2. remove an exemption provision in the Regulated Activities Order 2001 which currently provides that firms that cannot perform the ancillary test to determine whether or not their activities can be considered „ancillary“ to their main activities due to a lack of data are exempt from registration requirements and thus the position limits regime; and
3. remove any references in the Regulated Activities Order 2001 that relate to the corresponding ancillary test regulatory technical standards (RTS20).
It shall be noted that the order is only a first step to implement the recommendations of the Wholesale Market Review which came to the conclusion that the process currently in place to determine whether or not an activity can be considered „ancillary“ to a firm’s main activity is much too costly and tedious for firms and therefore needs modernisations. Other outcomes of the review as regards the ancillary activity test will be implemented by the FCA in due course.