On 22 June 2018, the European Securities and Markets Authority (ESMA) published a letter (dated 31 May 2018) it had received from Valdis Dombrovskis, Vice President of the European Commission which provides further clarification of the ancillary activity test contained in Article 2(1)(j) of MiFID II. In particular the letter discusses the application of the ancillary activity test to commercial group structures.

The letter provides that:

  • Article 2(1)(j) applies the ancillary activity test by comparing the MiFID activities that a person is engaged in with the commercial activities of the person or the group of which the person forms part. In doing so, Article 2(1)(j) accommodates varying commercial group structures whereby groups divide their business activities into separate legal entities to match the different stages in the commercial value chain;
  • in line with the structure of Article 2(1)(j) MiFID II, the reference to “persons within a group” in Delegated Regulation 2017/592 requires that the ancillary activities test needs to be calculated by each person within a group that engages in either of the two relevant MIFID activities mentioned in Article 2(1)(j). In consequence, the ancillary activities test must be calculated as many times as necessary for each separate person who trades in commodity derivatives within a group;
  • the approach in Delegated Regulation 2017/592 reflects the fact that an authorisation pursuant to MiFID II cannot be obtained by a group of entities which, taken together, do not have a single legal personality, but should be obtained by the relevant entity (or entities) within that group; and
  • the evidence presented to the Commission’s services has shown that a representative sample of the major European energy and agricultural groups conduct the MiFID activities described in Article 2(1)(j) through a single trading entity. This is based on a variety of prudential and commercial considerations which are well-known to ESMA. This means that, in practice, the ancillary activity test will need to be performed only once for each group within that sample.