On 3 October 2018, the European Securities and Markets Authority (ESMA) published an opinion (the Opinion) on ancillary activity – market size calculation.
The Opinion comes as a response from Member State national competent authorities (NCAs) and market participants who have asked for guidance for determining the market size figures in line with Article 2(3) of Commission Delegated Regulation (EU) 2017/592 (the DR) which supplements MiFID II.
By way of background, MiFID II sets out exemptions from its scope – one being where a firm deals on own account or provides investment services in specific cases, including where the activity is an ancillary activity to the main business provided certain conditions are met (Article 2(1)(j) MiFID II). The DR provides further information on this exemption by setting out the criteria for establishing when an activity is to be considered as ancillary to the main business at a group level. In particular, it lays down the rules for calculating the overall market trading activity. The calculation of the overall market trading activity is necessary for the establishment of the size of trading activity per market participant which ultimately determines whether an activity is ancillary, and whether a market participant falls within the scope of MiFID II.
However, NCAs and market participants have found it challenging to determine market size figures as there is no centralised recording of on-venue and off-venue transactions for commodity derivatives and emission allowances that is publicly available.
The Opinion provides estimates of the market size of various commodity derivatives as well as emission allowances. Data for the calculation of the on-venue market size was collected from trading venues located in the EEA, covering the total of 2015, the second half of 2016, and the total of 2017. Data for the calculation of the OTC market size is based on reports submitted to the Trade Repositories under Regulation (EU) No 648/2012.
ESMA is aware that the data used in the Opinion may have some inherent limitations and NCAs may consider any alternative data which market participants may provide.