On 24 January 2023, the FCA issued a further update on its website regarding the ancillary activities exemption for commodity derivatives.
The update follows a statement that the FCA published in March 2022 providing an update on the market share test and Handbook Notice No 99. In the statement of March 2022 the FCA said that firms do not need to perform the market share test as part of determining their eligibility to use the ancillary activities exemption for 2022-2023. In Handbook Notice No 99, the FCA said, in chapter 3, that firms could use figures relating to 2018, 2019 and 2020 as their numerator for the purposes of its remaining main business test calculations. The regulator also said that firms could use corresponding figures relating to 2019, 2020 and 2021. If it could meet the main business test, a firm could continue to rely on the ancillary exemption in 2022, provided it met the other conditions of the exemption as set out in PERG 13 Q44.
In the Ministerial Statement that accompanied the Edinburgh Reforms the Chancellor announced that the government would bring forward secondary legislation in Q1 2023 to remove burdens for firms trading commodities derivatives as an ancillary activity. The changes to the ancillary activities test will involve removing the current quantitative aspects of the test although the changes will not take effect until the end of this year.
In the update now published the FCA 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.”