On 14 March 2022, the Financial Conduct Authority (FCA) published an update on the market share test under the ancillary activities exemption for commodity derivatives.
The MiFID II Article 2(1)(j) ancillary activities exemption allows firms trading in commodity derivatives, emission allowances and emission allowance derivatives to be exempt from authorisation as a MiFID investment firm. To verify that they fulfil the criteria, firms were required to perform a ‘market share test’ and the ‘main business test’ as set out in Regulatory Technical Standard (RTS) 20.
The FCA explains that previously the European Securities and Markets Authority published consolidated figures for trading across the EU so that firms could make the calculation under the market share test per Article 2 of RTS 20. However, the EU MiFID II regime in respect of the ancillary activities test changed in February 2022 and the market share test has been removed.
The FCA states that it will not be publishing data. It adds that Article 72J of the Regulated Activities Order (RAO) enables firms seeking to rely on the UK ancillary activities exemption to carry on their business without obtaining authorisation if there is no data from an EU institution or a regulator to enable them to perform the ‘market share test’. The FCA is consulting on clarifications to the Perimeter Guidance Manual and the onshored version of RTS 20 to make clearer that performing the ‘market share test’ is not a necessary condition to benefit from the ancillary activities exemption. Firms otherwise meeting the criteria may rely on Article 72J of the RAO where they cannot perform the calculations the test requires.