Update on the market share test under the ancillary activities exemption for commodity derivatives

The MiFID II Article 2(1)(j) ancillary activities exemption enables firms trading in commodity derivatives, emission allowances and emission allowance derivatives to be exempt from authorisation as a MiFID investment firm if they fulfil certain criteria. As part of verifying that they fulfil these criteria, firms are currently required to perform the ‘market share test’ and the ‘main business test’ as set out in UK MiFID RTS 20.

The ‘market share test’ (under Article 2 RTS 20) requires the calculation of the aggregate notional value of all trades in commodity derivatives, emission allowances and emission allowance derivatives traded on, or outside, trading venues across the European Union (which included the UK at the time MiFID II was adopted). In the past, the European Securities and Markets Authority (ESMA) produced consolidated figures for trading across the EU. However, the EU MiFID regime in respect of the ancillary activities test changed in February 2022. The ‘market share test’ – also known as the ‘overall market test’ – has been removed.

The FCA will also not be publishing this data.

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’. We are consulting on clarifications to PERG and UK RTS 20 until 11 April 2022 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.