CP23/27: Reforming the commodity derivatives regulatory framework

Consultation opens
Consultation closes

Our consultation sets out our proposals concerning position limits, the exemptions from those limits, position management controls, the reporting regime and the ancillary activities test.

Update: 30 May 2024

The Treasury has laid the Financial Services and Markets Act 2000 (Commodity Derivatives and Emission Allowances) (Amendment) Order 2024. This includes provisions to delay the commencement date of articles 2(2), (3) and (4) of the Financial Services and Markets Act 2000 (Commodity Derivatives and Emission Allowances) Order 2023. In line with these changes, we will delay revoking the UK version of delegated regulation (EU) 2017/592 (RTS 20) for the time being. We will also not be taking forward the proposals we made in CP23/27 relating to the ancillary activity exemption.

We will work with the Treasury, and market participants, with the aim to develop an approach that reflects the conclusions of the Wholesale Markets Review while also taking into consideration the concerns raised by industry.


MiFID II Article 2(1)(j), transposed in paragraph 1(k) of Schedule 3 to the Regulated Activities Order (RAO) 2001, provides an exemption from authorisation to firms whose activities in commodity derivatives are ancillary to their commercial business (the ancillary activity exemption or AAE). To be able to benefit from the exemption certain criteria must be fulfilled (the ancillary activity test or AAT). Those criteria are set out in Schedule 3 to the RAO and RTS 20.

In May 2023, the Treasury legislated to simplify the exemption. Those changes are due to come into effect at the start of 2025. In CP23/27, we consulted on guidance intended to clarify how the AAE should be applied by firms.

The laying of the new order by the Treasury follows representations from industry, including in response to our consultation CP23/27, that have expressed concern that an approach based on qualitative criteria and FCA guidance does not provide sufficient certainty to firms about whether they could rely on the AAE. We and the Treasury will consider how to best address the concerns and make revised proposals.

The delay, announced on 29 May 2024, means that we will not be taking forward the proposals we made in CP23/27 relating to the AAE. RTS 20 will remain in place while a permanent solution is considered. This will mean that there continues to be a quantitative test for determining whether a firm can benefit from the exemption that will operate as it has done since we left the EU.

We can confirm that previous statements we have made about how the regime operates in the absence of data on the overall size of the market will remain operative until the revision of the regime is completed. However, the Treasury will not delay the abolition of the annual notification requirement in legislation. As a consequence, firms will no longer be required to systematically notify us on an annual basis on the use of the exemption.


Read CP23/27 (PDF)

Why we are consulting

The commodity derivatives regulatory regime aims to mitigate the risk that large positions can cause disorderly pricing or settlement conditions. This can harm participants in financial markets, users of commodity markets and the real economy.

We propose to apply more stringent requirements to a narrower set of critical contracts. The proposed changes aim to deliver fair and proportionate regulation by removing requirements that impose unnecessary burdens on firms, while placing a sharper focus on the market activity that poses the greatest risk to the real economy.

Who this is for

  • trading venues in the UK which admit to trading commodity derivatives
  • persons, including commercial users and financial firms, who trade commodity derivatives in the UK

Next steps

This consultation has now closed. We will publish feedback on responses and issue a Policy Statement once we have reviewed your comments.

After considering feedback, we will make the necessary amendments to the FCA Handbook rules and guidance.


This consultation is part of the Wholesale Markets Review (WMR), a review of the UK’s secondary markets framework, that we have been conducting with the Treasury. In line with our commitment in the WMR Consultation Response, we are amending our rules to ensure that they are proportionate to the benefits they deliver to market integrity.

The proposed regime builds on changes we have already made to strengthen commodity derivative markets and supports our aim to strengthen the UK’s position in global wholesale markets, a key priority in our 3-year strategy.