CP25/19: Ancillary Activities Test

Read CP: 25/19 (PDF)[1] 

Why we are consulting 

On 3 July 2025, the Treasury proposed to amend legislation[2] to enable us to write rules to define the conditions under which firms can rely on the AAE. This CP sets out our proposals regarding those rules.

The aim of our consultation is to simplify how firms determine whether they can benefit from the AAE while ensuring that it provides them with the necessary legal certainty. 

Who this is for 

The proposals in this CP will apply to non-financial firms that trade commodity derivatives, emission allowances or derivatives of emission allowances, seeking to rely on the AAE. 

Next steps 

Online response form[3] 

Send us your comments by Thursday 28 August 2025 using the online form.

You can also submit your comments by emailing: [email protected]

By writing to us at: Priya Kotadia/Zaril Razak, Financial Conduct Authority, 12 Endeavour Square, London E20 1JN.

We will consider feedback and aim to publish a Policy Statement finalising our changes in Q4 2025/Q1 2026. 

Background

The AAE exempts commercial users or producers of commodities from the need to seek authorisation as an investment firm, if they trade in commodity derivatives, emission allowances or derivatives of emission allowances as an ancillary activity.

To benefit from the AAE, a firm is required to carry out the AAT, which aims to determine if its activity in these financial instruments is ancillary to the main activities of the group to which it belongs.

The AAT, which was introduced by MiFID II, is complex and relies on calculations that require market data to be sourced every year at a cost.