ESMA Seeks EC Clarification on Ancillary Activity Test Under MiFID II
The European Securities and Markets Authority (ESMA) published a letter to the European Commission (EC) dated April 9, requesting clarification with respect to the exemption available to non-financial entities (NFEs) from having to be authorized as an investment firm under the revised Markets in Financial Instruments Directive (MiFID II).
NFEs are eligible for this exemption where their commodity derivative trading activity is ancillary to their main business. However, there is uncertainty as to whether the “ancillary to main business” assessment should be made at group or single-entity level.
ESMA previously published an opinion on the market size calculation for the assessment. In the opinion, ESMA refers to the assessment as being carried out at group level.
The letter to the EC highlights ambiguity between MiFID II (and related implementing legislation) and EC amendments to regulatory technical standards (RTSs), specifically RTS 20 (setting out the criteria establishing when an activity is considered to be ancillary to the main business). MiFID II supports the assessment at group level, while RTS 20 has been interpreted to indicate that the assessment should be carried out at single-entity level.
ESMA considers this a question of interpreting MiFID II and the related EC amendments and, as such, not appropriate for an ESMA question and answers document. Instead, ESMA invites the EC to provide further guidance on how and the level at which the assessment should be performed.
The letter is available here.