MiFID II allows non-financial firms active in commodity derivatives markets to be exempted from the requirement to obtain a MiFID license if they satisfy certain conditions, including remaining below certain ancillary activity thresholds. The rationale of the ancillary activity tests is to check whether entities not subject to financial regulation should be required to acquire an authorisation due to the relative or absolute size of their activity in commodity derivatives, emission allowances and derivatives thereof.
Article 2(4) of MiFID II permits a number of transaction types to be classified as “privileged transactions” and thus to be set aside for the purposes of the ancillary activities calculations.
It is our understanding that there is a preliminary agreement amongst NCAs that transactions carried out under liquidity programmes can be excluded from the ancillary activity calculations under certain conditions, i.e. they may qualify as privileged transactions. Europex fully supports this understanding and would welcome the development of more detailed level 3 guidance documentation by ESMA, which would provide for a common understanding on how the liquidity provider obligation can be implemented in practice, thereby contributing to the harmonised application of the ancillary activity calculations and mutual recognition of approved liquidity programmes.
Please read our full position below.