The European Commission adopted rules that provide a definitive basis for persons trading commodity derivatives and emission allowances and derivatives for their own account or providing investment services to others to calculate when such activity is ancillary to their core business and thus, under the Markets in Financial Instruments Directive II, places them outside requirements applicable to firms providing investment services. Under the EC’s rule, firms should apply a numerator to assess speculative trading activity that equals 15 percent of their net derivative position plus three percent of their gross derivative position. (This calculation is based on a European concept of regulatory capital.) They should likewise apply as a denominator capital employed for the company’s main business activity that equals their appropriate total equity and long term debt. If the resulting calculation results in a percentage above 10 percent, the EC agrees with a recommendation of the European Securities and Markets Authority that the firm should be regulated under MiFID; otherwise it should be exempt. Simultaneously, the EC also issued specific rules on how EU individual jurisdictions’’ regulators should formally implement position limits for commodity derivatives. Previously, ESMA published its broad rules on how such jurisdictions should apply such position limits. (Click here for details in the article, “ESMA Publishes Final Technical Standards for MiFID II” in the October 4, 2015 edition of Bridging the Week.)