On April 22, 2016, the European Commission published a letter rejecting ESMA's draft technical standards on ancillary activities and further requesting amendments in accordance with the Markets in Financial Instruments Directive II. The letter concerns ESMA’s draft RTS on the criteria to establish when an activity is considered to be ancillary to the main business. MiFID II exempts persons dealing on own account or providing investment services to clients in commodity derivatives provided that, amongst other things, it is an activity that is ancillary to their main business and that the main business is not the provision of investment services or banking services. The RTS lays down two tests which are required to be met in order for an activity to be considered ancillary, the market share test and the main business test. The Commission rejected the draft RTS because ESMA’s proposal for the main business test on the basis of total turnover as a proxy to commercial activity could result in an overly restrictive application of the test. The Commission concluded that the proposed ESMA trading ratio for determining an appropriate test for all cases and for all groups potentially affected by the ancillary activities test is not appropriate. The Commission suggested that the proposed main business test should be broadened to include a wider range of factors when determining the extent to which activities constitute a minority of activities at a group level.
The letter on ancillary activities to main business is available at: http://ec.europa.eu/finance/securities/docs/isd/mifid/160420-letter-to-esma-rts-20_en.pdf.