On June 30, the European Securities and Markets Authority (ESMA) published an opinion providing guidance on the ancillary activity market size calculation for the purposes of the exemption to the revised Markets in Financial Instruments Directive (MiFID II), available under Article 2(1)(j) of the same.
MiFID II will not apply to any person that can qualify for the exemption available under Article 2(1)(j) (Ancillary Exemption). The Ancillary Exemption provides that certain persons dealing with their own account or providing investment services relating to commodity derivatives will not be subject to MiFID II, if such activity is “ancillary” to their main business activity (provided that certain conditions are met). Market participants are therefore required to measure their own activity against total market sizes in commodity derivatives to determine if the exemption applies. Those calculations are to be based on historical data. Market participants exceeding a certain market share are required to apply for an authorization as an investment firm, and those below the market share and relying on the exemption to MiFID II are required to notify their national regulator.
Due to a lack of publically available records of on- and off-venue transactions in commodity derivatives, ESMA published the opinion with the intention of helping firms to determine the market sizes. ESMA collected data for the calculation of the on-venue market size from the trading venues located in the European Economic Area, which it provides for the total year of 2015 and for the second half of 2016. In addition, ESMA also looked at the size of the over-the-counter market for the second half of 2016 based on data from trade repositories. The opinion contains a table setting out the estimated value of market sizes in relevant commodities.
The opinion was updated on July 6, to correct a typing error, and is available here.