On June 22, 2018, the European Commission published a letter, dated May 31, 2018, from the President of the European Commission, Valdis Dombrovskis, to Steven Maijoor, Chair of the European Securities and Markets Authority, following ESMA's request in April for clarification on how to interpret the ancillary activity exemption under the revised Markets in Financial Instruments Directive.
MiFID II exempts non-financial entities that deal on own account, or provide investment services to clients, in commodity derivatives from having to obtain authorization as an investment firm under MiFID II provided that, among other things, this activity is ancillary to their main business. The wording of both MiFID II and related Regulatory Technical Standards suggests that the tests for whether an activity is ancillary to the main business should be carried out at the level of the entity's group. However, ESMA stated in its letter to the Commission that some drafting amendments that were introduced by the Commission have led to uncertainty as to whether the tests should be carried out at the level of the entity rather than at group level.
The Commission has confirmed that MiFID II requires that the ancillary activities test needs to be calculated by each entity within a group that engages in either of the two relevant MiFID activities for which the exemption is available. In consequence, the ancillary activities test must be calculated as many times as necessary for each separate entity which trades in commodity derivatives within a group.
The letter to ESMA is available at: https://www.esma.europa.eu/sites/default/files/library/letter_from_commission_vp_dombrovskis _answer_to_esma_letter_esma70-154-5851.pdf and the ESMA's request for clarification is available at: https://finreg.shearman.com/european-securities-and-markets-authority-seeks-c.
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