The European Securities and Markets Authority (ESMA) has issued today an Opinion in response to a letter sent by the European Commission (Commission) asking to amend its draft RTS 20 under the Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR). RTS 20 provides criteria to establish when a non-financial firm’s commodity derivatives trading activity is considered to be ancillary to its main business.
MiFID II aims at ensuring that non-financial firms are appropriately regulated and compete on a level-playing-field if they engage in commodity derivatives trading to an extent that cannot be considered ancillary to their main business. In order to achieve this, ESMA’s RTS 20 had designed quantitative tests, a trading activity and a business activity test. The two tests measured the size of the speculative commodity trading activity of the firm relative to the total size of the commodity market concerned and relative to the total activity of the firm. The draft RTS 20 also included a backstop mechanism to ensure that only activities of certain relevance are captured. While supporting the overall approach of the draft RTS, the Commission letter asks ESMA to amend the business activity test and to introduce a capital-based test, where appropriate, for certain firms.