MiFID II, implemented under Belgian law in the Act of 25 October 2016 on access to investment services and the status and supervision of portfolio management and investment advice firms (the "Act") , has limited the possibility for persons dealing on their own account in commodity derivatives to be exempted from the application of MiFID II. Henceforth, such persons can only benefit from an exemption if their activity of dealing on their own account in commodity derivatives constitutes an ancillary activity to their main business, which may not consist of the provision of investment services.
Legal framework applicable under MiFID I
MiFID I provided for two exemptions for persons dealing on their own account in commodity derivatives. Persons dealing on their own account in commodity derivatives as their main activity on the one hand, and persons dealing on their own account in commodity derivatives as an ancillary activity on the other hand, could – under certain conditions – be exempted from the application of MiFID I.
Legal Framework applicable under MiFID II
MiFID II has limited the possibility for persons dealing on their own account in commodity derivatives to benefit from an exemption.
The main activity exemption has been abrogated. Persons dealing on their own account in commodity derivatives as their main business must therefore obtain a licence to carry out their activity on a professional basis.
In addition, the conditions for benefiting from the ancillary activity exemption have been tightened. Persons dealing on their own account in commodity derivatives on a professional basis must meet four conditions in order to benefit from the ancillary activity exemption (article 4, §1, 10° of the Act).
First, their activity of dealing on their own account in commodity derivatives must not be for the purpose of executing clients' orders.
Secondly, their activity of dealing on their own account in commodity derivatives must be ancillary to their main business, which may not consist of the provision of investment services within the meaning of MiFID II or banking activities under the Belgian Banking Act, or acting as a market-maker in relation to commodity derivatives.
In order to allow the persons concerned to determine whether their dealing activity is ancillary to their main business, the European Commission has, in a Delegated Regulation (RTS 20: Delegated Regulation (EU) 2017/592 of 1 December 2016), designed a method consisting of two tests: the "market share test" and the "ancillary activity test at group level". If one of these tests is positive, the ancillary activity exemption will not be granted.
Thirdly, these persons are not allowed to utilise a high-frequency algorithmic trading technique.
Fourthly, these persons must notify the FSMA annually of their use of the ancillary activity exemption.
FSMA communication on the Ancillary Activity Exemption
On 1 December 2017, the FSMA published a communication on, among other topics, the ancillary activity exemption. This communication sets out the above principles and includes, as an annex, the form to be filled in and notified annually to the FSMA.