ESMA have released a new draft of MiFID II ‘s Regulatory Technical Standard (RTS) on the Ancillary Activity test, RTS 20, announcing it in this press release. This follows the “sending back” of the previous draft by the European Commission in March, with a request to re introduce a form of capital test. The test determines whether those in commodity and energy trading are required to set up a MiFID “regulated entity” which carries many costs and responsibilities with it.

The new draft (here) and accompanying opinion (here) do not re introduce a capital test. Instead the draft itself contains a few changes (in particular, clarifying the scope of some of the tests). However the opinion states that while ESMA’s view is that while the original “main business test”, which uses the level of trading in commodity derivatives activity as both numerator and denominator, conforms to the original mandate of the Level 1 text, the Commission should determine whether it is appropriate to introduce a capital test as an alternative. The opinion suggests some ways in which a capital test may be constructed, and urges the commission to keep a “level playing field” so all market participants are treated “fairly”. It is also suggested that the Commission consider revising the as yet unchanged market size tests if such an alternative is provided.

As a result of this response, the market will now still be “in suspense” as to the final form of the test, which will disappoint many. It will be hoped that the final version is issued by the Commission sooner, rather than later.