On Friday DG FISMA of the European Commission proposed a series of changes to financial legislation with the objective of helping the markets in the light of Covid-19. The press release can be found here and the proposed amending act here. The scope of the proposed changes includes aspects of both the ancillary activity test, and also the position limits regime.
In terms of the ancillary activity test, the proposals include:
- The test moving to be “qualitative” with all calculations removed.
- Removal of the need to notify the competent authority of exemption use .
In terms of position limits:
- Limits will only apply to “critical” contracts (more than 300,000 lots) and agricultural derivatives.
- The concept of “equivalent contracts” will be greatly reduced.
- Hedge exemptions will be available in some cases to Financial Counterparties.
- Position management controls to be improved.
Several of these changes were originally proposed in the consultation early this year (see here).
The amendment must be voted on by the European Parliament. It is proposed that the measures take effect 12 months after entry into force.
it will be interesting to see if the UK follows suit.