RTS 28: Draft regulatory technical standards on criteria for establishing when an activity is to be considered to be ancillary to the main business

Transcription

1 CHAPTER 7: COMMODITY DERIVATIVES RTS 28: Draft regulatory technical standards on criteria for establishing when an activity is to be considered to be ancillary to the main business COMMISSION DELEGATED REGULATION (EU) No /.. of [date] supplementing Directive 2014/65/EU [MiFID II] of the European Parliament and of the Council 51 with regard to regulatory technical standards on criteria for establishing when an activity is to be considered to be ancillary to the main business at a group level THE EUROPEAN COMMISSION, (Text with EEA relevance) Having regard to the Treaty on the Functioning of the European Union, Having regard to Directive 2014/65/EU [MiFID II] of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments, and in particular Article 2 (4). Whereas: (1) For defining the scope of the exemption provided for in Article 2(1)(j) of Directive 2014/65/EU criteria should be specified for establishing when an activity is to be considered to be ancillary to the main business at a group level. Those criteria shall ensure that non-financial firms dealing in financial instruments in a disproportionate manner compared with the level of investment in the main business are covered by the scope of Directive 2014/65/EU. They shall take into account at least the need for ancillary activities to constitute a minority of activities at group level and the size of the trading activity compared to the overall market trading activity in that asset class. (2) The definition of a group should be aligned with the definition used in Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings 52. Therefore, a group is considered to be comprised of the 51 OJ L 173, , p OJ L 182, , p

2 parent undertaking and all its subsidiary undertakings. Subsidiary undertakings are those undertakings controlled by the parent undertaking taking into account the elements of control as referred to in Directive 2013/34/EU. In line with that Directive a group includes entities domiciled in the European Union and third country entities, regardless of whether the group is headquartered inside or outside the EU. (3) The criteria for establishing when an activity is to be considered to be ancillary to the main business at a group level shall exclude privileged transactions. Such privileged transactions include intra-group transactions as referred to in Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories 53 that serve group-wide liquidity or risk management purposes; transactions in derivatives which are objectively measurable as reducing risks directly relating to the commercial activity or treasury financing activity and transactions in commodity derivatives and emission allowances entered into to fulfil obligations to provide liquidity on a trading venue where such obligations are required by regulatory authorities in accordance with Union law or national laws, regulations and administrative provisions, or by trading venues. (4) Transactions that are deemed to be objectively measurable as reducing risks directly relating to commercial activity or treasury financing activity and intra-group transactions should be considered in a consistent way with Regulation (EU) No 648/2012. However, in relation to transactions in derivatives which are objectively measurable as reducing risks directly relating to the commercial activity or treasury financing activity Commission Delegated Regulation (EU) No 149/2013 supplementing Regulation (EU) No 648/ only refers to OTC-derivatives while Article 2(4) of Directive 2014/65/EU covers also derivatives traded on trading venues. Therefore, this Regulation should also take into account non OTC-derivatives in relation to transactions that are deemed to be objectively measurable as reducing risks directly related to commercial activity or treasury financing activity. (5) Examples for obligations to provide liquidity on a trading venue required by regulatory authorities or trading venues include rules established by trading venues and the mandatory market making requirements established by the UK energy regulator Ofgem which oblige large electricity suppliers to post the prices at which they buy and sell wholesale electricity on power trading platforms up to two years in advance and to trade at these prices. In accordance with Directive 2014/65/EU the obligation to provide liquidity when engaging in algorithmic trading and pursuing market making strategies is also applicable to members or participants of regulated markets and MTFs who are not required to be authorised pursuant to that Directive. In accordance with Article 1(6) of Directive 2014/65/EU Article 57 of that Directive also applies to persons exempt under 53 OJ L 201, , p OJ L 52, , p

3 Article 2 of that Directive. Furthermore, the obligation to provide liquidity back into the market at an agreed price and volume with the express intent of mitigating the effects of a large or dominant position under Directive 2014(65/EU only applies on a temporary basis. Therefore, transactions in order to fulfil obligations to provide liquidity on a trading venue as referred to in Directive 2014/65/EU should not be considered as privileged transactions under that Directive. (6) In relation to the first threshold determining the extent to which ancillary activity constitutes a minority of activities at a group level, the capital employed for carrying out the ancillary activity relative to the capital employed for the main business should be considered. In order to take into account the global nature of commodity business and in line with the definition of the group, the main business should be determined by consideration of the overall activity of the group, including activity undertaken in third countries. The ancillary activity should be determined by taking together all ancillary activities undertaken in the European Union on the basis of the group excluding privileged transactions in the European Union on the basis of the group. Trading activity undertaken by a MiFID authorised entity of the group should be excluded when determining the ancillary activity. The capital employed should be calculated on the basis of balance sheets and financial statements. (7) With regard to the second threshold considering the size of the trading activity relative to the overall market trading activity, the size of the trading activity should be determined on the basis of all trading activity undertaken in the European Union at group level. The size of the trading activity should be determined by deducting the sum of the volume of privileged transactions from the volume of the overall trading activity undertaken by that person. Trading activity undertaken by a MiFID authorised entity of the group should be excluded. The volume should be determined by the gross notional value of contracts held by that person in the European Union at group level on the basis of a rolling average of three calendar years. The overall market size should be determined on the basis of trading activity undertaken in the EU and in relation to different asset classes, including metals, oil, coal, emission allowances, gas, power, agricultural products and other commodities. Derivatives on wholesale energy products as referred to in Article 2(4) of Regulation (EU) No 1227/2011 are not financial instruments in accordance with Article 4(1)(15) and Section C 6 of Annex I of Directive 2014/65/EU provided that they are traded on an OTF and must be physically settled. Therefore, these derivatives should not be taken into account when establishing the size of the trading activity. Due to the lack of availability of global data, the overall market size should be established at the level of the European Union by means of data collected by trade repositories.. Where a person operates simultaneously in different asset classes and exceeds the threshold in relation to one asset class, it should be subject to Directive 2014/65/EU for all commodity asset classes. 375

4 (8) A person should not be able to benefit from the exemption under Article 2(1)(j) of Directive 2014/65/EU if it exceeds one of the two thresholds. (9) In order to benefit from the exemption under Article 2(1)(j) of Directive 2014/65/EU, a person should comply on a continuous basis with the conditions laid down for that exemption. Furthermore, a person should notify the relevant competent authority on an annual basis that it makes use of that exemption and, upon request, report the basis on which it considers the activity to be ancillary to the main business. In order to avoid inconsistencies and potential conflicts of double regulation, the relevant competent authority should be the competent authority in the Member State of incorporation of the person making use of the exemption. If an entity situated in a third country undertakes ancillary activities in the European Union and wishes to benefit from the exemption it should make the notification to the competent authority of the Member State where its branch is situated. In order to allow for market participants to plan and operate a business in a reasonable way and to take into account seasonal patterns of activity, the calculation of the thresholds determining when an activity is considered to be ancillary to the main business should take place on the basis of a rolling average of three calendar years. (10) This Regulation is based on the draft regulatory technical standards submitted by the European Securities and Markets Authority to the Commission. (11) In accordance with Article 10 of Regulation (EU) No 1095/2010 of the European Parliament and of the Council 55, the European Securities and Markets Authority has conducted open public consultations on the draft regulatory technical standards, analysed the potential related costs and benefits and requested the opinion of the Securities and Markets Stakeholder Group established in accordance with Article 37 of that Regulation. HAS ADOPTED THIS REGULATION: CHAPTER I General Article 1 Definitions For the purpose of this Regulation the following definitions shall apply: (a) eligible activity means 55 OJ L 331, , p

5 (i) dealing on own account, including market makers, in commodity derivatives or emission allowances or derivatives thereof, excluding persons who deal on own account when executing client orders; or (ii) providing investment services, other than dealing on own account, in commodity derivatives or emission allowances or derivatives thereof to the customers or suppliers of their main business; (b) main business means the overall activity of a group; (c) privileged transactions means (i) intra-group transactions as referred to in Article 3 of Regulation (EU) No 648/2012 that serve group-wide liquidity or risk management purposes; (ii) transactions in derivatives which are objectively measurable as reducing risks directly relating to the commercial activity or treasury financing activity as referred to in Article 10 of Commission Delegated Regulation (EU) No 149/2013, including also non OTC derivatives; (iii) transactions in commodity derivatives and emission allowances entered into to fulfil obligations to provide liquidity on a trading venue, where such obligations are required by regulatory authorities in accordance with Union or national laws, regulations and administrative provisions or by trading venues; (d) capital means capital encompassing total equity, current debt and non-current debt as calculated from balance sheets and financial statements; (e) relevant national competent authority means the national competent authority of the jurisdiction of the place of incorporation of the person making use of the exemption under Article 2(1)(j) of Directive 2014/65/EU or the national competent authority of the Member State where its branch is situated if the person making use of that exemption is situated in a third country. CHAPTER II Thresholds defining when an activity is considered to be ancillary to the main business Article 2 Application of the thresholds An activity shall be considered to be ancillary to the main business in accordance with Article 2(1)(j) of Directive 2014/65 EU: 377

6 (a) if the capital employed by the group for carrying out eligible activity in the European Union accounts for less than 5% of the capital employed for carrying out the main business of the group in the European Union and in third countries; and (b) if the size of the trading activity (i) in commodity derivatives of the group undertaken in the European Union accounts for less than 0.5% of the overall market trading activity in the European Union in one of the following asset classes: 1. metals; 2. oil and oil products; 3. coal; 4. gas; 5. power; 6. agricultural products; or 7. other commodities, including freight and commodities referred to in Section C 10 of Annex I of Directive 2014/65/EU; or (ii) in emission allowances or derivatives thereof of the group undertaken in the European Union accounts for less than 0.5% of the overall market trading activity in the European Union. Article 3 Calculation of the capital employed 1. The capital employed for carrying out the eligible activity shall be calculated by deducting from the sum of the capital employed for eligible activity by the group in the European Union the sum of the capital employed for privileged transactions by the group in the European Union. Capital employed for trading activity undertaken by an entity of the group that holds a license in accordance with Article 5 of Directive 2014/65/EU shall not be considered when calculating the capital employed for the eligible activity. 2. The capital employed for carrying out the eligible activity calculated in accordance with paragraph (1) shall be divided by the capital employed for the main business of the group in the European Union and in third countries. Article 4 378

7 Calculation of the size of the trading activity 1. The size of the trading activity shall be calculated by deducting from the volume of the overall trading activity of the group in the European Union the sum of the volume of the privileged transactions undertaken by the group in the European Union. The volume of trading activity undertaken by an entity of the group that holds a license in accordance with Article 5 of Directive 2014/65/EU shall not be considered when calculating the size of the trading in the eligible activity. The volume shall be measured using the gross notional value of contracts. 2. The size of the trading activity calculated in accordance with paragraph (1) shall be divided by the overall market trading activity in the European Union in the relevant asset class referred to in Article 2(2)(b). 3. The size of the trading activity and the size of the overall trading activity in the relevant asset class referred to in Article 2(2)(b) shall be determined by using the records collected and maintained by trade repositories as referred to in Article 2(2) of Regulation (EU) No 648/2012. Article 5 Period for calculation 1. The calculation of the capital employed for the eligible activity as referred to in Article 3 and the calculation of the size of the trading activity as referred to in Article 4 shall be undertaken on the basis of a rolling average of three calendar years. 2. Until [ ] 2020 the calculation of the capital employed for the eligible activity as referred to in Article 3 and the calculation of the size of the trading activity as referred to in Article 4 shall be undertaken on the following basis: (a) for 2017, the calculation shall take into account the simple average of 12 months over the 2016 calendar year; (b) for 2018 the calculation shall take into account the simple average of 24 months for the calendar years 2016 and 2017; (c) for 2019 the calculation shall take into account the simple average of 36 months for the calendar years 2016, 2017 and CHAPTER III Final provisions Article 6 Entry into force 379

8 This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union. It shall apply from [ ]. This Regulation shall be binding in its entirety and directly applicable in all Member States. Done at Brussels, [ ] Done at Brussels, For the Commission The President On behalf of the President [Position] 380