The commodity derivatives ancillary test is easily one of the most complex pieces within MiFID II, making the double volume cap in equities look more like an amuse-bouche. The new test determines whether a firm's dealing in commodity derivatives is merely an ancillary activity, allowing it to stay out of scope for MiFID II. Trying to summarise the test in a few simple slides highlights its convoluted nature.
ESMA recently published its partial market size estimates, much needed data for firms wanting to work out whether they qualify for the ancillary exemption. The fact that ESMA itself cannot obtain a complete list of estimates covering the last two years is quite telling in itself. But these difficulties are set to become a thing of the past, as ESMA's document on derivatives data publication outlines. Under EMIR, trade repositories (TRs) are already obliged to publish data to the public on a regular basis, making them a natural starting point. The regulator's aim is to ensure that the TR data is aggregated and formatted in a way that makes it suitable for the ancillary test. While there is still a long way to go, the question of a company's size relative to the total market could, in the near future, be answered at the touch of a button.