MiFID II: How Does It Apply to Energy and Commodities?

Aviv Handler

A “MiFID company”, also known as an “investment firm”, is directly regulated by their local NCA and required to comply with a large proportion of the rules under MIFID II, having received “authorisation” to provide “investment services”. However, the majority of energy and commodity market participants rely on one or more “exemptions” from the rules, which removes the requirement for authorisation. Nevertheless, some of the rules will apply, and certain energy and commodities market participants are not able to depend on exemptions and will require authorisation.

Those market participants who do have an exemption are not required to comply with “the full MiFID”. The key areas for such exempted firms to focus on are:

• • investment services – which ones are carried out?

• • exemptions – which can be relied upon (in particular, the “ancillary activity” exemption)?

• • position limits – these apply to all market participants; and

• • algorithmic trading rules, which apply to all market participants.

This chapter will focus on these issues, although a brief summary will be provided of the possible requirements that may arise