Dealing on own account: Difference between revisions

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Ok we are getting somewhere, but — ah: there is this gnomic question of what counts as “ancillary to one’s main business”. Fear not: Article 2 also addresses that, but punts it off to ESMA to come up with some regulatory technical standards governing it. This has been recently updated and you can find the latest — as of June 2022 — [https://eur-lex.europa.eu/legal-content/en/TXT/?uri=CELEX%3A32021R1833 here].
Ok we are getting somewhere, but — ah: there is this gnomic question of what counts as “ancillary to one’s main business”. Fear not: Article 2 also addresses that, but punts it off to ESMA to come up with some regulatory technical standards governing it. This has been recently updated and you can find the latest — as of June 2022 — [https://eur-lex.europa.eu/legal-content/en/TXT/?uri=CELEX%3A32021R1833 here].


There are three alternative ancillary activity tests. Under the “'''[[de minimis threshold test]]'''”, a person’s activity is ancillary to its main business if its ''net outstanding notional exposure'' in cash settled commodity products traded in the EU, excluding those traded on a venue, is less than EUR 3 billion annually (calculated against an average over three-years on a rolling basis). The other two tests are a bit more speculative and fiddly to calculate, but for a repackaging SPV, the first one gives plenty of room to work with.
===== The “de minimis threshold” for ancillary activity =====
There are three alternative ancillary activity tests, of which two are a bit speculative and fiddly to calculate, but the third — the “'''[[de minimis threshold test]]'''” — gives a repackaging SPV room to work with.  


“Excluding those traded on a venue?” We suppose this exclusion is predicated on there being someone else — a broker — involved in an on-venue trade who has the appropriate permissioning (if there isn’t, the entity must be accessing the venue directly itself, so is out of scope for the exemption anyway) so these naturally should not count towards your limit — though query whether they should count towards offsetting OTC exposures you might have in other markets.
Under the [[de minimis threshold test]], a person’s activity is ancillary to its main business if its ''net outstanding notional exposure'' in EU-traded cash-settled commodity products, not counting those traded on a venue, is less than EUR 3 billion annually (calculated against an average over three-years on a rolling basis).  


This is all good stuff, if you can monitor, and keep a lid on, your commodity product exposure, or — if you are some kind of securitisation vehicle — you may wonder what “net” exposure means, and may be happy to see Article 3 of the RTS which goes on, in nutshell (full text in the panel) to say:
“Excluding those traded on a venue?” We suppose this exclusion is predicated on there being someone else — a broker — involved in an on-venue trade who has the appropriate permissioning (if there isn’t, the entity must be accessing the venue directly itself, so is out of scope for the exemption anyway) so these naturally should not count towards your limit — though query whether they should count towards offsetting OTC exposures you might have in other markets. It would be odd if an exposure to commodity derivatives hedged with futures gave you a different result to one hedged with a note or another swap.


{{quote|You calculate the “net outstanding notional exposure” by averaging the aggregated month-end net outstanding notional values for the previous 12 months resulting from all contracts in in-scope commodity products that may be cash settled and ''that are not traded on an EU trading venue'' between 1 January as 31 December in any year.}}
===== Net exposure =====
 
In any case this is all good stuff, if you can monitor, and keep a lid on, your commodity product exposure, or — if you are some kind of securitisation vehicle — you may wonder what “net outstanding notional” exposure means. 3(1) of the RTS addresses this. The punctuation in “commodity derivatives for cash settlement or emission allowances or derivatives thereof for cash settlement” leaves something to be desired — namely, some punctuation — but the only way we can read this is (i) cash-settled commodity derivatives; (ii) emission allowances; (iii) cash-settled emission allowance derivatives, which leaves out ''physically-settled'' commodity derivatives and emission allowance derivatives.{{sa}}
 
{{sa}}
*[[Repackaging programme]]
*[[Repackaging programme]]
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