MiFID II

Requirements according to MiFID II

Under the MiFID II Directive (Markets in Financial Instruments Directive), which applies since 3 January 2018, trading in emission allowances will for the first time be classified as investment service. For such investment services the Directive provides a comprehensive catalogue of requirements. Operators of installations and aircraft operators may be entitled to exemptions under which their dealing in emission allowances does not fall within the scope of the Directive.

MiFID II (Directive 2014/65/EU) and MIFIR (Markets in Financial Instruments Regulation, Regulation 2014/600/EU) compose the legal framework  of requirements on financial markets. They (entry into force:  3rd January 2018) are applicable for all authorized investment firms, regulated markets, data providers and non-member state firms which provide investment services and activities. MAD (Directive 2014/57/EU on criminal sanctions for market abuse) and MAR (Regulation 2014/596/EU on market abuse) complete this legal framework.

The aim of MiFID II is to provide a secure and transparent financial system. It imposes stricter regulations on financial markets and curbs price speculation. Emission allowances are expressly referred to as financial instruments (Annex 1 C (11) MiFID II). Trading with emission allowances is thus understood as an investment service as defined by MiFID II.

Article 2 and 3 of MiFID II state numerous exemptions. In particular, it is worth noting that MiFID II does not apply to

  1. Persons providing investment services exclusively for their parent undertakings, for their subsidiaries or for other subsidiaries of their parent undertakings (Article 2 (1) b).
  2. Operators with compliance obligations under Directive 2003/87/EC who, when dealing in emissions allowances, do not execute client orders and who do not provide any investment services or perform any investment activities other than dealing on own account, provided that those persons do not apply a high-frequency algorithmic trading technique (Article 2 (1) e).
  3. Persons dealing on own account, including so-called market-makers (…) and persons providing investment services other than dealing on own account (…) to the customers or suppliers of their main business. The prerequisites are that trading in emission allowances is only an ancillary activity, that these persons do not apply a high-frequency algorithmic trading technique and that they notify the relevant competent authority annually that they make use of this exemption because emission trading is an ancillary activity to their main business (Article 2 (1) j i) & ii)). The exemption is not applicable for persons who deal on own account when executing client orders (Article 2 (1) j i) & ii)).

 

The competent authority with the responsibility for performing tasks arising from MiFID II (Article 67 (1)) is Financial Market Supervision in Austria (Finanzmarktaufsicht - FMA). Persons to whom exemptions 1. and 2. apply need not contact the FMA unless they have any questions. Persons to whom exemption 3. applies have to notify the FMA accordingly.

Please use the link below (topic “Commodity derivatives”) under the heading “ancillary activity exemption” for further information:

Financial Market Supervision in Austria - FMA - Commodity derivatives

If you have any questions, please contact: warenderivate(at)fma.gv.at