MiFID II has not entered into force yet, but already became substantially amended. What has changed? Key issue - exemptions.
The respective provision regards dealing on own account exemption expressed in Article 2(1)(d) of the MiFID II.
I don't think this modification will be of crucial importance for commodity or carbon dealers, since it does not generally apply to such products (for other detailed conditions for the use of the dealing on own account exemption (Article 2(1)(d) MiFID II) see here), but those interested in other asset classes should pay attention to.
Directive (EU) 2016/1034 of the European Parliament and of the Council of 23 June 2016 amending Directive 2014/65/EU on markets in financial instruments
Article 1
Directive 2014/65/EU is amended as follows:
(1) in Article 2(1), point (d)(ii) is replaced by the following:
'(ii) are members of or participants in a regulated market or an MTF, on the one hand, or have direct electronic access to a trading venue, on the other hand, except for non-financial entities who execute transactions on a trading venue which are objectively measurable as reducing risks directly relating to the commercial activity or treasury financing activity of those non-financial entities or their groups;'
Recital 12
The exemption set out in point (d) of Article 2(1) of Directive 2014/65/EU should be extended to include non-financial entities who are members of or participants in a regulated market or a multilateral trading facility (MTF), or have direct electronic access to a trading venue when executing transactions on a trading venue which are objectively measurable as reducing risks directly relating to the commercial activity or treasury financing activity of those non-financial entities or their groups.
Article 2(1)(d)(ii) of MiFID II, when enacted in 2014, prohibited persons from using this exemption if they were a member of or a participant in a regulated market or multilateral trading facility (MTF) or had a direct electronic access to a trading venue.
The provision was indifferent whether the transaction was for speculative or hedging purposes.
This has changed now. Article 1 of the Directive (EU) 2016/1034 of the European Parliament and of the Council of 23 June 2016 amending Directive 2014/65/EU on markets in financial instruments amended MiFID II by replacing Article 2(1), point (d)(ii) by the following:
'(ii) are members of or participants in a regulated market or an MTF, on the one hand, or have direct electronic access to a trading venue, on the other hand, except for non-financial entities who execute transactions on a trading venue which are objectively measurable as reducing risks directly relating to the commercial activity or treasury financing activity of those non-financial entities or their groups'.
Hence, the legislative sense of this modification will be that hedging transactions concluded by members of or participants in a regulated market or an MTF, or persons having a direct electronic access to a trading venue will still qualify under MiFID II own account exemption, provided, obviously, other conditions are fulfilled.
Speculative transactions will be treated as before.
See in the box the exact wording of the respective amendment.