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UK Chancellor announces change to UK Ancillary Activity Test

Jeremy Hunt, the UK’s Chancellor of the Exchequer, announced a series of changes on Friday to Financial Services legislation as part of the “Edinburgh Reforms”. His speech included a commitment to review the MIFID II Ancillary Activity Test (under UK legislation) before the end of Q1 2023, by saying:

[the government] “Will bring forward secondary legislation in Q1 2023 to remove burdens for firms trading commodities derivatives as an ancillary activity, for example, when manufacturers seek to fix the future price of their purchases of specific raw materials.”.

The full speech can be found here.

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This follows a temporary change issued by the FCA last year before the end of Q1 calculation deadline (see here). The consultation run as part of the Wholesale Market Review (see here) suggested moving the test to a qualitative one, in contrast to the updated quantitative tests now used in the EU (see here).