HM Treasury publishes near-final draft instrument to simplify the Ancillary Activities Exemption and give the FCA power to set a new test and annual threshold

HM Treasury has published a near-final draft statutory instrument and policy note to amend the UK’s Ancillary Activities Exemption for commodity derivatives and emissions allowances trading. The changes are intended to revoke the existing ancillary activities test and enable the Financial Conduct Authority (FCA) to implement a simplified UK-tailored replacement test, including the option of an annual activity threshold as an alternative basis for relying on the exemption from FCA authorisation as an investment firm. The draft instrument amends the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 to introduce two routes for accessing the exemption: demonstrating that the activity is ancillary to the group’s main business, or falling below an FCA-set annual threshold for trading in commodity derivatives, emissions allowances, and related derivatives. It would confer FCA rulemaking powers to specify the criteria for the new test and to set the annual threshold, update reporting provisions to cover both routes, and remove references in the Regulated Activities Order to Commission Delegated Regulation (EU) 2017/592 (MiFID RTS 20), which is to be replaced by FCA rules. The policy note also indicates that Article 72J (the transitional regime linked to the market share test) will be retained for a further 12 months and then revoked from 1 January 2028. HM Treasury is seeking technical comments on the draft instrument by 28 August 2025, timed to coincide with the FCA’s consultation on its draft rules (running until 28 August 2025). Subject to feedback and parliamentary time, the government intends to lay the instrument before Parliament in Autumn 2025 and commence it before the FCA publishes final rules, with the new regime coming into force on 1 January 2027.