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The European Securities and Market Authority (ESMA) has published its draft regulatory technical standards which would establish ways of working under MiFID II, the European Union’s updated markets in financial instruments legislation. If passed in its current form this legislation would mean that energy and other real economy companies will become subject to requirements applicable to investment banks.

MIFID II includes an exemption for companies whose trading activity is “ancillary” or secondary to their primary commercial business. The formula currently proposed by ESMA to determine “ancillary” activity, however, no longer takes into account the scale of a company's asset base and primary commercial business as a criterion for eligibility. This will make many energy companies and other real economy firms subject to requirements more applicable to investment banks. 

It is clear that this legislation could trigger a cascade of negative impacts that will ultimately result in a substantive increase of costs for European consumers and businesses.