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MiFID II - Licence obligation and exceptions

MiFID II changes the definition of financial instrument as far as commodity derivatives and emission rights are concerned, and expands the licence obligations for certain market participants, such as proprietary traders. An exception to this licence obligation is possible.

Which parties are required to have a licence?

Commodity derivatives traded on a trading venue are, in principle, financial instruments under MiFID II, provided that they do not fall under the REMIT carve-out. Emission rights and derivatives thereof also qualify as financial instruments under MiFID II.

Market participants that engage in dealing on own account in these financial instruments are, in principle, subject to a licence obligation under MiFID II. Market participants that have to apply for a licence as an investment firm will also have to apply provisions that are laid down in the EMIR and CRD IV as this legislation is applicable to investment firms.

Parties that wish to engage in proprietary trading in commodity derivatives or emission rights or derivatives thereof after 3 January 2018 must have a licence or have notified themselves to the AFM.

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