BKM207700 - Bank compensation restriction: definition of banking company: excluded companies - commodities and emission allowance dealer

CTA09/S133F(2)(f) & (g)

Commodities firms are excluded companies for the purpose of the compensation restriction. Commodities firms include commodity and emission allowance dealers and firms which only carries on regulated activities for the purpose of trading in commodities or commodities derivatives.

Commodity and emission allowance dealers

Commodity and emission allowance dealers are firms that are exempt from certain provisions of the Investment Firms Prudential Regime. A company is a commodity and emission allowance dealer if it meets the definition in the FCA Handbook.

Exempt commodities firm

Prior to 1 January 2022, exempt commodities firms were firms that exempted from obtaining permissions by the regulatory authority. A company is an exempt commodities firm if it satisfies the regulation in force at the date of the relevant conduct:

  • between 1 January 2014 and 31 December 2021 this is an exempt IFPRU commodities firm as defined by the FCA Handbook at that time
  • from 1 April 2013 to 31 December 2013 this is an exempt BIPRU commodities firm as defined by the PRA Handbook at that time
  • from 1 January 2007 to 31 March 2013 this is an exempt BIPRU commodities firm as defined by the Handbook of the Financial Services Authority (FSA) at that time
  • before 1 January 2007 this is an exempt BIPRU commodities firm as defined by the Handbook of the FSA as in force on 1 January 2007

Commodity trading

A company not otherwise excluded as a ‘commodity and emission allowance dealer’ (or an ‘exempt IFPRU commodities firm’ prior to 1 January 2022) is also an excluded company if its only line of business is to carry on relevant regulated activities for the purpose of trading in commodities or commodity derivatives.

This exclusion also applies if a company carries on a second line of business, which is not deposit taking and:

  • the company’s activities in that line of business would not, on their own, result in it being an FCA investment firm that meets the conditions in CTA09/S133H(1B) if it only carried on this second line of business and the relevant conduct occurred on or after 1 January 2022
  • the company’s activities in that line of business would not, on their own, result in it being both an IFPRU 730K firm and a full scope IFPRU investment firm if it only carried on this second line of business and the relevant conduct occurred between 1 January 2014 and 31 December 2021.
  • the company’s activities in that line of business would not, on their own, result in it being both an BIPRU 730K firm and a full scope BIPRU investment firm if it only carried on the second line of business and the relevant conduct occurred before 1 January 2014

HM Revenue and Customs view hedging transactions undertaken in respect of commodities trades as being undertaken for the purposes of the commodity trading.