HM Treasury has signed off changes to the Regulated Activities Order (RAO) that reshape the ancillary activities exemption (AAE) used by commodity‑trading corporates. The Order was made on 17 November 2025 and laid before Parliament on 19 November 2025. Two commencement dates matter: 10 December 2025 for the FCA’s new rule‑making power, and 1 January 2027 for the new test to take effect across the market.

In practical terms, a firm dealing on its own account or providing investment services in commodity derivatives, emission allowances or their derivatives can rely on the exemption in one of two ways. Either its trading is ancillary to the group’s main business based on criteria the FCA will set, or the activity, viewed on its own, sits below an annual threshold that the FCA will specify. This dual route is designed to give commercial hedgers more certainty than the current EU‑era approach.

The Order inserts a new power for the FCA to define both the group‑level criteria and the annual threshold, as well as how firms should decide when activity is below that threshold. That power starts on 10 December 2025, allowing the regulator to consult and finalise rules through 2026 so firms have a stable test in place for 2027.

Until 1 January 2027, firms continue under the existing UK version of RTS 20 and related measures. The Financial Services and Markets Act 2023 (Commencement No. 11) Regulations confirm that RTS 20 and the remaining ancillary‑test provisions in article 72J of the RAO will be revoked from 1 January 2027, clearing the path for the UK‑only framework.

The Order also strips out references to Commission Delegated Regulation (EU) 2017/592 from UK definitions. For in‑house counsel and compliance teams, the takeaway is straightforward: after 2027 the tests that matter will live in FCA rules rather than EU technical standards, reducing cross‑reference risk in legal opinions and control frameworks.

Reporting is being tidied up rather than expanded. Regulation 47 of the 2017 Markets in Financial Instruments Regulations already lets the FCA direct how firms report the basis for relying on the exemption. The amended framework will preserve that ability for the post‑2027 routes, so firms should expect to evidence whether they qualify because trading is ancillary at group level or because activity is below the annual threshold.

Who should pay attention? Energy producers hedging production, utilities and industrials managing power and gas exposures, airlines covering jet fuel, and manufacturers using metals or agri‑hedges. If a group breaches the forthcoming threshold or fails the group‑ancillary test, it may be treated as an investment firm and require FCA authorisation.

Authorisation is a step‑change. It brings prudential capital under the UK Investment Firms Prudential Regime (MIFIDPRU), systems and controls expectations, and potentially client‑facing obligations depending on the operating model. Boards that have treated hedging as a back‑office treasury task should now assign clear ownership and invest in MI, governance and documentation.

What firms can do now is largely operational. Map every entity that trades commodity instruments, centralise management information at group level, and standardise notional measures across exchange and OTC. The threshold is not yet public, but scenario‑testing is simple enough: run historic and forward volumes against a range of plausible cut‑offs and see where pressure points land.

Expect a clear rulebook process. The FCA consulted on reforming the ancillary activities test over the summer (CP25/19), with the stated aim of simplifying the methodology while giving firms legal certainty. With the Treasury’s Order now granting the rule‑making power, a Policy Statement setting out the final approach should follow ahead of the 2027 go‑live.

This sits alongside wider UK reforms to commodity markets. Earlier changes moved responsibility for position limits from the FCA to trading venues from July 2026 and strengthened venues’ ability to collect OTC position data. The direction of travel is consistent: more venue‑level risk management and a UK‑specific rulebook for commercial users.

Treasury’s note signals no significant impact on business. Many desks will welcome the optional ‘annual threshold’ route for its clarity; the trade‑off is discipline. Firms that want to stay outside authorisation will need better data, stronger governance and periodic board attestations to explain why the exemption fits-well before 1 January 2027.