The European Securities and Markets Authority (ESMA) is
seeking input on draft guidelines and technical standards. These pertain to the
revised Alternative Investment Fund Managers Directive (AIFMD) and the
Undertakings for Collective Investment in Transferable Securities (UCITS)
Directive.
Both directives aim to reduce financial stability risks and
promote harmonization of liquidity risk management in the investment funds
sector.
Guidelines for LMT Calibration
The draft Regulatory Technical Standards (RTS) define the
characteristics of Liquidity Management Tools (LMTs). This includes calculation
methods and activation mechanisms. ESMA has also released draft guidelines on
LMTs for UCITS and open-ended AIFs.
These guidelines provide instructions on
how managers should select and calibrate LMTs. This selection should consider
their investment strategy, liquidity profile, and redemption policy.
“The revised AIFMD and UCITS Directive have introduced
long-awaited provisions on the availability and use of Liquidity Management
Tools. ESMA is now consulting on how to
apply these provisions in practice,” said Verena Ross, ESMA Chair.
“These new rules being proposed are in line with the latest
global standards provided by the FSB and IOSCO, and will contribute to the
strengthening of the EU regulatory and supervisory regime for investment funds.”
Earlier, ESMA
released its second Final Report on the Markets in Crypto-Assets Regulation, detailing eight draft technical standards, as reported by Finance Magnates. These aim to enhance transparency for retail investors and
clarify disclosure and record-keeping requirements for providers. The standards
also introduce data protocols to aid National Competent Authorities in
supervision.
📣 #ESMA is seeking input on Liquidity Management Tools for funds under the revised AIFMD and the #UCITS Directive. 🗓️ Send your input by 8 Octoberhttps://t.co/LxNEEX7i2O pic.twitter.com/6G2K4CVVim
— ESMA – EU Securities Markets Regulator 🇪🇺 (@ESMAComms) July 8, 2024
ESMA Seeks Consultation Input
The RTS and guidelines aim to promote consistent application
of the directives for UCITS and open-ended AIFs. They also aim to better equip
EU fund managers to handle liquidity in market stress situations. Additionally,
they clarify the functioning of specific LMTs, such as side pockets, a practice
that varies across the EU.
The publication of these consultations is a key step in
implementing the new AIFMD and UCITS Directive. ESMA invites responses to the consultations by 8 October.
ESMA will deliver the final RTS and guidelines by 16 April 2025.
This article was written by Tareq Sikder at www.financemagnates.com.
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