ESMA Issues New Guidelines On UCITS Derivative And Collateral Issues

The European Securities and Markets Authority published on January 9 its latest guidelines on ETFs and other UCITS issues for regulators and UCITS management companies.

The guidelines, published in Q&A format and based on questions posed by both regulatory authorities and members of the industry, are designed by ESMA to encourage harmonisation of supervisory approaches and practices in the application of the UCITS directives and their implementing measures.

The latest additions to the guidelines deal with financial derivative instruments and collateral management. ESMA says that in cases where the role of a counterparty to a derivative instrument only involves implementing a set of rules agreed in advance with the UCITS management company and does not allow the exercise of any discretion, the counterparty should not be considered to have any discretion over the composition of the underlying assets of the instrument.