The European Securities and Markets Authority (“ESMA”) published final guidelines on repurchase (repo) and reverse repurchase agreements for UCITS funds on 4 December 2012. This is a follow-up to ESMA’s publication in July 2012 of guidelines on ETFs and UCITS (see DechertOnPoint) (the “ETF Guidelines”), which contained a consultation on the guidelines which have now been published.

UCITS in general and money market funds in particular make extensive use of reverse repo arrangements (i.e., fund lends out cash and receives securities collateral), with some funds lending out all their cash on the terms of such agreements. Repo arrangements (i.e., fund borrows cash and posts securities collateral) are likely to be of great interest to funds which need to post cash collateral to clearing houses when mandatory clearing of OTC derivatives applies from next year.