The European Commission (the Commission) and European Securities and Markets Authority (ESMA) recently published additional guidelines for Undertakings for the Collective Investment in Transferable Securities funds (UCITS) and launched further consultations on the UCITS regime, including the use of repurchase agreements ("repo") and derivatives products and the regulation of money market funds.
Broadly, funds that comply with EU UCITS rules on eligible assets, issuer concentration or risk spreading can be sold to professional and retail investors across the European Union (EU). Most money market funds and exchange traded funds (ETFs) in the EU are structured and regulated as UCITS.
The Commission and ESMA have been increasingly focusing on ETFs and the use of derivatives given the significant increase in the number of ETFs and the increasing use of derivatives products either as part of a fund's investment strategy or as part of efficient portfolio management (EPM). The Commission and ESMA are concerned that the quality and liquidity of such funds may be declining, and accordingly, the Commission and ESMA are looking at steps that can be taken to maintain investor and market confidence.
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