Changes necessary to comply with ETF and Ucits guidelines set out recently by Europe's regulatory co-ordinator could impact liquidity and securities lending, according to French lawyers Gide Loyrette Nouel.
The final guidelines will become effective two months after ESMA publishes on its website local EU language translations – and Ucits created after that should comply immediately, Gide Loyrette Nouel adds.
ESMA also published transitional provisions for the first 12 months to allow companies to align existing financial indices and collateral.
Meanwhile, ESMA is seeking views on the appropriate treatment of repo and reverse repo arrangements in the context of its guidelines for ETFs and other Ucits issues.
The institution has proposed a distinct regime for repo and reverse repo arrangements, which would “allow a portion of the assets of the Ucits to be non-recallable at any time at the initiative of the Ucits”, Gide Loyrette Nouel added.
The proposed guidelines include safeguards to limit the counterparty risk arising from these arrangements and to allow Ucits entering into such arrangements to continue meeting redemption requests.