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The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, is publishing today the draft Regulatory Technical Standards (RTS) and a final report on the Guidelines (GL) on Liquidity Management Tools (LMTs).
These provisions will make EU fund managers better equipped to manage the liquidity of funds, in particular in case of market stress. In addition, the draft RTS will also clarify the functioning of LMTs, such as the use of side pockets for which rules currently vary significantly across the EU. Through their role in mitigating financial stability risks, these rules are an important contribution to the ongoing debate on Non-Bank Financial Intermediation.
This publication is a key step in the implementation of the revised AIFMD and UCITS Directive and will facilitate the harmonisation and full availability of the LMTs defined in the Directives in all Member States.
Next steps
The draft RTS have been submitted to the European Commission (EC) for adoption. From the date of submission, the EC shall take a decision on whether to adopt the RTS within three months. The EC may extend that period by one month.
ESMA will translate the GL after the adoption of the draft RTS by the EC. Should the EC amend the draft RTS in a way that impact the GL, ESMA will adjust the GL to ensure full consistency between the RTS and the GL. Upon publication of the translations on the ESMA website, national competent authorities will have two months to notify ESMA whether they comply or intend to comply with the GL.
The GL will start applying on the date of entry into force of the RTS. Funds existing before the entry into force the RTS will have twelve months to comply with the GL.
