ESMA publishes implementing rules on Liquidity Management Tools for funds

The European Securities and Markets Authority (ESMA) has published draft Regulatory Technical Standards (RTS) and a final report on Guidelines (GL) on Liquidity Management Tools (LMTs) for funds. These provisions aim to equip EU fund managers with better tools to manage fund liquidity, particularly during market stress. The draft RTS will clarify the functioning of LMTs, such as the use of side pockets, which currently have varying rules across the EU. This publication is a key step in implementing the revised AIFMD and UCITS Directive, facilitating the harmonization and availability of LMTs in all Member States. The draft RTS have been submitted to the European Commission (EC) for adoption, which is expected to take place within three months. ESMA will translate the GL after the EC adopts the draft RTS. National competent authorities will have two months to notify ESMA of their compliance with the GL after publication. The GL will apply on the date of entry into force of the RTS, with existing funds having twelve months to comply. The publication is an important contribution to the ongoing debate on Non-Bank Financial Intermediation, mitigating financial stability risks. The final reports on the Guidelines and draft RTS are available on the ESMA website.