Revision of the provisions on diversification of collateral in ESMA’s Guidelines on ETFs and other UCITS issues

In December 2012, ESMA published the guidelines on ETFs and other UCITS issues (ESMA/2012/832) (hereafter the guidelines). Since the entry into force of the guidelines on 18 February 2013, ESMA has been asked by stakeholders on numerous occasions to reconsider its position on the requirements on collateral diversification (paragraph 43(e) of the guidelines) on the basis that they have a significant adverse impact on UCITS’s collateral management policies. Stakeholders drew particular attention to the consequences for money market funds that place cash into reverse repurchase agreements.On 20 December 2013, ESMA published a consultation paper (ESMA/2013/1974) in which the Authority set out proposed amendments to paragraph 43(e) of the guidelines.