Final Report on Regulatory Technical Standards
What is it for?
In July 2024, ESMA asked for feedback on its proposed rules for LMTs. After getting feedback, ESMA released a final report with the updated rules.
What's in the Report?
- Feedback: Section 2 explains the feedback ESMA received and how they used it to change the rules.
- Annexes:
- Annex I: Detailed feedback from the public.
- Annex II: Why these rules are needed.
- Annex III: How these rules will affect costs and benefits.
- Annex IV: The complete rules for AIFs.
- Annex V: The complete rules for UCITS.
What Changed?
The rules were changed based on the feedback received:
- Redemption Gates: ESMA made the rules for redemption gates more flexible. Redemption gates limit how much money investors can take out of a fund at one time. For AIFs, the limit can be a percentage of the fund's value, a specific amount of money, or a percentage of liquid assets. For UCITS, the limit is still a percentage of the fund's value.
- Another Way to Use Redemption Gates: There's a new option to allow smaller withdrawal requests to be fully paid, while larger requests are limited by the redemption gate.
- Share Classes: ESMA removed rules about applying LMTs to different share classes (different types of shares in a fund).
- ETFs: ESMA clarified that certain actions by authorized participants and market makers related to ETFs (funds that trade like stocks) are not considered LMTs.