ESMA has published on 4 December 2012 its guidelines on repurchase and reverse repurchase agreements for UCITS funds intended to complement the ETF guidelines. They stipulate that UCITS should only enter into repo and reverse repo agreements if they are able to recall at any time any assets or the full amount of cash.
However, when cash is recalled on a mark-to-market basis, the mark-to-market value of the reverse repurchase agreements should be used for the calculation of the net asset value of the UCITS.
ESMA says that fixed-term repo and reverse repo agreements that do not exceed seven days shall be considered automatically as arrangements that allow the assets to be recalled at any time by the UCITS.
The guidelines are now being translated into all EU languages and will be incorporated into ESMA’s Guidelines on ETFs and other UCITS issues, which were first published in July 2012 and came into force on February 18 this year.
The repo and reverse repo guidelines will enter into force two months after the publication of the translations. ESMA says the result will be a single comprehensive rulebook for UCITS that increases transparency and investor protection as well as helping to safeguarding the stability of financial markets.