The asset management industry has responded to an industry consultation which sets out potential new requirements for repurchase and reverse repurchase arrangements for UCITS.
European Securities and Markets Authority proposes a distinct regime for repurchases, usually referred to as repos, and reverse repo arrangements – which, unlike for securities lending arrangements, would allow a proportion of the assets of the UCITS to be non-recallable at any time.
Repos provide a form of borrowing and are principally used to generate cash for funding purposes or to raise cash for onward reinvestment.
Reverse repos are a cash management tool and have largely replaced the unsecured deposit market.
The aim of the consultation (see earlier story) is to ensure that the guidelines that ESMA wishes to develop “are an appropriate regime for the treatment of repo and reverse repo with regard to the recallability of assets subject to these arrangements.”
The European regulator had...