The European Securities and Markets Authority (ESMA) is preparing to issue its opinion on the future of Europe-wide money market fund regulation to the European Commission (EC).
Speaking at the Irish Funds 5th Annual UK Symposium in London on Friday (10 November), Richard Stobo, head of investment management at the pan-European regulator said it was readying its recommendations to the EC, which would be based on an industry consultation held over the past year.
Stobo said it would help form the EC's work to produce EU-wide legislation for money market funds, which are currently regulated at country level.
ESMA's opinion had taken into account market responses to its May 2017 consultation paper on the products and aimed to bring about "sensible" regulatory convergence in the EU, he said.
"It is now up to the EC to decide whether they want to take our opinion on board."
ESMA's priority is ensuring the stability and integrity of money market funds, with key proposals including liquidity and credit quality requirements.
Once the EC has reviewed the position of the watchdog it will create new rules, which will replace those of national regulators, such as the UK's Financial Conduct Authority (FCA).
The European Asset Management Market Study
Stobo also said work was being undertaken on publishing a Europe-wide report similar to the FCA's Asset Management Market Study, designed to improve price competition in the industry.
He said ESMA's own study would approach the issue of price competition "slightly differently" to the FCA's approach, but he did not provide further details.
Stobo added the regulator's research would "begin with UCITS funds" as there is more data available on these products, but would eventually move to other vehicles including structured products.
He cautioned the "analytical work today is less related to future [regulatory] implications" but the results of the analysis would be something the regulator "will have to look at".
Meanwhile, Nick Miller, head of investment management supervision at the FCA, said the UK regulator is currently going through responses to its Asset Management Market Study in order to prepare for the implementation of a package of remedies for the new year.
Elsewhere at the Irish Funds conference, it emerged Irish regulator, the Central Bank of Ireland (CBI), would be outlining the future for its supervision of ETFs at a seminar in Dublin later this month.
Ireland is Europe's largest ETF jurisdiction, with €309bn in AUM, representing 56% of all European ETF assets.
Ireland's ETF industry could grow as large as €720bn by assets under management (AUM) by 2021, according to the CBI.
The bank led a discussion paper, published in May, on the regulation and supervision of ETFs, with three main areas of focus.
Firstly, the discussion paper looked at "the unique primary dealing and secondary trading arrangements which are an inherent part of the design of ETFs".
Secondly, the CBI was "pushing forward the discussion on the assessment of the risks inherent in the ETF structure".
Finally, the paper took a particular focus on leveraged and inverse ETFs and active ETFs, given their relative popularity.
The CBI's work is the most significant review of the regulation of ETFs since ESMA's 2012 publication of its ﬁnal set of guidelines, which took effect on 18 February 2013.
Aims of these guidelines included strengthening investor protection, mitigating counterparty risk and harmonising regulatory practices.
In an environment where yields are so low, costs can make a huge difference to the outcome’
ETF market to hit $7.6trn by 2020
Responsible for fund selection
Closing in 2020
Focused on asset liquidity and credit quality