ESMA Updates Instructions for Money Market Funds Regulation (MMFR)
The European Securities and Markets Authority (ESMA) has issued new instructions with updated validations and schemas for the first filings by money market fund (MMF) managers under the Money Market Funds Regulation (MMFR) due this September. Updates for the earlier instructions were published in July 2019 after considering feedback from market participants and the technical committee at ESMA. With this, MMF managers are required to use the latest version (v1.1) of the schemas to provide detailed information about the funds to their respective national competent authorities (NCAs) who will then share the same with ESMA after processing it through their internal systems.
These regulations, coming on the back of the report on the Money Market Funds Regulation (MMFR) published in November 2017, require MMF managers to conduct specific stress tests in tandem with stress tests that they already conduct. Based on Article 37 of the 2017 report, Steven Maijoor, chairman of the management board at ESMA, proclaimed that these tests will ensure uniformity across all MMF managers for the European MMF sector, enabling investors “to benefit from similar safeguards across different countries.”
These stress tests include scenarios based on:
- Liquidity levels
- Credit and interest rate risks
- Redemptions levels
- Widening/Narrowing of spreads among indexes to which interest rates of portfolio securities are tied
- Macro-economic shocks
On June 22nd, ESMA also published new guidelines on reporting to competent authorities under Article 37 of the MMF Regulation, detailing different parameters and requirements for the filings. Since the filings for Q1 and Q2 have to be completed and filed with the NCAs by all MMF managers in September 2020, a robust platform is needed to ensure compliance, improve accuracy and reduce the overall time required to file.
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