05 November 2013

ESMA/Maijoor speech at EFAMA Investment Management Forum

Our portfolio of activities is changing and becoming more balanced. In the early years, as a result of the regulatory reform in response to the crisis, the single rule book was the dominant activity. Now ESMA is moving into a phase where direct supervision and supervisory convergence is becoming a solid share of our portfolio of activities. The unit responsible for CRA supervision is close to reaching its cruising speed, and the number of registered CRAs increases steadily. In September, more than 30 CCPs from third countries applied for recognition with ESMA, and we expect to register the first Trade Repositories this month.

ESMA’s third birthday will coincide with the first formal evaluation of what we have achieved so far in our relatively brief existence. Considering this short period, and the good progress made, I think this first evaluation should not trigger a fundamental overhaul of the new European System of Financial Supervision or ESFS. However, at the same time it would be good to use this opportunity to strengthen further the ESFS. It is good to see that EFAMA has a similar view on the evaluation of the ESFS, although, as can be expected, on some elements our viewpoints differ somewhat.

Regarding AIFMD first of all, the establishment of this new framework has been one of ESMA’s top priorities during its first three years of existence. Many of you will be familiar with the individual work streams in this context, but let me recall a few of them.  The first challenge under the AIFMD was to deliver technical advice to the European Commission back in 2011. We were able to produce what was widely acknowledged as a comprehensive and high-quality piece of work in a relatively short period of time. The extensive input we received from stakeholders was crucial in allowing us to take final decisions on the various policy issues covered in the advice.

The final item I would like to mention in view of building a single rulebook for AIFMD are the regulatory technical standards (RTS) on types of AIFMs. We decided to focus these RTS on distinguishing between open-ended and closed-ended funds, due to the relevance of this distinction to the requirements in the Directive on liquidity management and valuation. ESMA submitted draft RTS to the Commission in April; the Commission then contacted ESMA in July indicating that it did not intend to endorse the draft due to a potential lack of consistency with the Level 1 text.

ESMA is of the view that the original draft RTS were valid and legally sound, but in order to move the process forward – and recognising that the Commission ultimately holds the pen – we submitted a revised draft in August. The revised version incorporates some flexibility to take account of certain existing fund structures. The final decision on these RTS now lies with the Commission.

I have spoken at length about the AIFMD, but we should not forget that ESMA has been, and continues to be, very active in the area of UCITS. Since the most recent reforms of the UCITS Directive go back a few years, much of ESMA’s role since 2011 has been what I would loosely call “maintenance work”. What I mean by that is that we have focused on clarifying and strengthening existing rules rather than introducing significant new requirements. Examples of this include our Q&A documents on the Key Investor Information Document and the UCITS notification procedure, or the opinion on the trash ratio.

I would like to say a few words about one related issue on which we are currently working. The ETF guidelines addressed some deficiencies in the rules that apply to ETFs covered by the UCITS Directive. For example, we considered it important to strengthen the disclosure requirements on ETFs and to ensure that secondary market investors can make direct redemptions at the level of the ETF in certain circumstances. However, the introduction of these requirements was in no way meant to stigmatise or single out ETFs for regulatory treatment. Indeed, we deliberately chose to apply certain of the new rules to UCITS in general since they were not only relevant to ETFs, such as the provisions on index-tracking funds. We recognise that ETFs could in certain cases be appropriate investment products for retail investors seeking exposure to the main equity or bond markets. However, it seems that in Europe ETFs are mostly acquired by professional investors. This is in contrast to the situation in the US, where the share of investment by retail investors is much greater.

Supervisory and regulatory authorities should always be wary of intervening in specific investment decisions. There are of course many factors that need to be taken into account when assessing the merits of a particular investment choice, so regulators should focus on ensuring that those choices are made on the basis of sound and accurate information and, where relevant, good-quality advice. Financial education is also a key piece of the puzzle. However, we as an authority are interested to understand better why retail exposure to ETFs appears to be relatively low. We are looking into this matter further, and hope to have a clearer overview of the situation in the coming months.

Full speech

ESMA lists those CCPs established in non-EEA countries which have applied for recognition under Article 25 of EMIR and which expressly agreed to have their name mentioned publicly. This list is not necessarily exhaustive and it remains subject to further updates. The list is provided for information purposes only and it is without prejudice to any future ESMA decision of the recognition of the applicant CCPs.

List of non-EEA CCPs that applied for recognition

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