Some good news for fund managers, ESMA has decided to revise its rules and allow all UCITS to receive all collateral in the form of transferable securities or money market instruments issued or guaranteed by a Member State, one or more of its local authorities, third countries or certain public international bodies. Previously ESMA had stated that no more than 20% of a UCITS fund's NAV could be received in collateral exposed to any one government issuer.  

This relates to collateral received in the context of OTC transactions and EPM techniques, such as repo and stock-lending transactions.  Use of the relaxed approach will be subject to additional disclosures and will require diversification across at least 6 different issues (with no one issue accounting for more than 30% of the UCITS fund's NAV).

See ESMA final report on Revision of the provisions on diversification of collateral in ESMA’s Guidelines on ETFs and other UCITS issues.

Less helpfully, ESMA has clarified its disclosure requirements for UCITS using financial indices, which will make it harder for index providers to preclude competitors from accessing full calculation methodology. See Updated ESMA Q&A on guidelines on ETFs and other UCITS issues.