Global Trustee and Fiduciary Services Bite-Sized Issue 9 2024

3 QUICK LINKS AI DORA FUND LIQUIDITY MIFID II/MIFIR SUSTAINABLE FINANCE/ ESG TOKENISATION AUSTRALIA ASIA EUROPE NORTH AMERICA UNITED KINGDOM Global Trustee and Fiduciary Services Bite-Sized | Issue 9 | 2024 FUND LIQUIDITY ESRB Responds to ESMA Consultation on Draft RTS and Guidelines on LMTs On 2 September 2024 (response dated 16 July), the European Systemic Risk Board (ESRB) published its response to the European Securities and Markets Authority ’s consultation on draft Regulatory Technical Standards and Guidelines on Liquidity Management Tools. The ESRB’s response builds on its Issues Note published in September 2023. The issues note provided a high-level approach to addressing risks in investment funds that invest in assets which are either inherently illiquid or might become illiquid in times of stress. It also outlined the further work to be carried out by the ESRB in this area. The ESRB says that this work will focus first on adapting certain policy tools to reflect the revised AIFMD and UCITS Directive and then on assessing the need for new tools to reduce systemic risk in the medium term. Firstly, the ESRB sets out in its response how structural liquidity mismatch in real estate funds could be reduced by ensuring closer alignment between the fund’s redemption terms and its investment strategy by introducing longer notice periods and a lower redemption frequency. Second, the ESRB discusses how financial stability could benefit if investment funds used anti-dilution LMTs to mitigate first-mover advantage. And lastly, the ESRB’s response describes how the liquidity stress testing framework for investment funds could incorporate liquidity risk stemming frommargin and/or collateral more effectively. Link to ESRB Response here MIFID II/MIFIR ESMA Publishes Data for Quarterly Bond Liquidity Assessment and the Systematic Internaliser Calculations On 1 August 2024, the European Securities and Markets Authority (ESMA) published the new quarterly liquidity assessment of bonds and the data for the quarterly systematic internaliser calculations for equity, equity-like instruments, bonds and for other non-equity instruments under MiFID II and MiFIR. Bonds quarterly liquidity assessment ESMA has published the latest quarterly liquidity assessment for bonds available for trading on EU trading venues. For this period, ESMA says that there are currently 1,355 liquid bonds subject to MiFID II transparency requirements. ESMA’s liquidity assessment for bonds is based on a quarterly assessment of quantitative liquidity criteria, which includes the daily average trading activity (trades and notional amount) and the percentage of days traded per quarter. ESMA updates the bond market liquidity assessments quarterly. However, additional data and corrections submitted to ESMA may result in further updates within each quarter, published in ESMA’s Financial Instruments Transparency System (FITRS), which shall be applicable the day following publication. ESMA also publishes two completeness indicators related to bond liquidity data. The transparency requirements for bonds deemed liquid will apply from 19 August to 17 November 2024.