New EU liquidity risk study promotes market tools
18 April 2016 London
Image: Shutterstock
European jurisdictions must make the full gamut of market-based liquidity tools available to tackle the rise of liquidity fragmentation, claims a new market study.
The report, jointly produced by two industry associations, argued that the European Securities Markets Authority and the European Systemic Risk Board must also fully utilise existing liquidity data being reported in Europe.
The reports highlighted “the reduced role of banks as market makers and liquidity providers or the prolonged accommodative monetary policy of the world’s most prominent central banks” as key drivers behind the trend.
The International Capital Market Association (ICMA) and the European Fund and Asset Management Association (EFAMA) commissioned the report in response to public concerns that “liquidity has become more fragmented”.
On the requirements of EU legislation, specifically UCITS and the Alternative Investment Fund Managers Directive (AIFMD), the reported concluded that “the combination of regulatory requirements and market-based tools prove comprehensive and appropriate for liquidity management in both normal and exceptional circumstances”.
Peter de Proft, director general at EFAMA, said: “Our industry acknowledges the virtues of the EU regulatory regimes for funds.”
“Indeed, existing regulatory requirements in EU legislation such as the UCITS and AIFMD regimes form a very far-reaching, strict and sound regime. The legal requirements have proven their merits and ensure appropriate liquidity management for investment funds.”
Martin Scheck, CEO of ICMA, added: “It shows that there is a comprehensive framework already in place available to managers to manage liquidity in difficult market conditions, through a combination of regulatory requirements and market-based tools.”
The report, jointly produced by two industry associations, argued that the European Securities Markets Authority and the European Systemic Risk Board must also fully utilise existing liquidity data being reported in Europe.
The reports highlighted “the reduced role of banks as market makers and liquidity providers or the prolonged accommodative monetary policy of the world’s most prominent central banks” as key drivers behind the trend.
The International Capital Market Association (ICMA) and the European Fund and Asset Management Association (EFAMA) commissioned the report in response to public concerns that “liquidity has become more fragmented”.
On the requirements of EU legislation, specifically UCITS and the Alternative Investment Fund Managers Directive (AIFMD), the reported concluded that “the combination of regulatory requirements and market-based tools prove comprehensive and appropriate for liquidity management in both normal and exceptional circumstances”.
Peter de Proft, director general at EFAMA, said: “Our industry acknowledges the virtues of the EU regulatory regimes for funds.”
“Indeed, existing regulatory requirements in EU legislation such as the UCITS and AIFMD regimes form a very far-reaching, strict and sound regime. The legal requirements have proven their merits and ensure appropriate liquidity management for investment funds.”
Martin Scheck, CEO of ICMA, added: “It shows that there is a comprehensive framework already in place available to managers to manage liquidity in difficult market conditions, through a combination of regulatory requirements and market-based tools.”
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