EUROPEAN UNION: EU Commission Letter to ESMA on Share Cancellation

Tuesday March 6 2018

On 2^nd  February 2018, ESMA published a letter from Olivier Guersent, EU Commission Director-General, DG FISMA, to Steven Maijoor, ESMA Chair, on the implementation of the Regulation on money market funds (MMF Regulation).

The letter concerns the practice of share cancellation (also referred to as the reverse distribution mechanism or share destruction). In its May 2017 consultation paper on its technical advice, implementing technical standards and guidelines under the MMF Regulation, ESMA gave its view that share cancellation was not allowed under the MMF Regulation. ESMA then sought the view of the Commission’s legal services on this issue when it submitted its final report to the Commission in November 2017.

The Commission agrees with ESMA’s analysis that the practice of share cancellation is not compatible with the MMF Regulation. ESMA’s website states that it is considering possible next steps with a view to promoting convergent application of the Benchmark Regulation across the EU.