ESMA · ESMA_QA_1202 Answer Published

Impact of EMIR on UCITS - Valuation of OTC derivatives

Regulation
Undertakings for Collective Investment in Transferable Securities Directive (UCITS) Directive 2009/65/EC
Topic
UCITS global exposure
Submitted
2016-07-19
Answered
2016-07-19
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Question

For OTC financial derivative transactions that are centrally cleared and subject to the reporting obligation of EMIR, can UCITS management companies rely on the valuation provided by the central counterparty (CCP)?

Answer

[ESMA 34-43-392 UCITS Q&A, section 6, Q&A 1] No. The UCITS framework requires UCITS management companies to have in place a process for accurate and independent verification of the value of the OTC financial derivative transactions, even if they are centrally cleared. The valuation provided by the CCP can only serve as a point of reference for the verification performed by the UCITS management company. Nevertheless, the UCITS management company should be able to justify any deviation from the valuation provided by the CCP.
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This Q&A is published by European Securities and Markets Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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