TITLE: European Securities and Markets Authority Publishes Guidance on Liquidity Management Tools for Open-Ended Funds
BODY:
On March 12, 2026, the European Securities and Markets Authority (ESMA) published guidance on the selection and calibration of liquidity management instruments for undertakings for collective investment in transferable securities (UCITS) and alternative investment funds (AIFs) of open-ended type.
The guidance establishes consistent supervisory practices and ensures uniform application of European Union law, particularly Article 18a(2) of the UCITS Directive and Articles 16(2b) and 16(2c) of the Alternative Investment Fund Managers Directive (AIFMD). It applies to competent authorities and fund administrators and covers the selection, activation, and calibration of liquidity management tools to manage liquidity risk and mitigate risks to financial stability.
The guidance addresses quantitative liquidity management instruments, including suspension of subscriptions and redemptions, redemption limits, and extended notice periods; anti-dilution tools, including redemption fees, swing pricing, dual pricing systems, and anti-dilution fees; and illiquid asset accounts. Fund administrators retain primary responsibility for liquidity risk management and must select appropriate tools based on factors including fund structure, investment strategy, trading conditions, asset liquidity profiles, stress test results, investor base characteristics, and operational barriers. While funds must select at least two liquidity management instruments, administrators may select additional tools to enhance resilience. The guidance emphasises that activation and calibration must serve the interests of all investors and be appropriate and effective given market conditions and fund characteristics.
Competent authorities must notify ESMA within two months of publication whether they comply with or intend to comply with the guidance, specifying reasons for non-compliance. Failure to respond results in presumed non-compliance. The guidance applies from the date of application of related regulatory technical standards, with a 12-month transition period for existing funds.
REFERENCES:
ESMA34-671404336-1364, published March 12, 2026
Directive 2009/65/EC (UCITS Directive)
Directive 2011/61/EU (AIFMD)
Directive (EU) 2024/927