The European Securities and Markets Authority (ESMA) published a call for evidence on the review of the Undertakings for Collective Investment in Transferable Securities (UCITS) Eligible Assets Directive (EAD) to assess possible risk and benefits of UCITS gaining exposure to various asset classes.
Since the adoption of the UCITS EAD almost two decades ago, the number and variety of financial instruments traded on financial markets has increased considerably, leading to uncertainty in determining whether some categories of assets are eligible for investment, in turn giving rise to divergent interpretations and market practices in terms of the application of the UCITS Directive.
One of the questions out for consultation refers to short sale restrictions: “What are the risks and benefits of permitting UCITS to build up short positions through the use of (embedded) derivatives, delta-one instruments or other instruments/tools? Please share evidence and experiences on current market practice and views on a possible need for legislative clarifications or amendments.”