In a move that will be welcomed by asset managers conducting ETF business in Ireland, or those who are hoping to move into the Irish ETF space, the Central Bank of Ireland has moved to allow for the establishment of semi-transparent ETFs by amending its requirements for portfolio transparency.
Previously, the Central Bank's UCITS Q&A 1012 provided that the Central Bank would not authorise an ETF unless arrangements were put in place to ensure that information is provided on a daily basis regarding the identities and quantities of portfolio holdings.
The revised Q&A however, while retaining the ability for ETFs to publish holdings on a daily basis, now provides flexibility in that "periodic disclosures" are now permissible, once the following conditions are adhered to:
- appropriate information is disclosed on a daily basis to facilitate an effective arbitrage mechanism;
- the prospectus discloses the type of information that is provided in point (1);
- this information is made available on a non-discriminatory basis to authorised participants (APs) and market makers (MMs);
- there are documented procedures to address circumstances where the arbitrage mechanism of the ETF is impaired;
- there is a documented procedure for investors to request portfolio information; and
- the portfolio holdings as at the end of each calendar quarter are disclosed publicly within 30 business days of the end of the quarter.
These new semi-transparent ETFs will be most attractive for active asset managers who have previously been dissuaded from establishing an ETF in Ireland due to their reluctance to share their proprietary information.
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