Key takeaways
- On 17 April 2025, the Central Bank of Ireland published its latest UCITS Q&A (42nd Edition).
- The Q&A contains its updated policy position regarding portfolio transparency requirements for exchange traded funds ("ETFs") enabling the establishment of semi-transparent ETFs.
- The change in policy on portfolio transparency delivers on one of the recommendations of the Funds Sector 2030 report and further enhances Ireland's reputation as the leading European ETF domicile.
Today, 17 April 2025, the Central Bank of Ireland (the
"Central Bank") has published a welcome
update in the latest 42nd edition of its UCITS Q&A which
formally outlines a change to its position regarding portfolio
transparency requirements for exchange traded funds
("ETFs"). The change provides formal
confirmation that Irish domiciled ETFs may be established with
"semi-transparent" portfolio holdings disclosure. While
the ability for an ETF to disclose portfolio holdings on a
"daily" basis remains, the Q&A provides that an ETF
can now disclose portfolio holdings on a "periodic" basis
provided such holdings are publicly disclosed as at the end of each
calendar quarter within 30 business days of the end of that
quarter. Prior to today's update, the Central Bank had
officially required Irish domiciled ETFs to publish their full
portfolio holdings on a daily basis.
This latest edition of the UCITS Q&A revises QA ID 1012 and is
intended to further facilitate the establishment of active ETFs. ID
1012 provides that periodic disclosure of portfolio holdings of the
UCITS ETF or ETF share class is permitted, subject to the
responsible person ensuring the following:
- 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 (i);
- this information is made available on a non-discriminatory
basis to authorised participants and market makers;
- 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.
Today's update reflects the implementation on some of the key recommendations outlined in the Department of Finance's final report on the Funds Sector 2030 which was published in October 2024 (the "Report"). The Report noted that Ireland is a leading domicile for ETFs and that the Irish industry, the Central Bank and the Department of Finance must continue to be at the forefront of innovation as the ETF market segment develops. In this regard, the Report recommended that the growth of the ETF market in Ireland must be supported and that the Central Bank should continue "to keep under consideration its requirements regarding portfolio transparency for ETFs, recognising the possibility of alternative approaches."
Similarly, IOSCO, in its Final Report on ETF Good Practices encouraged
regulators to "consider requirements regarding the
transparency of an ETF's portfolio and/or other appropriate
information provided to market participants so as to facilitate
effective arbitrage" while acknowledging the benefits to
different portfolio transparency approaches (other than full daily
disclosure of portfolio holdings.
The majority of ETFs are traditionally passive funds tracking an
underlying index or other segment of the market which do not have a
fund manager actively deciding which securities to invest in and
typically disclose their full portfolio holdings on a daily basis.
By contrast, active ETFs publish their holdings less frequently,
seeking to provide enough information to facilitate trading while
protecting the relevant fund manager's proprietary investment
strategy.
However, as demand for active ETFs has continued to grow both in
the US and Europe, the need to facilitate the semi-transparent
model of portfolio transparency which is usually comprised of
actively managed ETFs has also increased. At present, this demand
for actively managed ETFs is expected to be a key driver of assets
growth in the ETF market segment.
Today's update from the Central Bank is a further positive
development for ETF managers, particularly those with actively
managed ETFs following on from a Q&A update late last year in
which the Central Bank clarified that it was possible to have
listed share classes within a UCITS fund without the requirement to
redesignate as a "UCITS ETF".
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
