Regulation (EU) 2017/1131 of the European Parliament and of the Council of 14 June 2017 on money market funds (Text with EEA relevance. )

CHAPTER I

General provisions

Article 1

Subject matter and scope

This Regulation applies to collective investment undertakings that:

(a) require authorisation as UCITS or are authorised as UCITS under Directive 2009/65/EC or are AIFs under Directive 2011/61/EU;

(b) invest in short-term assets; and

(c) have distinct or cumulative objectives offering returns in line with money market rates or preserving the value of the investment.

Article 2

Definitions

For the purposes of this Regulation, the following definitions apply:

(1) ‘short-term assets’ means financial assets with a residual maturity not exceeding 2 years;

(2) ‘money market instruments’ means money market instruments as defined in Article 2(1)(o) of Directive 2009/65/EC, and instruments as referred to in Article 3 of Commission Directive 2007/16/EC (¹);

(3) ‘transferable securities’ means transferable securities as defined in Article 2(1)(n) of Directive 2009/65/EC, and instruments as referred to in Article 2(1) of Directive 2007/16/EC;

(4) ‘repurchase agreement’ means any agreement in which one party transfers securities or any rights related to that title to a counterparty, subject to a commitment to repurchase them at a specified price on a future date specified or to be specified;

(5) ‘reverse repurchase agreement’ means any agreement in which one party receives securities, or any rights related to a title or security from a counterparty subject to a commitment to sell them back at a specified price on a future date specified or to be specified;

(6) ‘securities lending’ and ‘securities borrowing’ mean any transaction in which an institution or its counterparty transfers securities subject to a commitment that the borrower will return equivalent securities at some future date or when requested to do so by the transferor, that transaction being known as ‘securities lending’ for the institution transferring the securities and being known as ‘securities borrowing’ for the institution to which they are transferred;

(7) ‘securitisation’ means securitisation as defined in Article 4(1)(61) of Regulation (EU) No 575/2013;

(8) ‘mark-to-market’ means the valuation of positions at readily available close out prices that are sourced independently, including exchange prices, screen prices, or quotes from several independent reputable brokers;

(9) ‘mark-to-model’ means any valuation which is benchmarked, extrapolated or otherwise calculated from one or more market input;

(10) ‘amortised cost method’ means a valuation method which takes the acquisition cost of an asset and adjusts that value for amortisation of premiums or discounts until maturity;

(11) ‘public debt constant net asset value MMF’ or ‘public debt CNAV MMF’ means an MMF: (a) that seeks to maintain an unchanging net asset value (NAV) per unit or share; (b) where the income in the fund is accrued daily and can either be paid out to the investor or used to purchase more units or shares in the fund; (c) where assets are generally valued according to the amortised cost method and where the NAV is rounded to the nearest percentage point or its equivalent in currency terms; and (d) that invests at least 99,5 % of its assets in instruments referred to in Article 17(7), reverse repurchase agreements secured with government debt referred to in Article 17(7) and in cash;

(12) ‘low volatility net asset value MMF’ or ‘LVNAV MMF’ means an MMF that complies with the specific requirements laid down in Articles 29, 30 and 32 and in Article 33(2)(b);

(13) ‘variable net asset value MMF’ or ‘VNAV MMF’ means an MMF that complies with the specific requirements laid down in Articles 29 and 30 and in Article 33(1);

(14) ‘short-term MMF’ means an MMF that invests in eligible money market instruments referred to in Article 10(1) and is subject to the portfolio rules set out in Article 24;

(15) ‘standard MMF’ means an MMF that invests in eligible money market instruments referred to in Article 10(1) and (2) and is subject to the portfolio rules set out in Article 25;

(16) ‘credit institution’ means credit institution as defined in point (1) of Article 4(1) of Regulation (EU) No 575/2013;

(17) ‘competent authority of the MMF’ means: (a) for UCITS, the competent authority of the UCITS home Member State designated in accordance with Article 97 of Directive 2009/65/EC; (b) for EU AIFs, the competent authority of the home Member State of the AIF as defined in Article 4(1)(p) of Directive 2011/61/EU; (c) for non-EU AIFs, any of the following: (i) the competent authority of the Member State where the non-EU AIF is marketed in the Union without a passport; (ii) the competent authority of the EU AIFM managing the non-EU AIF, where the non-EU AIF is marketed in the Union with a passport or is not marketed in the Union; (iii) the competent authority of the Member State of reference if the non-EU AIF is not managed by an EU AIFM and is marketed in the Union with a passport;

(18) ‘legal maturity’ means the date when the principal of a security is to be repaid in full and which is not subject to any optionality;

(19) ‘weighted average maturity’ or ‘WAM’ means the average length of time to legal maturity or, if shorter, to the next interest rate reset to a money market rate, of all of the underlying assets in the MMF reflecting the relative holdings in each asset;

(20) ‘weighted average life’ or ‘WAL’ means the average length of time to legal maturity of all of the underlying assets in the MMF reflecting the relative holdings in each asset;

(21) ‘residual maturity’ means the length of time remaining until the legal maturity of a security;

(22) ‘short sale’ means any sale by an MMF of an instrument which the MMF does not own at the time of entering into the agreement to sell, including such sale where, at the time of entering into the agreement to sell, the MMF has borrowed or agreed to borrow the instrument for delivery at settlement, not including: (a) a sale by either party under a repurchase agreement where one party has agreed to sell to the other a security at a specified price with a commitment from the other party to sell the security back at a later date at another specified price; or (b) an entry into a futures contract or other derivative contract where it is agreed to sell securities at a specified price at a future date;

(23) ‘manager of an MMF’ means, in the case of an MMF that is a UCITS, the UCITS management company, or the UCITS investment company in the case of a self-managed UCITS, and, in the case of an MMF that is an AIF, an AIFM or an internally-managed AIF;

(24) ‘CCP’ means a CCP as defined in Article 2, point (1), of Regulation (EU) No 648/2012 of the European Parliament and of the Council (²).

Article 3

Types of MMFs

MMFs shall be set up as one of the following types:

(a) a VNAV MMF;

(b) a public debt CNAV MMF;

(c) a LVNAV MMF.

Article 4

Authorisation of MMFs

Such authorisation shall be valid for all Member States.

Where a collective investment undertaking has already been authorised as a UCITS under Directive 2009/65/EC, it may apply for authorisation as an MMF in accordance with the procedure set out in paragraphs 4 and 5 of this Article.

For the purposes of authorisation as an MMF, a collective investment undertaking shall submit to its competent authority all of the following documents:

(a) the fund rules or instruments of incorporation of the MMF, including an indication of which type of MMF it is from those set out in Article 3(1);

(b) identification of the manager of the MMF;

(c) identification of the depositary;

(d) a description of, or any information on, the MMF available to investors;

(e) a description of, or any information on, the arrangements and procedures needed to comply with the requirements referred to in Chapters II to VII;

(f) any other information or document requested by the competent authority of the MMF to verify compliance with the requirements of this Regulation.

Article 5

Procedure for authorising MMFs that are AIFs

When submitting the application for managing an MMF that is an AIF, the authorised AIFM shall provide the competent authority of the MMF with:

(a) the written agreement with the depositary;

(b) information on delegation arrangements regarding portfolio and risk management and administration with regard to the AIF;

(c) information about the investment strategies, the risk profile and other characteristics of MMFs that are AIFs that the AIFM manages or intends to manage.

The competent authority of the MMF may ask the competent authority of the AIFM for clarification and information concerning the documentation referred to in the first subparagraph or an attestation as to whether MMFs fall within the scope of the AIFM's management authorisation. The competent authority of the AIFM shall respond within 10 working days of such request.

The competent authority of the MMF shall refuse the application of the AIFM only in the event that any of the following applies:

(a) the AIFM does not comply with this Regulation;

(b) the AIFM does not comply with Directive 2011/61/EU;

(c) the AIFM is not authorised by its competent authority to manage MMFs;

(d) the AIFM has not provided the documentation referred to in paragraph 2.

Before refusing an application, the competent authority of the MMF shall consult the competent authority of the AIFM.

Article 6

Use of designation as MMF

A UCITS or an AIF shall not use a misleading or inaccurate designation which would suggest it is an MMF, unless it has been authorised as an MMF in accordance with this Regulation.

A UCITS or an AIF shall not have characteristics which are substantially similar to those referred to in Article 1(1), unless it has been authorised as an MMF in accordance with this Regulation.

Article 7

Applicable rules

CHAPTER II

Obligations concerning the investment policies of MMFs

Section I

General rules and eligible assets

Article 8

General principles

Article 9

Eligible assets

An MMF shall invest only in one or more of the following categories of financial assets and only under the conditions specified in this Regulation:

(a) money market instruments including financial instruments issued or guaranteed separately or jointly by the Union, the national, regional and local administrations of the Member States or their central banks, the European Central Bank, the European Investment Bank, the European Investment Fund, the European Stability Mechanism, the European Financial Stability Facility, a central authority or central bank of a third country, the International Monetary Fund, the International Bank for Reconstruction and Development, the Council of Europe Development Bank, the European Bank for Reconstruction and Development, the Bank for International Settlements or any other relevant international financial institution or organisation to which one or more Member States belong;

(b) eligible securitisations and asset-backed commercial paper (ABCPs);

(c) deposits with credit institutions;

(d) financial derivative instruments;

(e) repurchase agreements that fulfil the conditions set out in Article 14;

(f) reverse repurchase agreements that fulfil the conditions set out in Article 15;

(g) units or shares of other MMFs.

An MMF shall not undertake any of the following activities:

(a) investing in assets other than those referred to in paragraph 1;

(b) short sale of any of the following instruments: money market instruments, securitisations, ABCPs and units or shares of other MMFs;

(c) taking direct or indirect exposure to equity or commodities, including via derivatives, certificates representing them, indices based on them, or any other means or instrument that would give an exposure to them;

(d) entering into securities lending agreements or securities borrowing agreements, or any other agreement that would encumber the assets of the MMF;

(e) borrowing and lending cash.

Article 10

Eligible money market instruments

A money market instrument shall be eligible for investment by an MMF provided that it fulfils all of the following requirements:

(a) it falls within one of the categories of money market instruments referred to in point (a), (b), (c) or (h) of Article 50(1) of Directive 2009/65/EC;

(b) it displays one of the following alternative characteristics: (i) it has a legal maturity at issuance of 397 days or less; (ii) it has a residual maturity of 397 days or less;

(c) the issuer of the money market instrument and the quality of the money market instrument have received a favourable assessment pursuant to Articles 19 to 22;

(d) where an MMF invests in a securitisation or ABCP, it is subject to the requirements laid down in Article 11.

Article 11

Eligible securitisations and ABCPs

Both a securitisation and an ABCP shall be considered to be eligible for investment by an MMF provided that the securitisation or ABCP is sufficiently liquid, has received a favourable assessment pursuant to Articles 19 to 22, and is any of the following:

(a) a securitisation referred to in Article 13 of Commission Delegated Regulation (EU) 2015/61 (³);

(b) an ABCP issued by an ABCP programme which: (i) is fully supported by a regulated credit institution that covers all liquidity, credit and material dilution risks, as well as ongoing transaction costs and ongoing programme-wide costs related to the ABCP, if necessary to guarantee the investor the full payment of any amount under the ABCP; (ii) is not a re-securitisation and the exposures underlying the securitisation at the level of each ABCP transaction do not include any securitisation position; (iii) does not include a synthetic securitisation as defined in point (11) of Article 242 of Regulation (EU) No 575/2013;

(c) a simple, transparent and standardised (STS) securitisation, as determined in accordance with the criteria and conditions laid down in Articles 20, 21 and 22 of Regulation (EU) 2017/2402 of the European Parliament and of the Council (⁴), or an STS ABCP, as determined in accordance with the criteria and conditions laid down in Articles 24, 25 and 26 of that Regulation.

A short-term MMF may invest in the securitisations or ABCPs referred to in paragraph 1 provided any of the following conditions is fulfilled, as applicable:

(a) the legal maturity at issuance of the securitisations referred to in point (a) of paragraph 1 is 2 years or less and the time remaining until the next interest rate reset date is 397 days or less;

(b) the legal maturity at issuance or residual maturity of the securitisations or ABCPs referred to in points (b) and (c) of paragraph 1 is 397 days or less;

(c) the securitisations referred to in points (a) and (c) of paragraph 1 are amortising instruments and have a WAL of 2 years or less.

A standard MMF may invest in the securitisations or ABCPs referred to in paragraph 1 provided any of the following conditions is fulfilled, as applicable:

(a) the legal maturity at issuance or residual maturity of the securitisations and ABCPs referred to in points (a), (b) and (c) of paragraph 1 is 2 years or less and the time remaining until the next interest rate reset date is 397 days or less;

(b) the securitisations referred to in points (a) and (c) of paragraph 1 are amortising instruments and have a WAL of 2 years or less.

For the purposes of the first subparagraph, the criteria identifying STS securitisations and ABCPs shall include at least the following:

(a) requirements relating to the simplicity of the securitisation, including its true sale character and the respect of standards relating to the underwriting of the exposures;

(b) requirements relating to standardisation of the securitisation, including risk retention requirements;

(c) requirements relating to the transparency of the securitisation, including the provision of information to potential investors;

(d) for ABCPs, in addition to points (a), (b) and (c), requirements relating to the sponsor and to the sponsor support of the ABCP programme.

Article 12

Eligible deposits with credit institutions

A deposit with a credit institution shall be eligible for investment by an MMF provided that all of the following conditions are fulfilled:

(a) the deposit is repayable on demand or is able to be withdrawn at any time;

(b) the deposit matures in no more than 12 months;

(c) the credit institution has its registered office in a Member State or, where the credit institution has its registered office in a third country, it is subject to prudential rules considered equivalent to those laid down in Union law in accordance with the procedure laid down in Article 107(4) of Regulation (EU) No 575/2013.

Article 13

Eligible financial derivative instruments

A financial derivative instrument shall be eligible for investment by an MMF provided it is dealt in on a regulated market as referred to in point (a), (b) or (c) of Article 50(1) of Directive 2009/65/EC or OTC and provided that all of the following conditions are fulfilled:

(a) the underlying of the derivative instrument consists of interest rates, foreign exchange rates, currencies or indices representing one of those categories;

(b) the derivative instrument serves only the purpose of hedging the interest rate or exchange rate risks inherent in other investments of the MMF;

(c) the counterparties to OTC derivative transactions are institutions subject to prudential regulation and supervision and belonging to the categories approved by the competent authority of the MMF;

(d) the OTC derivatives are subject to reliable and verifiable valuation on a daily basis and can be sold, liquidated or closed by an offsetting transaction at any time at their fair value at the MMF's initiative.

Article 14

Eligible repurchase agreements

A repurchase agreement shall be eligible to be entered into by an MMF provided that all of the following conditions are fulfilled:

(a) it is used on a temporary basis, for no more than seven working days, only for liquidity management purposes and not for investment purposes other than as referred to in point (c);

(b) the counterparty receiving assets transferred by the MMF as collateral under the repurchase agreement is prohibited from selling, investing, pledging or otherwise transferring those assets without the MMF's prior consent;

(c) the cash received by the MMF as part of the repurchase agreement is able to be: (i) placed on deposits in accordance with point (f) of Article 50(1) of Directive 2009/65/EC; or (ii) invested in assets referred to in Article 15(6), but shall not otherwise be invested in eligible assets as referred to in Article 9, transferred or otherwise reused;