Circular CSSF 26/910
Executive Summary
Circular CSSF 26/910 announces the CSSF's application of ESMA Guidelines on Liquidity Management Tools (LMTs) for UCITS and open-ended AIFs, establishing standards for selecting, calibrating, and using LMTs to manage liquidity risks and mitigate financial stability threats. This matters for Luxembourg investment fund managers (IFMs) as it enforces uniform EU-wide supervisory practices under UCITS Directive Article 18a(2) and AIFMD Articles 16(2b)/(2c), holding IFMs primarily accountable for liquidity risk oversight. #
What Changed
- - Adoption of ESMA Guidelines: CSSF formally applies ESMA's guidelines (ESMA34-671404336-1364), focusing on LMT selection (e.g., redemption gates, suspension of redemptions/dealings, side pockets), calibration of anti-dilution tools (ADTs like redemp
- Calibration Requirements: IFMs must demonstrate fair and reasonable ADT calibration for normal and stressed conditions, including explicit transaction costs and, where appropriate, estimated implicit costs (e.g., market impact from prior transactions
- LMT Recommendations: IFMs should select at least one quantitative-based LMT, one ADT, one for normal conditions, and one for stressed conditions; consider additional measures.
- Scope Expansion Recommendation: Open-ended SIFs (not under Part II of the 2010 Law) should consider the circular alongside Commission Delegated Regulation (EU) 2026/465.
Suggested Considerations
- Review and Update Policies: IFMs must select, calibrate, activate/deactivate LMTs per ESMA guidelines, documenting fair/reasonable ADT calibration (e.g., transaction costs, market impact analysis).
- Demonstrate Compliance: Be prepared to show regulators liquidity risk management, including at least one quantitative LMT, one ADT, and condition-specific tools; integrate with UCITS/AIFMD requirements.
- Risk Management Integration: Ensure primary responsibility for LMTs, with consistent supervisory application; open-ended SIFs to cross-reference with (EU) 2026/465.
- Supervisory Preparedness: Maintain records of previous transactions for market impact estimation and overall LMT rationale.
Key Dates
Compliance Impact
Urgency: High – Published today (15 April 2026), this imposes immediate supervisory expectations on liquidity risk management for Luxembourg's dominant fund sector, where non-compliance risks enforcement under UCITS/AIFMD. IFMs must promptly review LMT frameworks to avoid supervisory scrutiny, especially amid potential market stress.
Who is Affected
References
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Summary
ESMA Guidelines on Liquidity Management Tools (LMTs) of UCITS and open-ended AIFs (ESMA34-671404336-1364)