Central Bank to move on UCITS ETF Naming Requirement

In a speech published on the Central Bank website¹ on 24 October 2024, Deputy Governor Derville Rowland confirmed that the Central Bank is in the process of converging its regulatory approach with other European regulators with respect to the use of the “UCITS ETF” identifier at the share class level.

Under the current Central Bank UCITS rules and ESMA Guidelines on ETFs and other UCITS issues [ESMA/2014/937/EN]², a UCITS ETF is defined as a UCITS at least one unit or share class of which is traded throughout the day on at least one regulated market or multilateral trading facility with at least one market maker which takes action to ensure that the stock exchange value of its units does not vary significantly from its net asset value and where applicable from its indicative net asset value. A UCITS ETF must use the “UCITS ETF” identifier in its constitutional document, prospectus, KIID / KID and marketing communications.

The Central Bank, up until this point, has interpreted the identifier requirements as applying at the level of the sub-fund where that sub-fund has at least one unit or share class which is exchange traded. Other European regulators, such as the Commission de Surveillance du Secteur Financier in Luxembourg, have taken a broader interpretation of the ESMA Guidelines by allowing the UCITS ETF identifier to be used at the share class level where a sub-fund encompasses both exchanged traded and non-exchange traded share classes.

The Central Bank’s confirmation of a change in this approach clears the path for asset managers to create an ETF share class in their existing Irish mutual funds by meeting the ETF identifier requirements at the share class level only. This welcome move closes the existing regulatory divergence across European fund domiciles and provides greater clarity for asset managers and investors.

An updated Central Bank UCITS Q&A is expected to be issued shortly to clarify this new position.