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”.
