In November 2021, the European Securities and Markets Authority (ESMA) published a consultation on its report on highly liquid financial instruments with regards to the investment policy of central counterparties. In this consultation, ESMA reviews whether the current, fairly restrictive list of investment options for central counterparties (CCPs) should be extended. The report contains a very thorough analysis of regulation and CCP practices in other jurisdictions and proposes some extension of the range of investments available to a CCP, for instance debt issued by the EU but also consults about including corporate debt. On money market funds, ESMA is more careful and proposes for now not to allow these funds.
ISDA members are very supportive of some of the extension of investments available to the CCP and propose to be less prescriptive but to give the CCP and its governance forums including supervisors more leeway. In the response, we also support the inclusion of public debt constant net asset value money market funds, which had significant inflows during the crisis in 2020.