The European Securities and Markets Authority (ESMA) will force hedge funds to verify their OTC derivatives transactions independently in a regulatory update.
The European regulator issued an update to its Q&A for UCITS and AIFMD directives.
In the publication, ESMA has stated that OTC derivatives subject to the European Market Infrastructure Regulation (EMIR) must have an independent verification of the value of the OTC derivatives transaction, even if it is centrally cleared.
It also states that the valuation provided by the central counterparty (CCP) can only be used as a reference point for the verification performed by either the UCITS or AIFMD management company.
Valuations are needed for funds to meet OTC derivatives reporting requirements set out in EMIR.
Hedge funds will need to independently verify OTC values
ESMA says funds will need to verify OTC valuations under UCITS and AIFMD directives.