Article 19 (1) of the UCITS Directive requires that (with some exception) the investments of a UCITS into transferable securities must consist solely of transferable securities admitted to or dealt in on

• a “Regulated Market” within the meaning of Article 1(13) of the ISD (now MiFID) and/or

• another regulated market in a EEA Member State which operates regularly and is recognized and open to the public.

• another regulated market in a non-Member State which operates regularly and is recognised and open to the public provided that the choice of stock exchange or market has been approved by the competent authorities or is provided for in law or the fund rules or the investment company's instrument of incorporation.

The ISD has now been superceded by MiFID and the references should now be taken to mean reference to MiFID Regulated Markets. The list of MiFID Regulated Markets can be found by clicking here within our site, at the European Commission's website or on the CESR MiFID Website. For more on MiFID and markets, click here.

The impact in practice is that Managers can assume that MiFID "Regulated Markets" are acceptable UCITS Eligible Markets but that for other Markets, including other EEA Markets, Managers need to perform detailed analysis of whether the Markets are "regulated", "operate regularly", are "recognised" and are "open to the public" - further definition of each of these terms can be found in MiFID Title III. Managers will need to consider matters such as:

• Requirements in respect of trading, clearing and settlement arrangements

• Whether the market / exchange has regular trading hours
• The availability and timing of price and volume information and the way it is distributed
• The degree and speed with which companies listed on the market must release price sensitive information
• An assessment of whether there is adequate liquidity in the market; and
• The adequacy of arrangements in respect of repatriation of capital and income

All of these issues are considered in the Funds-Axis eligible market reviews. Click here for details of our service.

EEA Regulated Markets

Managers do need to be careful to note that not all EEA Markets will be "Regulated Markets".  Indeed a distinction needs to be understood between Stock Exchanges and Markets and Market Segments. For example, the London Stock Exchange is a corporate body which has a number of different markets / market segments; some of these markets / segments are "Regulated Markets, others are not. We need to look and assess the individual markets rather than simply identifying the Stock Exchange .