Money Market Fund Reform Package
Floating NAV – Under the floating NAV amendments, institutional prime money market funds would be required to transact at a floating NAV, instead of at a $1.00 stable share price. The floating NAV amendments are designed to reduce the first mover advantage inherent in a stable NAV fund, by dis-incentivizing redemption activity that can result from investors attempting to exploit the possibility of redeeming shares at the stable share price even if the portfolio has suffered a loss. They are also intended to reduce the chance of unfair investor dilution and make it more transparent to certain of the impacted investors that they, and not the fund sponsors or the Federal government, bear the risk of loss.
Floating the NAV – Institutional prime money market funds would no longer be able to use amortized cost to value their portfolio securities. Daily share prices of these money market funds would fluctuate along with changes in the market-based value of their portfolio securities.
https://www.sec.gov/News/PressRelease/Detail/PressRelease/1370542347679
Liquidity Fees and Redemption Gates – The SEC would adopt a new liquidity fees and gates regime to give fund boards a new tool to directly address runs.
•Liquidity Fees – Under the rules, if a money market fund’s level of “weekly liquid assets” falls below 30 percent of its total assets (the regulatory minimum), the money market fund’s board would be allowed to impose a liquidity fee of up to two percent on all redemptions. Such a fee could be imposed only if the money market fund’s board of directors determines that such a fee is in the best interests of the fund. If a money market fund’s level of weekly liquid assets falls below 10 percent, the money market fund would be required to impose a liquidity fee of one percent on all redemptions. However, such a fee would not be imposed if the fund’s board of directors determines that such a fee is not in the best interests of the fund or that a lower or higher (up to two percent) liquidity fee is in the best interests of the fund. Weekly liquid assets generally include cash, U.S. Treasury securities, certain other government securities with remaining maturities of 60 days or less, and securities that convert into cash within one week.
•Redemption Gates – Under the rules, if a money market fund’s level of weekly liquid assets falls below 30 percent, a money market fund’s board could in its discretion temporarily suspend redemptions (gate). To impose a gate, the board of directors would find that imposing a gate is in the money market fund’s best interests. A money market fund that imposes a gate would be required to lift that gate within 10 business days, although the board of directors could determine to lift the gate earlier. Money market funds would not be able to impose a gate for more than 10 business days in any 90-day period.
•Prompt Public Disclosure – Money market funds would be required to promptly and publicly disclose instances in which the fund’s level of weekly liquid assets falls below the 10 percent threshold and the imposition and removal of any liquidity fee or gate.
•Government Money Market Funds – Government money market funds would not be subject to the new fees and gates provisions. However, under the proposed rules, these funds could voluntarily opt into them, if previously disclosed to investors.
•
>>>>
This was prompted by that letter from Vanguard.
If I understand what I think I'm reading . . .
the half wits think forcing the NAV's of money markets
to 'float' will disencentivize 'some' from trying
to sell early on market volativity . . .
In my opinion, with the money market NAV fixed at
one dollar, there would be little incentive for
pulling out (unless things went very very badly . ..)
But if the M.M. NAV floats . . . if I thought it was
gonna float downwards I'd be tempted to try to get
out early . . . or, worse, we will have Micro-1's
Algo's trying to get the NAV's to bounce in a semi-
predictable manner so's they can make money off them.
Zim.
Mad Poet Strikes Again.
| 
