On July 23, the SEC adopted amendments to the rules that govern money market mutual funds. The new rules require a floating net asset value (NAV) for institutional prime money market funds to fluctuate, which allows the daily share prices of these funds to fluctuate along with changes in the market-based value of fund assets. This provides non-government money market fund boards with new tools— liquidity fees and redemption gates—to address the problem of investor runs. With a floating NAV, institutional prime money market funds are required to value their portfolio securities using market-based factors and sell and redeem shares based on a floating NAV. Release. Final Rule.
money market fund reform
NY Fed Releases Money Market Fund Reform Staff Report
On July 19, the NY Fed issued a staff report on money market fund reform to address the equitable distribution of withdrawals out of a distressed fund. Currently, fundholders who redeem early receive the full amount of their investments, leaving later redeemers to bear any losses. The report contains several proposals that would disincentivize runs on distressed funds. NY Fed Release. NY Fed Paper.