money market funds

CFTC Announces Measures to Enhance Protection of Customer Funds


On August 8, 2016, the U.S. Commodity Futures Trading Commission (CFTC) announced three separate enhancements relating to the protection of customer funds. The new protections address the exemption of certain Federal Reserve Banks from liability under the Commodity Exchange Act, as well as the use of money market funds by derivatives clearing organizations and futures commission merchants. Press Release.

ECON Publishes Draft Report on MMF Regulation

On November 17, the European Parliament’s Committee on Economic and Monetary Affairs (ECON) published a draft report on the proposed Regulation on Money Market Funds (the MMF Regulation).

Money market funds are a type of investment fund that invests in short-term debt such as money market instruments issued by banks, governments and companies (MMFs).  If adopted, the MMF Regulation will introduce a general framework of requirements to enhance the liquidity and stability of MMF funds.

The draft report sets out suggested amendments to the European Commission’s original proposal and an explanatory statement. The statement comments that:

  • there is still significant scope for improvement relating to liquidity and maturity transformation and in making MMFs more stable;
  • a new category of EU government constant net assets value money market fund (CNAV MMF) should be established, which would invest a majority of assets into EU government debt; and
  • the net asset value of CNAVs should be subject to daily disclosure requirements, stress tests should take place on a quarterly basis and there should be stronger investor warnings.

The Parliament is scheduled to consider the MMF Regulation at its plenary session on March 25, 2015. Draft report.

ECB Opines on the Proposed Money Market Funds Regulation

On June 4,  the European Central Bank (ECB) published an opinion on the European Commission’s proposed regulation on Money Market Funds (MMF).  The MMF regulation, which is aimed at enhancing the liquidity and stability of MMF, is part of a wider effort to develop a regulatory framework for shadow banking entities, over which concerns have been growing in relation to financial stability.

In the opinion, the ECB makes supporting observations towards the proposed regulation in the following areas:

  • the interconnection of the regulation and the legal frameworks for undertakings for collective investment in transferable securities (UCITS) and alternative investment fund managers (AIFMs);
  • financial stability;
  • the constant net asset value of MMFs;
  • the provision of external support;
  • risk management of MMFs;
  • the role of MMFs in intermediation;
  • internal rating systems; and
  • reporting requirements for MMFs.

In addition to those observations, the ECB also suggests a number of technical amendments to the proposed regulation. Opinion.

Rating Agency Developments

On July 19, Moody’s issued its U.S. RMBS surveillance methodology.  Moody’s Report

On July 19, DBRS released its criteria for rating guarantees and other forms of explicit supportDBRS Report

On July 19, KBRA released its financial guaranty rating methodology.  KBRA Report

On July 19, Fitch released its national scale criteria for rating money market fundsFitch Report

On July 17, Fitch released its criteria for evaluating third-party partial credit guaranteesFitch Report

On July 16, Fitch released its criteria for rating U.S. RMBSFitch Report

Note: Free registration is required for rating agency releases and reports.

SEC Proposes Legislation to Reform Money Market Funds

Since the 2008 financial crisis, reforming money market funds has been the subject of high drama and intense scrutiny on Capitol Hill.  Advocates for reform finally got their long awaited breakthrough last Wednesday, June 5, when the Securities and Exchange Commission voted unanimously to propose legislation that would reform money market funds.  For more information and to visit our Securities Litigation blog, please click here.

Treasury Pushes for Money Market Fund Reforms

On September 27, Treasury sent a letter to the Financial Stability Oversight Council calling for structural reforms to the regulation of money market funds.  The letter, which relates to last month’s announcement by the SEC that it would not proceed with public comment on MMF reforms, requested that the FSOC solicit comments on certain MMF reforms and provide a recommendation to the SEC to adopt such standards.  Treasury Letter.

SEC Decides Not To Release Money Market Fund Reform Proposal

On August 22, the SEC announced that three of five Commissioners did not support a proposal to reform money market funds and the proposal will not move forward to publication for public comment.  The proposal was intended to address certain structural issues inherent to such funds and to disincentivize runs on the funds.  Statement of SEC Chairman.  Testimony of Witnesses.  

Rating Agency Developments

On April 8, Fitch published a report on its treatment of junior corporate debt In Europe. Fitch Release. Fitch Report.

On April 7, Fitch issued its U.S. Federal Family Education Loan Program (FFELP) student loan rating criteria. Fitch Release.

On April 4, Fitch updated its global rating criteria for money market funds. Fitch Release. Fitch Report.

On April 4, Fitch published its EMEA CMBS rating criteria and legal assumptions. Fitch Rating Criteria. Fitch Legal Assumptions.

Note: Free registration is required for Fitch releases and reports.

SEC Releases MMF Portfolio and “Shadow NAV” Information

On January 31, the SEC announced that investors can now access detailed information that money market funds file with the SEC on EDGAR, including investment information and the market-based price of its portfolio, known as its “shadow NAV” (net asset value) or mark-to-market valuation. SEC Release.