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This continues my series of posts on the SEC’s proposal to require money market funds with floating net asset values (“institutional money funds”) to implement swing pricing during any pricing period in which the fund has net redemptions. Having surveyed how institutional money funds are supposed to determine swing prices under the proposal, I am turning to when swing pricing would be required. First, I want to consider a unique feature of institutional money funds, namely that many funds calculate a floating net asset value per share (“NAV”) more than once a day. The proposed amendments would define the time from the calculation of one NAV to the next as a “pricing period.” Pricing periods pose two conflicting problems for swing pricing.…

This continues my series of posts on the SEC’s proposal to require money market funds with floating net asset values (“institutional money funds”) to implement swing pricing during any pricing period in which the fund has net redemptions. Having address the estimated costs that institutional money funds must always include in their swing price, this post considers the “market impact factor” to be included when net redemptions exceed the market impact threshold. I suspect the SEC underestimated the difficulty of estimating market impact factors.…

This is another in my series of posts on the SEC’s proposal to require that money market funds with floating net asset values (“institutional money funds”) implement swing pricing during any pricing period in which the fund has net redemptions. This post continues the analysis of the estimated costs that an institutional money fund “must include, for each security in the fund’s portfolio” when determining any swing price. These costs are:

  • Spread costs,
  • Brokerage commissions,
  • Custody fees, and
  • Any other charges, fees, and taxes associated with portfolio security sales.

I cannot tell what this last bullet might include, so I will discuss two expenses that should not be included.…

This is another in my series of posts on the SEC’s proposal to require money market funds with floating net asset values (“institutional money funds”) to implement swing pricing during any pricing period in which the fund has net redemptions. This post continues the analysis of the estimated costs that an institutional money fund “must include, for each security in the fund’s portfolio” when determining any swing price. These costs are:

  • Spread costs,
  • Brokerage commissions,
  • Custody fees, and
  • Any other charges, fees, and taxes associated with portfolio security sales.

This post considers custody fees.…

This post begins a detailed consideration of the SEC’s proposal to require money market funds with floating net asset values (“institutional money funds”) to implement swing pricing during any pricing period in which the fund has net redemptions. I begin with the estimated costs that an institutional money fund “must include for each security in the fund’s portfolio” when determining any swing price, namely:

  • spread costs,
  • brokerage commissions,
  • custody fees, and
  • any other charges, fees, and taxes associated with portfolio security sales.

This post considers spread costs and brokerage commissions.…

This is the fifth in my series of posts analyzing the SEC’s recent proposal to require money market funds with floating share prices (“institutional money funds”) to implement “swing pricing” for pricing periods in which the fund has net redemptions. This post completes the illustration from my last two posts and examines the impact of swing pricing on the fund and its shareholders.…

This is the fourth in my series of posts analyzing the SEC’s recent proposal to require money market funds with floating share prices (“institutional money funds”) to implement “swing pricing” for pricing periods in which the fund has net redemptions. This post continues the example from the previous post to illustrate how the proposal would address net redemptions exceeding the market impact threshold.…

This is the third in my series of posts analyzing the SEC’s recent proposal to require money market funds with floating share prices (“institutional money funds”) to implement “swing pricing” for pricing periods in which the fund has net redemptions. This post illustrates how the proposal would operate when market impact factors are not required. Readers should refer to the first post for an explanation of the proposed swing pricing process and the second post for an explanation of how a swing price should be calculated.…

This is my second attempt at the second in my series of posts analyzing the SEC’s recent proposal to require money market funds with floating share prices (“institutional money funds”) to implement “swing pricing” for pricing periods in which the fund has net redemptions. I removed some earlier posts because I am less sure how to interpret the proposed definition of a “swing factor.” This post explores the disparity between the proposed definition of a “swing factor” and the discussion of swing pricing in the proposing release.…

On December 15, 2021, the SEC proposed amendments to the regulation (Rule 2a-7) governing money market funds.

The proposed amendments are intended to reduce run risk, mitigate the liquidity externalities transacting investors impose on non-transacting investors, and enhance the resilience of money market funds.”

The proposing release has not yet been published in the Federal Register, so we do not know when the sixty-day comment period will begin.

The most significant proposals would (1) eliminate the power of a money market fund’s board of directors or trustees (its “Board”) to temporarily suspend, or impose liquidity fees on, redemptions and (2) require money market funds with fluctuating net asset values per share (known as “institutional money funds”) to implement “swing pricing.” This post explains this swing pricing proposal.…