I was looking for something else on the Division of Investment Management’s (Division) website the other day and ran across a study of Prime MMFs’ Asset Composition and Asset Sales (the Study) released by its Analytics Office in June. Nothing indicates why the Study was prepared, but I hope it reflects an effort by the Division to better understand how prime institutional money market funds operate and the potential consequences of the proposal to require these funds to employ “swing pricing” whenever they have net redemptions. The Study supports my conclusion that this proposal would dilute redeeming shareholders rather than preventing dilution to remaining shareholders.

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. In this post, I consider the effects of swinging a price too frequently.

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.