SEC proposal

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On November 2, 2022, the SEC proposed wide-ranging changes to how open-end investment companies (other than exchange traded funds and money market funds, “Funds”) process and price shareholder transactions and manage their corresponding liquidity risks (the “Proposal”). This post attempts to summarize key elements of the Proposal as a precursor to our analysis of its merits. “Attempts” is the apt term, as the Proposal would involve substantial revisions to multiple rules and disclosure forms, which makes organizing our summary a challenge.…

While working out the possible impact of the SEC’s proposal to require central clearing of triparty repurchase agreements, we realized that we short-changed the analysis of multilateral netting in our last post. Our explanation of the SEC’s example focused on just the cash side of the trades, which is to say the amounts to be paid. To appreciate multilateral netting fully, we need to consider the security side of the trades, what is to be delivered, as well. This post seeks to rectify our oversight.

Our previous post explained the SEC’s proposal (the Proposal) to require central clearing of all “eligible secondary market transactions” with a participant in the Fixed Income Clearing Corporation (FICC). In this post we review the benefits of central clearing cited by the SEC to justify its Proposal. We also discuss “hybrid clearing” and “multilateral netting.”…

On September 14, 2022, the SEC proposed amendments (the Proposal) to regulations for clearing agencies under the Securities Exchange Act of 1934 (the Exchange Act). The Proposal would increase the central clearing of U.S. Treasury securities, to be defined as “any security issued by the U.S. Department of the Treasury.” According to the SEC’s press release, “the proposal would require that clearing agencies in the U.S. Treasury market adopt policies and procedures designed to require their members to submit for clearing certain specified secondary market transactions.”…

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.…

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.…

On Monday, the SEC announced its much anticipated proposal on climate-related disclosure for public companies. As our colleague Allison Handy explains in her Public Chatter blog, the proposal would require disclosure on climate-related risks financial statement metrics, including information on greenhouse gas emissions, weather-related and other natural events, operational resilience, and the company’s climate-related transition…

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.…