Wednesday, October 25, 2023

New Money Fund Reforms: Safer and More Resilient Cash Collateral Pools?

More liquidity, transparency, and safety for institutional investors?

Author: David Schwartz J.D. CPA

The Securities and Exchange Commission (SEC) recently adopted final rules on money market (2a-7) fund reforms. These reforms are designed to make money market funds more resilient and liquid, potentially making them safer and more attractive vehicles for mutual funds to use as collateral pools for their securities lending programs.

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Thursday, August 28, 2014

Could Redemption Gates Actually Encourage Runs on Funds?

Economists at the NY Fed posit that in some cases redemption gates may the have opposite effect intended

Author: David Schwartz J.D. CPA
Under rules recently finalized by the SEC, all money market funds will be permitted, and under some circumstances required, to impose liquidity fees and gates against investor redemptions if the fund’s weekly liquid assets fall below specified thresholds. In their release, the SEC said the purpose of these new rules is to mitigate money market funds’ susceptibility to heavy redemptions and improve their ability to manage and thwart possible contagion from redemptions.  An April 14, 2014 paper published by the the staff of the New York Fed, however, finds that in some cases the imposition of redemption gates may actually increase, rather than decrease, the possibility of runs on a fund.
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