The Securities and Exchange Commission today proposed new amendments intended to help improve the resilience and transparency of money market funds, following significant volatility seen in the early days of the COVID-19 crisis.
The proposed changes would: increase minimum liquidity requirements to provide a more substantial buffer in the event of rapid redemptions; remove the ability of money market funds to impose liquidity fees and redemption gates when they fall below certain liquidity thresholds, which would eliminate an incentive for preemptive redemptions; require certain money market funds to implement swing pricing so that redeeming investors bear the liquidity costs of their redemptions; and enhance certain reporting requirements to improve the SEC’s ability to monitor and analyze money market fund data. In a comment letter earlier this year, the American Bankers Association supported the elimination of the tie between liquidity thresholds and imposition of fees and gates on redemptions. ABA is reviewing the proposal as it considers further comments to the SEC.
“Together, these amendments are designed to reduce the likelihood of runs on money market funds during periods of stress,” said SEC Chairman Gary Gensler. “They also would equip funds to better meet large redemptions, addressing concerns about redemption costs and liquidity.”