US money market fund regulation: the market reacts

Author: Zoe Thomas | Published: 1 Oct 2013
  • Regulatory changes to prime money market funds could result in a flight to alternative products including government funds and bank accounts;
  • A move away from a stable one dollar net asset value (NAV) to a floating NAV has raised concern among institutional investors. Retail investors are concerned over the possible implantations of liquidity fees and gates;
  • Municipal funds will not be excluded from the floating NAV, causing some to question the product’s ability to attract investors and raise capital.

US market participants are concerned that proposed changes to the way money market funds (MMF) are regulated could significantly disrupt the market and cause a flight to other products, including bank accounts and government treasury MMFs.

The US Security and Exchange Commission’s (SEC’s) comment period for proposed MMF regulations closed on September 17.

While industry players with large investor bases have generally supported a liquidity fees and gates regulation, those...