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Alternative Market Briefing

SEC approves money market rules

Thursday, July 24, 2014

Bailey McCann, Opalesque New York:

Earlier this month, Opalesque reported on a potentially growing turf war between the SEC and FSOC. Part of that battle hinges on rules voted in by the SEC today. On a split vote, SEC Commissioners agreed to institute a floating NAV for certain money market funds. The new rules aren't as far reaching as FSOC desired, and are basically a give away to Charles Schwab which has been involved with the process throughout.

Provisions as decided would set up floating NAV's for money market funds that involve corporate debt or municipal securities. Another part of the rule would set up a gating system for redemptions from money market funds in the event of a big market swing to allow for a slower unwind on those funds. The rules essentially fall in line with what Wall Street wanted for them.

Each of the Commissioners that voted against had different reasons. Commissioner Stein voted against the proposed rule saying that sophisticated investors could use the provision that limits redemptions to front run sell-offs. Commissioner Piwowar also voted against although it seems that any rule would be over the line for him in this instance.

"Today’s reforms will fundamentally change the way that most money market funds operate. They will reduce the risk of runs in money market funds and provide important new tools that will help further protect investors and the financial system in a crisis," Chairwoman Mary Jo White said in her rema......................

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