The Securiꦦties and Exchange Commission (SEC), seeking to strengthen financial market safeguards, adopted sweeping reforms governing the $6 trillion money market fund industry on Wednesday.

However, the reforms did not include a controversial "swing pricing" mechanism that the SEC initially proposed—and the asset management industry ardently opposed.

Two years ago, the SEC began considering ways to protect institutional money market funds in the event of overwhelming outflows, as they faced at the start of the Covid-19 pandemic. The regulator imposed similar rules to shore up liquidity after the 2008 global financial crisis.

The changes approved raise minimum liquidity requirements so 澳洲幸运5官方开奖结果体彩网:money market funds have a larger cushion to meet redemption requests amid financial market turbulence. They also eliminate a current rule that allows funds to suspend redemptions temporarily.

Meanwhile, the SEC now will force money market investors who withdraw funds to pay a mandatory liquidity fee when a fund's daily redemptions exceed 5% of its assets.

Fixing "Structural Liquidity Mismatch"

SEC chairman Gary Gensler said the reforms will enhance liquidity and transparency for money market funds, which he says face a "structural liquidity mismatch."

That mismatch stems from the ability of investors to withdraw ෴funds on a daily basis, whereas funds typically maintain some of their assets in securities with less liquidity.

The reforms will require funds to keep 25% of their assets in securities they can liquidate on a daily basis and 50% of assets in securities they can liquidate in a week.

Funds also currently can charge invesꦫtors a fee when weekly assets dip below an established liquidity threshold. Moving forward, the SEC will prohibit such fees ma🏅ndating withdrawal fees only when redemptions spike.

What Is Swing Pricing and Why Was It Opposed?

The new fee approach, aimed at discour✅aging investors from laꦆrge redemptions, replaces the so-called swing pricing plan the SEC initially proposed in December 2021.

Swing pricing would have mandated an adjustment in the fund's 澳洲幸运5官方开奖结果体彩网:net asset value (NAV) in a manner that essentially shifted the costs of withdrawals in high-redemption periods to all fund shareholders.

Asset managers vociferously opposed swing pricing, and several key investment industry groups filed objections to the initial swing pricing proposal.

"Based upon public feedback, today's final rules will require liquidity fees instead of the originally proposed swing pricing requirement," Gensler said. "I believe that liquidity fees, compared with swing pricing, offer many of the same benefits and fewer of the operational burdens."

Ho♌wever, many who opposed swing pricing viewed the approved mandatory fee alternative as simply a lesser of two evils.

The Investment Company Institute said the SEC's fee approach "missed the mark." Hester Peirce, a Republican SEC commissioner noted the elimination of swing pricing was a broad consensus, but said a "regulatory, one-size-fits-all" may not be the best way forward. She proposed letting the funds decide the approach to levying redemption costs.

The new rules won't take effect immediately. Asset managers will have a one-year implementation period to begin applying the mandatory liquidity fees, with certain minor changes to reporting forms taking effect in mid-2024.