Money Market "Gates"

[imoldernu]

SEC ruling:
SEC's long path to money market fund reform ends in compromise | Reuters

A little involved, and not scheduled to take effect for 2 years, but a change that could limit accessibility to Money Market fund/accounts ($2.6 Trillion) in the case of a Lehman type market slide.

The Securities and Exchange Commission's rule garnered mixed reviews from the industry and even the SEC's own commissioners, with two voting against it.

The main pillar of the rule requires "prime" money funds used by institutional investors to float their values, instead of letting them maintain a stable value at $1 per share. The goal is to prevent investors from getting spooked by the prospect of funds breaking the buck, or their net asset value falling below $1 per share.

In addition, fund boards will have discretion to lower "gates" on redemptions, or charge fees of up to 2 percent if market stress causes a fund's weekly liquid assets to fall below 30 percent.

It appears that the original plan requiring capital "buffers" will not take place... will not take place on "retail" funds.

Bond market "gates" up next...