07/17/2023
SEC’s new rules for Money Market Funds will help investors and the industry
As the world’s largest provider of institutional money market funds, J.P. Morgan Asset Management welcomes the new amendments to rules governing money market funds (MMFs) announced by the Securities and Exchange Commission (SEC) on July 12.
We believe these “Money Market Reform” changes will be helpful in making the nearly $6T MMF industry more resilient in a crisis, transparent to clients and regulators, and ultimately more sustainable.
We do not expect to see any material difference in yields for clients once the amended rules go into effect.
Under the new rules
All money market funds will be required to:
Institutional (prime and tax-exempt) money market funds will be required to:
Impose a mandatory liquidity fee on investors who seek to redeem when a fund’s daily net redemptions exceed 5% of its net assets—unless the fund's liquidity costs are negligible (“de minimus”).
Although this new redemption fee has received a great deal of press, the likelihood is remote as it will be triggered by all but the most extreme market circumstances.
Government, Treasury and retail money market funds:
Timetable for changes
The new rules become effective based on a tiered approach 60 days after publication in the Federal Register, which we expect may occur sometime in August.
From that date::
What this timing means for clients is that there is a nearly -immediate disconnection of fees and gates from specific liquidity thresholds. There also are [SRM(U1] about 14 months before the mandatory liquidity fee for institutional prime and tax-exempt money market funds will be implemented.
Backdrop for these new rules
The new final rule was adopted by a vote of 3 to 2 and were approved amendments to Rule 2A-7 and other rules that government MMF under the Investment Company Act of 1940.
They are designed to discourage runs and shield remaining shareholders from liquidity costs sparked by high redemption levels.
The SEC dropped a much-discussed proposal to impose "swing pricing" on institutional prime and institutional tax-exempt MMFs, which the industry argued would have made these funds unattractive to shareholders and created too-challenging operational complexities for funds.
We can help
Our firm remains committed to keeping you, our clients, informed. Please reach out to your JPMorgan Representative if you have any questions.