SEC's New Money Market Fund Rules
Jul 14, 2023

If your business uses money market funds to manage cash, it's crucial to understand the recent changes by the Securities and Exchange Commission (SEC). These new rules aim to enhance the resilience and transparency of money market funds, but they could also impact how businesses manage their investments.
Critical Changes to Money Market Fund Rules
Increased Liquid Asset Requirements:
The SEC now requires money market funds to hold at least 25% of their daily liquid assets and 50% in weekly liquid assets. This change is designed to help funds manage rapid investor redemptions during market stress.
Removal of Temporary Redemption Gates:
Funds can no longer impose temporary redemption gates, which previously restricted investors from redeeming shares. This aims to reduce the risk of investor runs during stressed market conditions.
Mandatory Liquidity Fees:
Institutional prime and tax-exempt money market funds must impose liquidity fees on redeemed shares when daily net redemptions exceed 5% of a fund's net assets unless costs are minimal. This change is intended to allocate redemption costs more fairly.
Potential Impacts on Your Business
Lower Yields:
With increased liquidity requirements, funds may lower yields to cover costs, potentially reducing returns for your business.
Higher Fees:
Introducing mandatory liquidity fees could lead to higher costs, further impacting returns.
Reduced Liquidity:
Accessing cash quickly might become more challenging due to liquidity fees, which could affect your ability to meet financial obligations promptly.
Strategies for Businesses
Explore Alternative Cash Management Options:
Consider high-yield accounts or other cash management strategies that offer similar yields with better liquidity.
Spread your cash across different financial institutions and strategies to minimize risk and ensure stability.
If you have any questions about these new regulations or need guidance on cash management strategies, please comment below. We're here to help you navigate these changes with confidence!
These new rules were adopted by the SEC on July 12, 2023. For more details, see the SEC's official press release: https://www.sec.gov/news/press-release/2023-129
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