US - Finalisation by the SEC of the reform of money market funds
On July 12 2023, the Securities and Exchange Commission (SEC), the American financial markets authority, published the finalized version of its Money Market Funds (MMF) reform.
In line with the initial proposal, MMF liquidity ratios are raised: the overnight liquid asset ratio rises to 25% of assets (from 10% currently) and the one-week liquid asset ratio rises to 50% of assets (from 30% currently).
The reform also removes the mechanical link between liquidity ratios and the application of redemption fees and restrictions on redemptions, a link considered to be at the root of massive withdrawal movements in times of stress.
Unlike the proposed rule, which provided for the application of a swing pricing mechanism, the final rule imposes mandatory redemption fees on MMFs for institutional investors (except for those investing solely in US federal debt securities), when daily net redemptions exceed 5% of net assets.
The timetable for implementation is expected to range from 6 to 12 months, depending on the measures.