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Friday, September 13, 2013

Fed Bank Presidents Comment on SEC MMMF Reform Proposal

The presidents of the twelve regional Federal Reserve banks wrote the SEC regarding the SEC’s money market fund reform proposal.

The letter notes that the SEC has taken step towards Money Market Mutual Fund (“MMMF”) reform by issuing a proposal, which includes two principal reform alternatives: (i) a floating net asset value per share (“NAV”) requirement for prime institutional MMMFs, and (ii) stand-by liquidity fees and temporary redemption gates for non-government MMMFs that breach a pre-determined trigger.

The regional Federal Reserve bank presidents “strongly support” the floating NAV alternative. However, do not support the stand-by liquidity fees and temporary reduction gates alternative, “as these mechanisms do not meaningfully reduce the risks that MMMFs pose to financial stability.”

Read the full letter.

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