Letter to SEC on Money Market Fund Reforms

Vanessa A. Countryman
Secretary
Securities and Exchange Commission
100 F Street NE
Washington, DC 20549–1090

Dear Ms. Countryman:

The American Bankers Association (ABA) appreciates the opportunity to comment on the Securities and Exchange Commission’s (SEC) proposed money market fund (MMF) reforms. The SEC issued this proposal following consideration of potential reforms as raised in the December 2020 report of the President’s Working Group on Financial Markets and the SEC’s request for comments in February 2021. The SEC proposes these amendments to existing rules to “to improve the resilience and transparency of money market funds.”

As we noted in response to the 2021 request for comments, banks and their affiliates interact with MMFs in many ways, including as facilitators of bank customer investments (e.g., sweep arrangements from fiduciary and non-fiduciary accounts), as sponsors of MMFs, as investors, and as issuers of certificates of deposit and commercial paper in which prime MMFs invest. While banks value greater stability and resilience for participants in the short-term funding markets to weather financial shocks, we urge the SEC to consider carefully any changes that may affect the availability of these funds to bank fiduciary and nonfiduciary accounts.

Summary of the Proposal

The proposal intends to strengthen money market funds, as well increase disclosure, in a number of ways. Specifically, the proposal eliminates the liquidity fee and redemption gate mechanism in the rule in order to remove the “first mover” advantage in anticipation of those triggers. In addition, institutional prime and tax-exempt funds would need to implement “swing pricing” to internalize related costs on redeeming investors when there are net redemptions in a pricing period. The proposal would also double the daily liquid asset and weekly liquid asset minimum liquidity requirements, to increase the liquid assets available. In terms of expanded disclosures, the proposal would amend Forms N-MFP and N-CR with additional relevant information. Lastly, the proposal would require stable net asset value (NAV) funds, such as government money market funds, to switch to floating NAV in the rare situation of negative interest rates, and furthermore require any financial intermediary to be able to accommodate floating NAV transactions in order to invest on behalf of others.

Download the comment letter to read the full text.