In a recent turn of events, the U.S. Securities and Exchange Commission (SEC) decided against implementing swing pricing for money market funds, instead opting to impose mandatory redemption (liquidity) fees. This decision, however, was not unanimous. Made on July 12, the SEC’s move toward money market fund reforms was decided upon with a 3-2 party line vote.
Swing pricing, a mechanism that adjusts a fund’s net asset value (NAV) to offset trading costs incurred by shareholders’ trading activity, was initially proposed for certain institutional money market funds. Its adoption would have represented a significant shift in the way these funds operate. However, the SEC decided to implement mandatory redemption fees instead, a decision that carries its own set of implications for money market funds.
As developments continue to unfold, it is clear that the debate surrounding the implementation of swing pricing is far from over. For the time being, however, the odds are lengthening against its adoption for other types of funds.
Stay updated with the latest news and developments on this matter by following this link to the full report by Carlton Fields on JD Supra.