U.S. regulators are already scrutinizing money market funds and even considering radical changes to one of the stable norms within the market. However, asset managers are already looking for a contingency plan in exchange traded fund products for potential changes.
Regulators are looking at money market funds as a potential bailout waiting to happen, similar to when the U.S. Treasury and the Federal Reserve intervened back in 2008.
SEC Chairman Mary Schapiro has been urging the commission to consider both capital buffer requirement and a 30-day hold back on redemption requests from investors, or to impose a floating net asset value, essentially breaking the buck on the $1-per-share value that current funds follow. [Short-Maturity ETFs Eye Money Fund Reform Gridlock]
Corporate and state treasurers expect to see increased costs from borrowing and tax accounting as a result if money market funds are allowed to float, reports Ari I. Weinberg for Forbes.
Consequently, more asset managers are considering short-maturity bond ETFs as a back-up plan – the ETFs are highly transparent, liquid and easily accessible, making them a clearer reflection of a basket of short-term debt.