The multi-trillion dollar money market fund business is facing renewed efforts on regulatory reform, putting investors on edge. Nevertheless, what may be a bane for the money markets could be a boon for short-duration bond exchange traded funds.
“The council is seeking comment on other potential reforms of [money market funds]that meet the objectives of addressing the structural vulnerabilities inherent in [money market funds]and mitigating the risk of runs,” Amias Gerety, deputy assistant secretary for the Financial Stability Oversight Council, said last month, Ignites reports.
“I would certainly expect you are getting a fresh set of eyes [at regulators]on multiple areas and new thoughts coming to the process, and I think that is a healthy thing,” Barbara Novick, vice chairman at BlackRock, said in the article. “In 2012, there was a lot of contention. I would think in 2013 there would be a resolution of money market reform.”
Investors are cautiously watching as the FSOC and the SEC mull over proposals, like floating the net asset value, which would diminish appetite for money funds as safe and liquid money parking spots. [Short-Term Bond ETFs in Focus on Money Fund Reform Talk]