The Securities and Exchange Commission is “actively” working on balanced reforms to address risks in the $2.6 trillion money market fund industry, which could push investors to ultra-short-duration bond ETFs as a viable alternative.
“The staff and Commissioners are actively engaged in discussions designed to yield an appropriate and balanced proposal in the near future,” SEC Chairman Mary Jo White said Friday.
However, White stopped short of fully detailing proposals on the table.
The regulatory body is considering a scaled-back approach after then-SEC Chairman Mary Schapiro’s failed attempts to enact reforms last year, reports Andrew Ackerman for the Wall Street Journal.
Some are throwing around the idea of only requiring the riskiest funds to abandon their fixed $1 per share price and let values float like other mutual fund offerings.
The SEC staff argues that this would let investors know that money funds can fluctuate in value before everyone makes a run on the funds in times of severe stress. Specifically, the SEC could focus on “prime” money funds that invest in short-term corporate debt – the funds make up 54% of the industry and are most vulnerable as they were the source of investor runs during the 2008 crisis. [Money Market Reform Could Drive Hundreds of Billions to Short-Duration Bond ETFs]