Ultra-short-duration bond exchange traded funds have popped up as an alternative to money market funds as Fed leaders push for tighter rules while financial leaders point to increased costs.

The 12 heads of regional Federal Reserve bank warned that Securities and Exchange Commission’s proposed regulatory reforms in the $2.6 trillion money-market mutual fund industry is not enough, stating that the approach “seems imprudent,” the Wall Street Journal reports.

Specifically, the Fed believes that the SEC’s proposal to abandon the fixed $1 share price and to float the value on “prime” funds held by treasurers and institutional investors should also expand to retail investors. They argue that floating the net asset value would train investors to accept slight fluctuations in case the value dips below $1. [Floating Money Market NAV Makes Short-Duration ETFs Attractive]

“While retail investors did not en masse act on this incentive during the crisis, it seems imprudent to assume that their behavior in the future will be the same as in the past,” Eric Rosengren, president of the Federal Reserve Bank of Boston, along with 11 fellow Fed bank presidents, said in a note.

The Fed leaders are opposed to alternative reform options, including an imposed withdrawal fee or temporary block on redemptions.

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