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SIFMA today submitted a comment letter to the Securities and Exchange Commission (SEC) in response to the SEC Staff Analysis of Data and Academic Literature Related to Money Market Fund Reform. SIFMA's letter was submitted jointly by SIFMA's Asset Management Group and Private Client Group.
SIFMA appreciates the SEC's open process and the opportunity to provide the industry's feedback on the staff analysis and the potential impact of reform. Money market funds are essential to a well-functioning financial system, and it is important that any reforms undertaken by the SEC are designed to strengthen these funds and preserve their benefits.
The letter is focused on the specific analysis contained in the Memoranda addressing Liquidity Cost During Crisis Periods (the "Liquidity Cost Memorandum") and Municipal Money Market Funds Exposure to Parents of Guarantors (the "Municipal MMF Memorandum"), and addresses the following points:
- Liquidity Cost - If the Commission adopts a liquidity fee, the default level of the fee should be reduced from 2% to 1%. Data in the Liquidity Cost Memorandum support that a lower default level will effectively compensate money market funds for the cost of liquidity during market turmoil.
- Muni MMFs - The Commission should not expand the credit support diversification test to 100% of the assets of a money market fund portfolio, from the current 75%. That is, money market funds should continue to be permitted to have a 25% basket for non-diversified credit support ("25% basket"). The Municipal MMF Memorandum does not show that the complete elimination of the 25% basket is necessary and does not adequately recognize the difficulties for municipal money market funds that utilize the 25% basket.
SIFMA's comment letter is available here: http://www.sifma.org/issues/item.aspx?id=8589948862
SIFMA's past letter on money market fund reform (September 2013) is available here:http://www.sifma.org/newsroom/2013/sifma-comments-on-sec-money-market-fund-proposal/
