Earlier this month, the Securities and Exchange Commission unanimously voted for new measures to be proposed that would reform how money market funds operate. Specifically, changes would be made to make the funds less susceptible to runs that could harm investors.
A recent Trade Finance Matters article highlighted two of the principal alternatives brought forth by the SEC.
“1. Mark to market the net asset value (NAV) for prime institutional money market funds, in essence no more accounting myth that funds are always worth $1 but are floating based on the value of the underlying investment owned. 2. Put restrictions on withdrawals, in essence, no more 100 percent liquidity.”
The news source also cited data from the Investment Company Institute, which said that corporate treasurers and professional investors have close to $900 billion in prime money market mutual funds. Those funds are about 35 percent of the $2.6 trillion money fund industry.
According to the article’s author, the proposed changes could mean big things for the P2P industry, as short-term trade finance assets will become a more attractive option. This is because the yields are much higher and those assets mature typically in 90 days.
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