Key Changes from the SEC Money Market Reform

Update from the Cash and Liquidity Management team

Liquidity and cash management 14 Sep 2023 2 min read

Cash and Liquidity Management team

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On Wednesday, July 12, 2023, the U.S. Securities and Exchange Commission (SEC) voted 3-2 to amend rules governing how money market mutual funds (“MMMFs”) are structured and may operate. Here we outline the 4 key changes.

Removal of redemption gates

What it is	What it is	Funds affected	Funds affected	Compliance date	Compliance date
What it is	Elimination of the language related to the temporary suspensions of redemptions and, therefore, money market mutual funds will no longer be subject to what is commonly referred to as “gating”.	Funds affected	All MMMFs	Compliance date	October 2, 2023

Reverse Distribution Mechanism (RDM)

What it is	What it is	Funds affected	Funds affected	Compliance date	Compliance date
What it is	A new provision explicitly permitting a Constant Net Asset Value (CNAV) money market mutual fund that experiences a negative gross yield caused by negative interest rates to reduce the number of its shares outstanding to maintain a stable share price, in lieu of converting to an FNAV fund.	Funds affected	All CNAV MMMFs	Compliance date	October 2, 2023

A new provision explicitly permitting a Constant Net Asset Value (CNAV) money market mutual fund that experiences a negative gross yield caused by negative interest rates to reduce the number of its shares outstanding to maintain a stable share price, in lieu of converting to an FNAV fund.

All CNAV MMMFs

October 2, 2023

Increase in daily and weekly liquidity assets requirements

What it is	What it is	Funds affected	Funds affected	Compliance date	Compliance date
What it is	The minimum daily liquidity requirement will be increased from 10% to 25% of a fund’s total assets. This provision does not apply to tax exempt funds. The minimum weekly liquidity requirement will be increased from 30% to 50% of a fund’s total assets. More importantly, effective October 2, 2023, the requirement to impose liquidity when a fund falls below the weekly liquid assets threshold (which had inhibited funds from actually using that liquidity in a crisis) is being removed.	Funds affected	All MMMFs	Compliance date	April 2, 2024

The minimum daily liquidity requirement will be increased from 10% to 25% of a fund’s total assets. This provision does not apply to tax exempt funds.

The minimum weekly liquidity requirement will be increased from 30% to 50% of a fund’s total assets.

More importantly, effective October 2, 2023, the requirement to impose liquidity when a fund falls below the weekly liquid assets threshold (which had inhibited funds from actually using that liquidity in a crisis) is being removed.

All MMMFs

April 2, 2024

Mandatory Liquidity fees

What it is	What it is	Funds affected	Funds affected	Compliance date	Compliance date
What it is	A new requirement for Floating Net Asset Value (FNAV) prime and municipal money market mutual funds implement a mandatory liquidity fee, based on an estimate of the fund’s liquidity costs, if the fund has total net redemptions that day which exceed 5% of the fund’s net assets, unless those costs are de minimis.	Funds affected	All FNAV MMMFs	Compliance date	October 2, 2024

A new requirement for Floating Net Asset Value (FNAV) prime and municipal money market mutual funds implement a mandatory liquidity fee, based on an estimate of the fund’s liquidity costs, if the fund has total net redemptions that day which exceed 5% of the fund’s net assets, unless those costs are de minimis.

All FNAV MMMFs

October 2, 2024

We look forward to helping you understand these rules and their implications. Please contact us with any questions.

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