A press release entitled, "Staff Analysis of Data and Academic Literature Related to Money Market Fund Reform," says, "The staff of the Securities and Exchange Commission today made available certain analyses of data and academic literature related to money market fund reform. The analyses, which were conducted by the staff of the SEC's Division of Economic and Risk Analysis, are available for review and comment on the Commission's website as part of the comment file for rule amendments proposed by the SEC in June 2013 regarding money market fund reform." The postings or "mini" studies include: Analysis of Liquidity Cost During Crisis Periods; Analysis of Government Money Market Fund Exposure to Non-Government Securities, Analysis of Municipal Money Market Funds Exposure to Parents of Guarantors, and Analysis of Demand and Supply of Safe Assets in the Economy.
The SEC's release tells us, "The analyses examine: The spread between same-day buy and sell transaction prices for certain corporate bonds from Jan. 2, 2008 to Jan. 31, 2009. The extent of government money market fund exposure to non-government securities. Academic literature reviewing recent evidence on the availability of "safe assets" in the U.S. and global economies. The extent various types of money market funds are holding in their portfolios guarantees and demand features from a single institution."
It continues, "The SEC staff believes that the analyses have the potential to be informative for evaluating final rule amendments for the regulation of money market funds. These analyses may supplement other information considered in connection with those final rule amendments, and the SEC staff is making these analyses available to allow the public to consider and comment on this supplemental information. Comments on this supplemental information may be submitted to the comment file for rule amendments the SEC proposed in June 2013 regarding money market fund reform (File No. S7-03-13) and should be received by April 23, 2014."
The SEC adds, "Additional studies, memoranda, or other substantive items may be added by the Commission or staff to the comment file during this rulemaking. A notification of the inclusion in the comment file of any such materials and an invitation for public comment will be made available on the Commission's web page. To ensure direct electronic receipt of such notifications, sign up through the "Stay Connected" option at www.sec.gov to receive by e-mail "Notifications Regarding the Money Market Fund Reform and Amendments to Form PF Rulemaking.""
The SEC's first study comments, "The Division of Economic and Risk Analysis ("DERA") has prepared an analysis of the spread between same-day buy and sell transaction prices ("spread") for Tier 1 and 2 securities during the period starting January 2, 2008 and ending January 31, 2009. This analysis is intended to assist the Commission in the development of final rules regarding Money Market Fund (MMF) Reform, including any possible liquidity fee. The analysis documents changes in the cost of liquidity provision before, during, and after the window that commences with the bankruptcy of Lehman Brothers and ends the day before the Federal Reserve's announcement of the creation of the Money Market Investor Funding Facility."
The "Government MMF Exposure to Non-Government Securities update tells us, "The Division of Economic and Risk Analysis has studied the exposure of government money market funds to non-government assets between November 2010 and November 2013. The analysis provides information that characterizes the usage level of non-government securities in government money market funds, and it is intended to assist the Commission in developing final rules regarding Money Market Fund Reform, including any appropriate exemption for government money market funds."
Their Muni MMF Guarantor paper says, "In this memo, the Division of Economic and Risk Analysis presents an analysis of the exposure municipal money market funds ("MMFs") have to the parents of guarantors. There are two types of municipal MMFs on Form N-MFP (item 10): Single State and Other Tax-Exempt funds. The analysis examines the extent to which MMFs use the "25% basket" under which up to 25% of the value of securities held in a MMF portfolio may be subject to guarantees or demand features from a single guarantor in municipal MMFs. The analysis is intended to assist the Commission in developing final rules regarding Money Market Fund Reform."
Finally, the "Safe Assets update," states, "The Division of Economic and Risk Analysis ("DERA") has reviewed recent evidence on the availability of domestic government securities and global "safe assets." The memorandum is intended to assist the Commission in the development of final rules regarding Money Market Fund (MMF) Reform that could possibly increase the demand for these assets. We focus not only on the availability of domestic government securities, but also global safe assets. The fungibility and hence substitutability of global safe assets in other contexts (but not for money market funds) would likely free up supplies of domestic government securities elsewhere. DERA staff ("staff") note a marked increase in the global demand for domestic government securities and global safe assets but do not anticipate that, if such changes were adopted, the impact would be large relative to the domestic and global markets for safe assets."
