Website RIABiz.com writes on BlackRock's new Money Market ETFs in "BlackRock rattles giant saber at Schwab and Fidelity by launching high-yield 'money market' funds that 'circumvent' shelf-space controls and pay big." They tell us, "BlackRock on Feb. 4, launched iShares Prime MMF (PMMF) and the iShares Government MMF (GMMF). The money market ETFs reported $104.2 million and $26 million in net assets, respectively, in just the first 17 days since launch." (See our Feb. 6 News, "BlackRock Money Market ETFs Go Live; Ondo Finance on Tokenized MMFs.") (Note: Register soon for our upcoming Bond Fund Symposium, which is March 27-28 in Newport Beach. We hope to see you next month in Southern California!)
The article says, "For the first time, BlackRock takes direct aim at a discount brokerage and RIA custody cash cow -- cash management money market funds (MMF). (And indirect aim at high-yield FDIC cash accounts.) BlackRock declined a request for comment, including, specifically, whether avoiding shelf-space fees influenced its decision to launch a MMF ETFs, making it the second firm ever to do so. Until now, laws, economics, fee structures, and even unwritten channel-conflict red lines have kept BlackRock from selling money market funds to investors, directly or through their RIAs and brokers."
It explains, "Using ETFs – in a zero-commission world – may disrupt that paradigm. Employing an ETF wrapper gets 'around the need to be 'approved' as a money fund option on the clearing firm platforms, and/or the need to pay a fee to be on a fund supermarket,' says Frank Bonanno, managing director and head of marketing at cash management shop StoneCastle.... 'It's a pretty smart way to circumvent restrictions most large firms are placing on MMFs, as they'd likely prefer cash stay in sweep. [This] makes it easy to find a likely higher-yielding alternative, without having to use a proprietary fund, or be forced to settle for one that's on platform,' he explains."
The RIABiz piece states, "Yet, analysts and industry insiders are split over precisely who BlackRock's new ETFs will serve. 'I'm not quite sure I 'get it,' says Jeff DeMaso, founder and editor of the Independent Vanguard Advisor, via email. 'The pitch here is that this is a 'money market' for ETF investors, or maybe, a money market with better liquidity. 'If you're going to get money market returns without the stable price, why not just buy an actual money market fund with a stable price?' he asks."
They also quote "Peter Crane, president [of] Crane Data, also expresses puzzlement. 'I'm still not sure of the attraction either, other than to offer advisors the ETF format that they evidently prefer,' he says, via email. 'We'll see if it flies ... [but] given how hot ETFs are, coupled with how hot money market funds are, it's worth a shot.' he adds."
The article continues, "BlackRock's entry into RIA and retail cash accounts via ETFs comes at a time of tension between investors, financial advisors, custodians, and asset managers. At issue are fees, spreads, yields, who gets them -- and transparency. Schwab and Fidelity not only guide cash largely to their own funds but are also determined to sweep cash to funds where they collect fatter margins."
It states, "The new BlackRock ETFs take advantage of both the 2014 Floating NAV Rule change, and 2023 SEC updates to Rule 2a-7 of the '40 Act, which, together, opened the door to money market ETFs. 'Money market ETFs did not evolve until recently, primarily because ETFs typically have a fluctuating NAV, whereas money market funds historically ... had a stable NAV,' says Ari Sonneberg, partner at Wagner Law Group. Now the SEC 'is satisfied' that current regulations address the risk MMFs 'might collapse,' and asset managers are confident MMF regulations have stabilized, he explains."
See also VettaFi's "Managing Cash With Money Market Funds vs. ETFs," which says, "Money market mutual funds have long been a popular cash management tool for investors looking to park cash short-term, while preserving capital and picking up some return and yield. Now, there are money market ETFs for that, too. Earlier this month, my colleague, Kirsten Chang, highlighted the arrival and appeal of money market ETFs. Texas Capital ... pioneered the category, with the launch of the Texas Capital Government Money Market ETF (MMKT) last year. BlackRock followed with two competing ETFs, the iShares Government Money Market ETF (GMMF) and the iShares Prime Money Market ETF (PMMF)."
In other news, a press release titled, "Figure Markets Launched Industry First Yield-Bearing Stablecoin" tells us, "Figure Markets, a leader in decentralized finance, has launched the first interest-bearing stablecoin native to a public blockchain, registered with the Securities and Exchange Commission. YLDS, a public security offered through Figure Markets's wholly owned subsidiary, Figure Certificate Company, is a fixed price, daily accrual public security native to the Provenance Blockchain. YLDS can be transferred peer-to-peer and is backed by the same securities that prime money market funds hold."
It explains, "YLDS marks a transformative shift in financial applications built on public blockchain, offering holders the ability to earn interest, transfer securities peer-to-peer, and transact 24x7. YLDS utilizes Figure Markets's self-custody wallets, giving users control of the tokens without relying on third parties."
Figure Markets CEO, Mike Cagney comments, "We see tremendous applications for YLDS.... Exchange collateral, cross-border remittances, and payment rails are some of the immediate opportunities. But we see this as a catalyst to a much larger migration of TradFi to blockchain."
The release also says, "Starting today, both individuals and institutions can purchase YLDS through Figure Markets (www.figuremarkets.com). Figure Markets -- working with its sister company Figure Technology Solutions -- has been a leader in the real-world asset (RWA) space on blockchain, supporting over $41B in RWA transactions on the Provenance Blockchain, with over $13B in RWA total locked value on-chain. YLDS will add to that number."
June Ou, Interim Executive Director of the Provenance Blockchain Foundation, adds, "We're excited to support YLDS on Provenance Blockchain. We expect, and will support, significant third-party developer interest to use YLDS and its fiat rails in DeFi, payments, and other applications built on Provenance Blockchain. We will also be integral in wrapping YLDS for applications on other L1 blockchains."
Finally, the release says, "YLDS pays an interest rate of SOFR minus 0.50%. Interest is accrued daily and paid monthly in USD or YLDS. Holders can buy/sell YLDS using USD and other stablecoins 24x7 on Figure Markets, and can off-ramp to fiat during US banking hours."
