Crane Data President & Publisher Peter Crane sent in his comments on the Securities & Exchange Commission's late Monday. We reprint much of the letter below. (The full letter is now available on the SEC's website.) Crane's letter joins substantial comment letters from Vanguard, Fidelity, and a number brief postings. Though the majority of money funds have yet to be heard from, we expect a host of additional comment letters to appear in coming days. Interested parties have until September 9 to submit their comments, so we encourage serious parties to make their voices heard.
Crane writes, "I appreciate the chance to comment on the SEC's Money Market Reform Proposals and would like to thank the Commission for their tireless efforts in this arena. As background, I have written about and analyzed the money market mutual fund space for 15 years, most recently as President & Publisher of Crane Data LLC. My company publishes the monthly newsletter Money Fund Intelligence and writes daily news on the cash industry via the website http://www.cranedata.com. Our clients, subscribers and visitors consist of practically every money market mutual fund manager, a number of money market securities issuers and dealers, money fund raters, distributors and service providers, and money fund investors, both institutional and retail."
The letter continues, "Crane Data recently surveyed its Money Fund Intelligence and website readership about the SEC's recent Money Market Fund Reform Proposals and about issues facing money funds. We also conducted numerous informal interviews and held a number of discussions with industry participants on the proposals, and we hosted a series of sessions at a recent industry conference, Crane's Money Fund Symposium. We share these results and our thoughts below."
"The overwhelming consensus is that both money fund providers and investors rate the overall SEC proposals quite favorably. All share the SEC's overall goal of making money funds more resilient. But many feel that some changes are needed to reduce the overall burden of the new regulations and to reduce the possibility that the proposed changes may actually increase overall systematic risk by concentrating funds and securities into a shorter and smaller space," writes Crane.
It says, "Of particular concern to money funds are the reduction of WAM to 60 days and the 30% weekly liquidity buckets for institutional money funds. We'd urge the SEC to consider limiting WAM to 75 days instead of 60 days, which would offer more flexibility to smaller fund complexes and to retail money funds, especially during the current ultra-low yield environment. We'd also suggest eliminating the institutional liquidity bucket distinction (and just mandating a 5% daily and 15% weekly bucket for all), or, alternatively, we'd suggest broadening the liquidity bucket to include government agency securities. These changes would substantially ease the burden on smaller funds, and lessen the chances of unintended consequences resulting from a significantly heavier concentration of shorter assets in funds."
The letter, which includes our recent Money Fund Intelligence survey results, adds, "[W]e'd also like to mention a couple more points. First, we believe the events of the past two years were unprecedented and are unlikely to be repeated. While funds must consider the possibility of a system-wide panic and run, money funds fared much better than most. All asset classes were in effect at the mercy of government support to quell the panic. Money funds should not be singled out. It can be argued that they required much less support, and certainly less costly support, than that required by bank savings."
"Next, don't forget that both investors and advisors have reacted to these events by scaling back their risk-taking and exposure. Severe actions at this point are akin to 'closing the barn door after the horses left the barn.' The risk of overregulation is high in this scenario, so we urge caution and incremental change, especially given the money markets' still fragile state. Finally, we think the floating NAV and disclosure of any actual mark-to-market pricing is a very bad idea."
