The most recent entry on the SEC's "Comments on Proposed Rule: Money Market Fund Reform" is from Timothy W. Cameron, John Maurello, and Matthew J. Nevins, Securities Industry and Financial Markets Association (SIFMA). It says, "The Securities Industry and Financial Markets Association ("SIFMA") respectfully submits these comments on four memoranda dated March 17, 2014 from the staff of DERA (the "Staff") of the Securities and Exchange Commission (the "Commission" or "SEC"), titled, respectively: Liquidity Cost During Crisis Periods (the "Liquidity Cost Memorandum"); Municipal Money Market Funds Exposure to Parents of Guarantors (the "Municipal MMF Memorandum"); Demand and Supply of Safe Assets in the Economy; and Government Money Market Fund Exposure to Non-Government Securities (each, a Memorandum" and, together, the "Memoranda"). The Memoranda are intended to be informative for evaluating proposed new and amended rules and forms relating to money market funds in the Release, including Rule 2a-7 under the Investment Company Act of 1940, as amended ("Rule 2a-7"). SIFMA commented on the proposals in a letter to you dated September 17, 2013 (the "Comment Letter").... We welcome DERA's data-driven analysis of issues relating to proposed money market fund reforms and their potential costs and benefits. We appreciate the opportunity to comment regarding the insights the Memoranda offer as to money market fund reform. As further explained in this letter, we ask the Commission to consider the following relating to the Liquidity Cost Memorandum and the Municipal MMF Memorandum: (1) If the Commission adopts a liquidity fee, we recommend that the default level of the fee be reduced from 2% to 1%. Data in the Liquidity Cost Memorandum support that a lower default level will effectively compensate money market funds for the cost of liquidity during market turmoil. (2) The Commission should not expand the credit support diversification test to 100% of the assets of a money market fund portfolio, from the current 75%. That is, money market funds should continue to be permitted to have a 25% non-diversified basket ("25% basket").... In our Comment Letter, we recommended that the default level of the liquidity fee be reduced to 1%, subject to reduction by the fund's board (or to increase by the fund's board up to 2%). The reduced default level would better align the amount of the fee with the costs to the money market fund of liquidating assets to honor redemptions in times of market stress, without imposing a punitive charge on shareholders."
