Impacts of Reforms on Broker-Dealers
Management consulting firm Gartland & Mellina Group recently issued a white paper entitled, "Tackling Money Market Reform," a guide for broker-dealers to develop a strategy to comply with MMF reforms. It says, "The impacts of the reform are far-reaching for broker-dealers who have built not only their money market fund supporting infrastructure and processing systems around the assumption that these funds will always be priced at $1.00, but their operational policies and procedures as well. The operational and technological changes required will permeate layers of processing that currently support money market funds and would infiltrate areas that have previously excluded money market funds. As evidenced by the response to a 2013 SIFMA survey of broker-dealers, `many are expecting large time and cost expenditures to develop and implement modified procedures, controls and systems to support money market funds under the regulation. Financial intermediaries must now incur the costs of investing in enhancements to support floating NAV money market funds and the infrastructure to implement redemption fees and gates." It adds, "Same-day settlement is predicated on the basis of a stable share price and will be a challenge to support for impacted funds unless fund companies consider intra-day pricing.... A floating NAV would add complexity to reconciliation, trade exception and correction processing that does not exist for money market funds today. Interfaces will be needed between fund companies and broker-dealers to facilitate communication of liquidity fees or gates. In light of the above impacts, where should broker-dealers start to assess and implement the potential changes required to their organization to comply with the reform? The following approach provides a framework that broker-dealers can apply to better understand the impacted areas and potential changes and then develop and execute a strategy on how to meet the requirements of the reform."
