MSIM on European MMF Regulations
Morgan Stanley Investment Management posted a "European MMF Regulatory Update," which says, "The path toward European Money Money Market (MMF) reform has accelerated in recent months since the Dutch assumed the Presidency of the Council in January 2016. Recent discussions have increased in both intensity and frequency, with the Dutch aiming to finalise this proposal text before the end of their presidency in June. The Council's proposal text differs from the Parliament's agreement -- which was finalised in 2015 -- in many significant ways." (See the table in the document for full details.) MSIM lists differences in the following areas: CNAV funds, Low Volatility NAV funds, VNAV funds, Capital Buffer Provisions, Sponsor Support, and External Ratings Liquidity Requirements, Fees and Gates, and a Sunset Clause. It also outlines the Next Steps. They state, "The Dutch presidency hopes to finalise the compromise text by the end of their presidency in June. If the text is finalised, it will be used as the basis for trilogue negotiation with the Parliament and the Commission to produce an EU agreement on the file. The Council is expected to meet again in mid-May to further discuss and progress the text with the 28 Member States. Once law, the MMF Regulation will have direct application in all EU Member States. Supervision remains the prerogative of national competent authorities, but the European Securities and Market Authority (ESMA) will be tasked with ensuring consistent application." Finally, it gives Background, "In September 2013, the European Commission (Commission) released a proposal for new MMF regulation. Key components of this [initial] proposal included: 3% capital buffer for CNAV funds; all other funds convert to VNAV; Minimum daily and weekly portfolio liquidity and additional diversification requirements; Elimination of both amortised cost accounting and external credit ratings.... On 26 February 2015, the ECON Committee reached a political agreement on MMF regulation. The text of this agreement was ratified by a full vote of Parliament on 28 April 2015. The Parliament text simply reflects its negotiated position as it enters trilogue with the Commission and Council. Historically, regulations are amended as they are worked through the trilogue process."
