Goldman Sachs Asset Management posted a white paper entitled, "From Stable to Floating NAV: Implications for Prime and Municipal Money Market Funds." It says, "Starting on October 14, 2016, the U.S. Securities and Exchange Commission (SEC) rules will require institutional prime and municipal money market funds to migrate from a stable $1.00 price per share to a floating new asset value (NAV). The new rule allows all prime and municipal money market funds to temporarily prevent investors from making withdrawals or to impose fees for investors who redeem shares under certain extraordinary circumstances. The changes were proposed after the financial crisis of 2007-08, when the Reserve Primary Fund dripped bellow a $1.00 NAV price and "broke the buck," prompting a run of redemptions from institutional prime money market funds. The new rules will have implications for how institutional investors use and evaluate money market funds, and have therefore raised number of questions in advance of the rule change later this year. What is a floating NAV and how are such funds priced? A floating NAV is calculated using market value or-mark-to-market-accounting rather than the amortized cost accounting that money market funds have historically used. This means that floating NAV funds have to calculate and transact at the underlying value of all of the securities in the fund on an ongoing basis and publish out to four decimal places. Pricing services determine the NAV based on how like securities are trading in the market, and will adjust the price as needed to reflect credit events or other market developments impacting prices. As such, the NAV can fluctuate, or float, whereas stable NAV funds are able to round up to $1.00 so long as the amortized cost per share is $0.9950. Could changes in NAV be material? In most cases, we believe changes to the NAV will likely be immaterial, as the value of the underlying securities in most prime and municipal money market funds rarely move. Nevertheless, there may be instances where the change in the NAV has a material impact on the underlying principal and investors in floating NAV funds should prepare for this possibility. What tax and accounting requirements are there for floating NAV funds? Floating NAV market funds will still be treated as cash and cash equivalents on the balance sheet, but those who use them will now have to recognize the gains and losses associated with their fluctuation prices. At the bare minimum, investors will need to do this once per year, though ultimately it may make sense to track gains and losses more frequently. Check with your auditors to determine the best course."

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