J.P. Morgan Asset Management posted a brief, entitled, "Understanding Floating Net Asset Value (FNAV): calculate, disclose, transact." It explains under, "Charting a steady course through any market cycle," "Under the SEC's amendments to Rule 2a-7, effective October 14, 2016, institutional prime and municipal MMFs must now transact at a market-based NAV, rounded to four decimal places (e.g. USD 1.0000). This means that small fluctuations above or below the purchase price will affect shareholders, leading to the potential for small realized gains or losses over time when shares are sold. It's critical to understand the relationship between income, price movement and total return, as shown in the case study below." The paper asks, "How Can MMF Managers Seek to Limit FNAV Volatility?" They explain, "Despite volatile market conditions since 2010, MMF share values have generally remained very stable. This is partly because of the SEC's strict requirements for MMFs to hold very short-term, high-quality securities, with: A maximum weighted average maturity of 60 days, A maximum weighted average life2 of 120 days, A minimum of 10% of total assets represented by daily liquid assets, and A minimum of 30% of total assets represented by weekly liquid assets. Additionally, a rigorous focus on risk management and credit analysis can also play a critical role in keeping the movement of FNAV to a narrow band, and in keeping our interests firmly aligned with those of our clients.... Between the beginning of 2013 and September 30, 2016, the JPMorgan Prime Money Market Fund kept its market-based NAV between USD 1.0001 and USD 0.9999. Since its move to FNAV on October 1, 2016, ahead of the SEC deadline, our robust controls have successfully kept FNAV within a narrow band." Finally, a sidebar explains, "What Drives FNAV Movement? Fluctuations in FNAV -- above or below USD 1.0000 -- can be common, but have typically been small. These movements can be caused by: changes in market interest rates, changes in credit spreads, inflows and outflows, and other credit-specific events."

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