Yesterday, we wrote about additional Disclosures listed in the SEC's latest proposed Money Market Fund Reforms, but today we wanted to add their section on "Compliance Dates." The SEC says, "We propose to provide a transition period after the effective date of the amendments to give affected funds sufficient time to comply with the proposed changes and associated disclosure and reporting requirements, as described below.... We propose that 12 months after the effective date of the amendments, any money market fund that is not a government money market fund or a retail money market fund must comply with the proposed swing pricing requirement in rule 2a-7, if adopted, as well as the swing pricing disclosures applicable to these money market funds in the proposed amendments, if adopted, to Forms N-MFP and N-1A."
They add, "The proposed compliance period for all other aspects of the proposal is six months after the effective date of the amendments.... Removal of the liquidity fee and redemption gate provisions in rule 2a-7, as well as removal of associated disclosure requirements in Form N-1A and N-CR, would be effective, if adopted, when the final rule is effective."
In other news, Wells Fargo Securities' latest Fixed Income Market and Portfolio Strategy "Daily Short Stuff" asks "Where did BSBY go in 2021? SOFR dominates. Author Vanessa Hubbard McMichael writes, "SOFR averaged about 4 basis points this year ranging from a low of 1 basis point and a momentary high of 11 basis points. The high was relevant for one day in early January. SOFR remained compressed this year given a mix of Fed policy, an abundance of cash and limited front-end options. SOFR reset at 1 basis point for 70 days in 2021 and at 5 basis points for 132 days. The 5 basis point level was reached and maintained after the Fed increased the lower bound on its administered rates by 5 basis points mid-June. After this technical shift from 0 to 5 basis points, SOFR reset on a daily basis at 5 basis points 96 percent of the time (128 out of 133 trading days)."
She says, "SOFR has been the dominate rate for floating-rate instruments in U.S. IG markets this year, but even as late as November 2021, there were a few LIBOR-based CDs sprinkled into weekly issuance data. These CDs used either 1-month or 3-month LIBOR as the underlying reference rate. 1-week and 2-week USD LIBOR tenors are retiring in just a few days, while overnight, 1-month, 3-month, 6-month and 12-month LIBOR tenors will still exist through June 2023, although U.S. regulators strongly urge ceasing any new LIBOR issuance once 2021 concludes."
McMichael tells us, "Recall that mid-2021 there was heightened interest in credit-sensitive alternatives to replace LIBOR and there were a handful of securities priced over BSBY or the Bloomberg Short-term Bank Yield Index. There was just $5.50 billion in total par amount amongst 5 transactions issued with BSBY as the reference rate mid-2021, and two of these securities matured this month. Thus, there is just $3.25 billion in outstanding IG BSBY securities remaining. After the initial issuance May - July, we have not seen sustained adoption of BSBY in investment grade fixed income floating-rate markets."
She comments, "Last week SOFR issuance for transactions with at least $50 million in par amount was light with just $2.62 billion coming to market. Of this total, GSE issuers comprised 59 percent of issuance and financial names the remaining 41 percent. The Federal Home Loan Bank priced a $50 million 60-month at SOFR+20 basis points, and the Federal Farm Credit Banks priced $1.50 billion in securities ranging in maturity from 21-months to 24-months. FFCB's 21-month priced at SOFR+5 basis points and 24-month at SOFR+6 basis points."
Wells adds, "Over the first two days of this final week of 2021, there have been about $1.85 billion in new SOFR transactions that have come to market. The Federal Farm Credit Banks priced a $500 million 3-month security at SOFR flat and a $1.25 billion 24-month at SOFR+5.5 basis points.... Year-to-date there have been about $318 billion in total SOFR securities that have come to market with at least $50 million in par amount. Financial names dominated the space, comprising about 50 percent of total issuance while government names, which include both GSEs and SSAs, made up about 40 percent. The remaining 10% of issuance came from a variety of financial names in the consumer, communications, industrial, technology and energy and utilities sectors."
Finally, a press release entitled, "Futu Inc. Partners with StoneCastle Insured Sweep to Provide Insured Cash Platform to its Brokerage and Wealth Management Clients," explains, "Futu Inc., a subsidiary of Futu Holdings Limited, an advanced technology company offering fully digitized brokerage and wealth management platforms, recently announced a deal with StoneCastle Insured Sweep, LLC to provide insured cash sweep services to Futu's brokerage clients. Implementation of the insured cash platform took place in early November 2021."
Keith Chan, CEO of Futu, comments, "Offering a bank sweep product to our clients is a natural progression of the continued expansion of our products and services.... Futu engages closely with its clients who have come to expect us to innovate and enhance client-experience. Adding a feature that provides greater protection for clients' cash while allowing them to earn interest is a win for our clients."
The release adds, "Insured cash sweep programs have become commonplace in the industry and have grown to more than a trillion-dollar cash category over the past couple of decades. "We constantly look for partners that truly differentiate themselves in the marketplace," said David Gareis, a senior executive at Stonecastle. "Our size, business model, experience on digital platforms, and ability to source the banks they need to run and grow their programs made it a natural fit."
