Today, we quote from another of last month's "Comments on Money Market Fund Reform" published on the SEC's website. The letter submitted by SIFMA's Asset Management Group tells us, "The Asset Management Group of the Securities Industry and Financial Markets Association ('SIFMA AMG'), together with the Securities Industry and Financial Markets Association (collectively, 'SIFMA'), respectfully submits this comment letter to the U.S. Securities and Exchange Commission (the 'Commission') with respect to the Commission's request for comment on proposed amendments to Rule 2a-7 that govern money market funds under the Investment Company Act of 1940 ('1940 Act'), and related proposed amendments to Form N-MFP, Form N-CR and Form N-1A. We appreciate the opportunity to provide our views to the Commission." (Note: Register ASAP for our upcoming Money Fund Symposium, which takes place June 20-22, in Minneapolis, Minn.)
It explains, "We believe SIFMA offers a valuable and unique perspective on the Proposed Rule because, among other things, our members represent individuals and businesses that depend on money market funds as an essential cash management tool as well as issuers who depend on money market funds to create and maintain an active and robust market for the securities they issue. As fiduciaries to millions of investors and clients and as investment managers to money market funds used as investment vehicles by retail and institutional investors, SIFMA's members are committed to enhancing investor protections through reasonable regulation. Therefore, SIFMA supports the Commission's overall objective of improving the resilience and transparency of money market funds. At the same time, however, SIFMA believes that it is essential for regulation to preserve the core, valuable cash management functions that money market funds provide to various types of investors and the financial and economic functions that money market funds provide to capital markets more broadly."
The letter says, "SIFMA appreciates that the Commission has refrained from proposing certain reforms that SIFMA believes would destroy the utility and benefit of money market funds without addressing the unique stresses experienced by money market funds in March 2020. Yet, SIFMA remains troubled that aspects of the Proposed Rule would go too far in endangering the vitality of money market funds as a product. SIFMA is very concerned that certain of the proposed reforms would either obstruct the operation of money market funds or alter their indispensable characteristics, harming shareholders who rely on them as a cash management tool and issuers who depend on money market funds as an important source of financing. Below, we discuss the important role of money market funds in the short-term funding markets, provide our positions on the provisions of the Proposed Rule, identify potentially harmful aspects of the reforms, and recommend several modifications to the Proposed Rule with the goal of better focusing the regulations on improving the resilience of money market funds."
It continues, "SIFMA members support a rulemaking package that removes redemption gate provisions from Rule 2a-7 and increases daily and weekly liquid asset requirements. SIFMA members believe such measures, taken together, most effectively address the stresses faced by money market funds in March 2020 and improve the resilience of money market funds because (i) removing redemption gates from Rule 2a-7 will eliminate a driver of increased redemption behavior experienced in March 2020 and (ii) establishing incremental increased liquidity minimums to 20% daily liquid assets and 40% weekly liquid assets will provide adequate protection from dilution (if any). SIFMA members do not believe additional anti-dilution measures, such as swing pricing, are necessary or appropriate for money market funds, and strongly oppose the Commission's swing pricing proposal."
The comment summarizes, "SIFMA members take the following general views on the following key provisions of the Proposed Rule: SIFMA supports the removal of redemption gates from Rule 2a-7 ...; SIFMA supports incremental increased liquidity minimums and believes that incremental increased liquidity minimums, together with the removal of liquidity fees and redemption gates, sufficiently address the issues faced by money market funds in March 2020 ...; SIFMA strongly opposes swing pricing requirements for any type of money market fund and believes that implementing swing pricing requirements for money market funds would unnecessarily restrict investors' ability to use money market funds for their intended cash management purposes and would be ineffective in achieving the Commission's goals for reform ...; SIFMA does not support requiring government and retail money market funds to determine that financial intermediaries that submit orders to a money market fund have the capacity to redeem and sell the fund's shares at prices that do not correspond to a stable price per share ...; and, SIFMA does not support prohibiting a money market fund from using RDM or similar mechanisms in a negative interest rate environment to maintain a stable price per share."
In other news, money market fund yields continue to inch higher following a surge early in May in reaction to the Fed's 50-basis-point move. The 7-Day Yield Average for our flagship Crane 100 Money Fund Index rose to 0.57% in the week ended Friday, May 27. The average had been 0.55% the prior week, 0.21% on April 29, 0.15% on March 31 and 0.02% on February 28 (where it had been for almost 2 years prior). Brokerage sweep rates also continued to inch higher over the past week. Our latest Brokerage Sweep Intelligence shows the average rate inched up to 0.05% (on FDIC insured deposits), up from 0.04% last week and up from 0.01% a month ago. We review the latest money fund and brokerage sweep yields below.
The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 674), shows a 7-day yield of 0.46%, up 2 basis points in the week through Friday. The Crane Money Fund Average is up 31 bps from 0.15% at the beginning of May. Prime Inst MFs were up 1 bps to 0.63% in the latest week, and up 39 bps over the course of May. Government Inst MFs rose by 2 bps to 0.53%, they are up 36 bps MTD. Treasury Inst MFs rose by 3 bps to 0.49%, up 30 bps in May. Treasury Retail MFs currently yield 0.29%, (up 4 bps for the week, and up 23 bps in May), Government Retail MFs yield 0.25% (up 2 bps for the week, and up 21 bps in May), and Prime Retail MFs yield 0.46% (up 1 bp for the week, and up 32 bps for May), Tax-exempt MF 7-day yields rose by 1 bp to 0.42%, they were up 28 bps in May.
Our Crane Brokerage Sweep Index, the average rate for brokerage sweep clients (all of which are swept into FDIC insured accounts), inched up to 0.05%. This follows increases over the past 2 weeks and follows 2 straight years of yields at 0.01%. Sweep yields were 0.12% on average at the end of 2019 and 0.28% on average at the end of 2018. The latest Brokerage Sweep Intelligence, with data as of May 27, shows just one change over the previous week -- Ameriprise increased its rates to 0.02% for balances over $100K (and to 0.03% for balances over $5M). A number of brokerages increased rates over the two weeks prior.
Two weeks ago, Brokerage Sweep Intelligence reported that Fidelity hiked its FCash brokerage account rate to 0.25% across all tiers. (Rates on its default sweep Cash Management Account also rose to 0.25%.) We also showed that Raymond James increased rates from 0.01% to 0.02% for balances under $25K, to 0.03% for balances under $100K, to 0.05% for balances under $500K and to 0.08% for balances $500K to $2.5 million. Also, RW Baird increased its sweep rates from 0.03% to 0.10% for the week ended May 13. Six of 11 major brokerages still offer rates of 0.01% for balances of $100K (and most other tiers). These include: E*Trade, Merrill Lynch, Morgan Stanley, Schwab, TD Ameritrade, and UBS. (Wells moved its rates to 0.02% two weeks ago.)
According to Tuesday's Money Fund Intelligence Daily, with data as of Friday (5/27), just 79 funds (out of 821 total) still yield 0.00% or 0.01% with assets of $63.6 billion, or 1.3% of total assets. (This compares to 593 funds with $2.623 trillion yielding 0.00% or 0.01% at the beginning of the year.) There were 34 funds yielding between 0.02% and 0.09%, totaling $56.4B, or 1.1% of assets; 38 funds yielded between 0.10% and 0.19% with $12.0 billion, or 0.2% of assets; 261 funds yielded between 0.20% and 0.49% with $1.254 trillion in assets, or 25.3%; 364 funds yielded between 0.50% and 0.79% with $2.989 trillion in assets, or 60.4%; and just 45 funds yielded 0.80% or higher with $577.7 billion in assets or 11.7%; three funds yielded over 0.90%.
