The Chamber of Commerce, which is hosting a small event on money market funds in Washington today, released a statement entitled, "U.S. Chamber Report Outlines Costs, Operational Challenges of Floating NAV for Money Market Mutual Funds, Estimates Costs to Move from Stable to Floating NAV Could Reach $2Billion For Investors." The Chamber's release says, "A new U.S. Chamber of Commerce Center for Capital Markets Competitiveness (CCMC) report released today finds that the operational complexity, systems alterations, and business process changes needed to support a floating NAV threaten the vitality of money market funds for most investors, including businesses and municipalities. The report titled, "Operational Implications of a Floating NAV across Money Market Fund Industry Key Stakeholders," examines the compliance costs across key stakeholders if money market funds (MMFs) transition to a floating net asset value (NAV)." (Note: Federated Investors will host its latest quarterly earnings call at 9am. Call 877-407-0782 to listen in and look for excerpts on Monday.)
David Hirschmann, president and CEO of Chamber's Center for Capital Markets Competitiveness, comments, "The current proposal doesn't yet adequately address the challenges of implementing a floating NAV. The SEC must tackle the operational, tax, and accounting implications and the same day settlement issue. If the Commission fails to adopt a proposal that preserves the utility of MMMFs, business, cities, and states will be left searching for alternative, less regulated, cash management tools."
The release explains, "The report, conducted by independent treasury management firm Treasury Strategies, estimates total upfront cost for investors to move from a stable to a floating NAV would be between $1.8 and $2 billion. Further, new estimated annual operating costs would be an additional $2 to $2.5 billion. States, municipalities, and other public institutions, already operating within tight budgets, would have to absorb these and additional costs for compliance."
It adds, "Additionally, because of the complexity and interdependence of various fund service providers, the time required by market participants to fully comply with a floating NAV would be more than two years."
Hirschmann tells us, "While the SEC's proposed change might seem to be a small change in the large scheme of things, the impact is actually quite dramatic in both cost and operations. This proposed change represents a fundamental redesign of the structure and nature of MMFs making them undesirable to institutional investors trying to manage liquidity."
Finally, the release says, "Since its inception in 2007, the Center for Capital Markets Competitiveness has led a bipartisan effort to modernize and strengthen the outmoded regulatory systems that have governed our capital markets. The CCMC is committed to working aggressively with the administration, Congress, and global leaders to implement reforms to strengthen the economy, restore investor confidence, and ensure well-functioning capital markets. The U.S. Chamber of Commerce is the world’s largest business federation representing the interests of more than 3 million businesses of all sizes, sectors, and regions, as well as state and local chambers and industry associations."
