Online money market trading portal software provider Cachematrix, a subsidiary of BlackRock, released CacheMonitor, a new module that allows portals to offer a set of investment guidelines for clients. A press release entitled, "CacheMonitor: A new way to manage risk," explains, "Corporate treasurers often use investment policies as a tool to help navigate today's risk-adverse financial climate. We believe that with the help of CacheMonitor, a suite of functionality aimed at empowering your clients with risk management tools and information, we can digitize some of the application of a carefully constructed investment policy."
It tells us, "CacheMonitor seeks to put the control into the hands of your clients' Administrators, or SuperTraders, by allowing them to create rules specific to their investment policy that serve as digital "guard rails" for portfolios. CacheMonitor allows for several rule types including defining: Assets under management levels; Weighted average maturity levels; and, Investment parameters for specific funds and fund families."
The release adds, "CacheMonitor also includes alerting functionality, which provides customizable delivery of portfolio information based on personalized parameters across Cachematrix Platform functionalities. If an established rule is violated by a proposed trade, Super Traders can choose to notify the user and/or block the trade. Alerts can be sent to you and/or your clients via: Email, SMS or the Cachematrix Platform."
It says, "Before a trade order is sent, CacheMonitor runs the trade order through the investment policy rules and generates an alert if the order will cause a violation. This functionality aims to reduce risk and help your clients trade more confidently by providing the opportunity to take corrective actions on trade orders before potential violations of established rules.... We are excited about the digital revolution of risk management and this new functionality, which we believe will empower your clients to better adhere to their investment policies."
In other news, The Wall Street Journal published the piece, "Bank Sues New York Fed Over Lack of Account," which describes a longshot potential new competitor, or investment, for money market funds." They explain, "A new bank is suing the Federal Reserve Bank of New York, saying it is unfairly preventing the firm from pursuing a novel business strategy."
The Journal continues, "TNB USA Inc. -- run by a former top New York Fed staffer -- said its primary business activity will be to enable large institutional money-market investors to earn higher interest rates from the Federal Reserve than they could otherwise, according a complaint filed in federal court Friday. Such investors include pension funds, companies and other entities managing large sums of money."
They tell us, "But first TNB, based in Connecticut, needs to open an interest-bearing account at the New York Fed, like those held by many large banks. The Fed hasn't granted or rejected TNB's request. TNB's chairman and chief executive, James McAndrews, worked at the New York Fed for 28 years, including his last six as its head of research until 2016."
The article says, "TNB has obtained temporary approval to operate as a bank from Connecticut's banking authority, but doesn't plan to make loans or provide any retail banking services for individuals. Instead, its 'sole business will be to accept deposits from the most financially secure institutions' and place that money in an interest-bearing Fed account, 'permitting depositors to earn higher rates of interest than are currently available to nonfinancial companies and consumers,' the filing said."
It add, "TNB's customers will primarily be institutional money-market investors, but it would also accept deposits from foreign central banks, the filing said. If TNB could open a Fed account, its deposits there would earn a rate currently set at 1.95%. This is the rate paid on money, called reserves, parked at the central bank by deposit-taking private-sector banks. Fed officials expect to raise this rate along with other short-term interest rates in coming years to keep the economy expanding on an even keel."
Finally, they write, "Under the Fed's current system for setting rates, institutional money-market funds cannot earn this rate on reserves. Instead, they can participate in a Fed program that now pays an interest rate of 1.75%. TNB's business model would enable the money-market investors to earn the higher rate on reserves, minus a profit for the firm. Its name stands for 'the narrow bank,' a riff on its narrow business model, according to the suit."
Also, Asian newsletter The Asset writes "MNCs seek out asset managers for money market funds." They tell us, "[R]ecently ... corporations have turned to asset managers for these products as the banks comply with the requirements of Basel III. The intriguing aspect to this trend is that the asset managers that provide money market funds for MNCs are sister companies of the corporate banks. For DWS, the asset management unit of the Deutsche Bank Group, the focus is on building its money market funds business for MNCs in Asia by deploying a full-time liquidity manager, based in Hong Kong, to service clients in this region."
The article explains, "DWS became a subsidiary of the DB Group in March 2018 following a successful IPO that raised 1.4 billion euros and made the asset manager a separate legal entity from the DB Group. Before the IPO, the bank's asset management unit also offered money market funds for Asian MNCs from its London office. At that time the DB's corporate banking unit, which has an established presence in Asia, promoted the same products for MNCs. But Basel III changed the operating landscape. Basel III's raison d'être is to improve the stability of banks by increasing the ratio of their deposits that are placed in long funds vis-a-vis short funds."
It adds, "Banks, therefore, are compelled to encourage clients to move their deposits from short-term current accounts to longer time deposits. Despite these laudable aspirations, many MNCs shy away from long-term commitments, and would rather not lock their funds in long-term time deposits because they need liquidity.... Unlike time deposits, where the funds have to be locked up for 30 days, 60 days, or 90 days, money market funds can also be locked up but for shorter periods than time deposits."
