Wells' Fargo Securities' Garret Sloan wrote last week, "The recently finalized Volcker Rule has raised a number of questions along with the answers it has provided. Many have been wondering aloud what constitutes a "​covered fund" under the current Volcker definition. This question has immediate and real world implications for certain products popular amongst money market investors. First, there is the question of the Tender-​Option Bond (​TOB) programs that currently exist at banks allowing investors to borrow and create a leveraged position in municipal debt. TOBs utilize short-​term borrowings to fund the purchase of longer-​term municipal debt. The largest buyers of TOB floater paper are municipal money market funds. Currently, the tax-​exempt money market space is just over $​250 billion and of that, tender-​option bonds comprise somewhere between $​55-$​70 billion. The exact number is difficult to establish because of the different ways in which the data are presented. Nevertheless, the Volcker Rule as currently interpreted would curb banks from participating in Tender-​Option bond programs. The language of the rule specifically notes that tender option bonds should be treated no differently than the resecuritization of other debt instruments. The rule further notes that tender option bond vehicles are more in the nature of other types of bond repackaging securitizations. As such, banking entities currently providing credit enhancement, liquidity support or other similar services to the TOB market are likely to be curtailed unless an exclusion from the definition of a covered fund is found. We have not seen one as of yet, but we will cross our fingers. Muni funds with a hankering for short-​term debt will be looking for a place to park cash and with less inventory, we could see much more downward pressure on the traditional municipal VRDN market. One long-​term positive could be the interest generated amongst municipal issuers to return to the more traditional VRDN market, which could increase supply. However, that is not a short-​term fix for a problem that could be in place by mid-​year 2014."

A release entitled, "SEC Removes References to NRSRO Ratings in Certain Rules and Forms," which does not mention Rule 2a-​7 among the other rules affected, says, "The Securities and Exchange Commission today announced that it has adopted amendments to eliminate references in certain of its rules and forms to credit ratings by nationally recognized statistical rating organizations (​NRSROs). The changes were required by the Dodd-​Frank Wall Street Reform and Consumer Protection Act and remove credit rating references from: Rule 5b-​3 under the Investment Company Act -- a rule that permits funds to look through repurchase agreements to the underlying collateral securities for certain counterparty limitation and diversification purposes provided the collateral meets certain credit quality standards. Forms N-​1A, N-​2, and N-​3 -- forms that contain requirements for funds to report information about their activities to shareholders, including information about the credit quality of their portfolios. Rule 15c3-​1 (​and certain appendices) under the Securities Exchange Act of 1934 -- a rule that requires broker-​dealers to maintain more than a dollar of highly liquid assets for each dollar of liabilities, which helps ensure that if the broker-​dealer fails, it will have sufficient liquid assets to cover its liabilities. Rule 15c3-​3 under the Securities Exchange Act of 1934 -- a rule that prohibits broker-​dealers from using customer securities and cash to finance the firm’​s own business. By segregating customer securities and cash from the firm’​s proprietary business activities, the rule increases the likelihood that customer assets will be readily available to be returned to customers if the broker-​dealer fails. Rule 10b-​10 under the Securities Exchange Act of 1934 -- the SEC'​s confirmation rule that generally requires broker-​dealers effecting transactions for customers in securities other than U.​S. savings bonds or municipal securities to provide those customers with written notification of the terms of the transaction at or before the completion of the transaction."

Registrations are now being accepted for Crane'​s Money Fund Symposium 2014, which will take place June 23-​25, 2014, at the Renaissance Boston Waterfront. The preliminary agenda will be posted next week, and sponsorships are now being accepted. Registrations and sponsorships are also still being accepted for our 4th annual Crane'​s Money Fund University, which will take place January 23-​24, 2014, at The Renaissance Providence Hotel. Money Fund University offers attendees an affordable and comprehensive two day, "​basic training" course on money market mutual funds. This year'​s program will feature a heavier than usual regulatory component and will also cover the history of money funds, interest rates, Rule 2a-​7, ratings, rankings, money market instruments such as commercial paper and repo, and portfolio construction and credit analysis. New portfolio managers, analysts, investors, issuers, service providers, and anyone interested in expanding their knowledge of "​cash" investing should benefit from our comprehensive program. Even experienced professionals should enjoy a refresher course and the opportunity to interact with peers in an informal setting. Attendee registration for Crane'​s Money Fund University is $​500. Exhibit space is $​2,​000 and sponsorship opportunities are $​3K, $​4.​5K, and $​5K. (Click here to register. A block of rooms has been reserved at The Renaissance Providence Hotel. The conference negotiated rate of $​159 (​plus sales of tax 13% currently) was available through, December 20th. For booking information please reference the Hotel and Travel page on the website. We hope to see you in Providence! Note: We'​ll also be releasing the preliminary agenda for our European Money Fund Symposium, which will take place in London, Sept. 23-​24, 2014, in coming weeks.

The ICI'​s latest "​Money Market Mutual Fund Assets" report says, "Total money market mutual fund assets increased by $​22.​09 billion to $​2.​697 trillion for the five-​day period ending Monday, December 23, the Investment Company Institute reported today. Taxable government funds increased by $​8.​00 billion, taxable non-​government funds increased by $​13.​92 billion, and tax-​exempt funds increased by $​170 million.... Assets of retail money market funds increased by $​1.​27 billion to $​926.​93 billion. Taxable government money market fund assets in the retail category increased by $​140 million to $​199.​68 billion, taxable non-​government money market fund assets increased by $​310 million to $​531.​95 billion, and tax-​exempt fund assets increased by $​810 million to $​195.​30 billion.... Assets of institutional money market funds increased by $​20.​85 billion to $​1.​770 trillion. Among institutional funds, taxable government money market fund assets increased by $​7.​86 billion to $​740.​62 billion, taxable non-​government money market fund assets increased by $​13.​61 billion to $​954.​94 billion, and tax-​exempt fund assets decreased by $​640 million to $​74.​80 billion." This rebound follows a decline of $​34.​3 billion last week, which in turn followed three consecutive weeks of inflows. Year-​to-​date, money fund assets have increased by approximately $​32 billion, or 1.​2%.

Economists from the Federal Reserve Bank of New York continue their jihad against money market funds with "The Fragility of an MMF-​Intermediated Financial System." They write, "Since the financial crisis of 2007-​09 -- and, in particular, the run on prime money market funds (​MMFs) in September 2008 -- policymakers have been concerned that the funds' fragility may render banks themselves more susceptible to risk. For instance, in a recent article and speech arguing in favor of MMF reform, New York Fed President Bill Dudley stated that MMF fragility may contribute to financial market systemic risk. The idea that the susceptibility of MMFs to runs may make the financial system more unstable seems intuitive, but is it correct? In this post, we show that the idea isn'​t only intuitively appealing, it'​s also sound from an economic theory standpoint: MMF fragility is indeed a concern for the stability of the banking system and a contributing factor to financial market systemic risk.... Traditionally, banks have financed their investments in loans and long-​term securities by collecting demand deposits from both households and corporations. In recent decades, however, U.​S. banks have also increasingly relied on funding from other financial intermediaries, such as MMFs. As we discuss in an earlier post, MMFs collect money from large institutional and retail investors in order to provide short-​term funding to the financial sector and to banks in particular. In the United States, they'​re a significant player in the short-​term funding market. The funds managed approximately $​2.​5 trillion in assets at the end of 2012. As the table below shows, MMFs held 43 percent of financial commercial paper, 29 percent of certificates of deposit, and 33 percent of repo agreements."

On Friday, the New York Federal Reserve issues a statement entitled, "​Statement to Revise Terms of Overnight Fixed-​Rate Reverse Repurchase Agreement Operational Exercise", which says, "​As noted in the October 19, 2009, Statement Regarding Reverse Repurchase Agreements, the Open Market Trading Desk (​the Desk) at the Federal Reserve Bank of New York (​New York Fed) has been working internally and with market participants on operational aspects of tri-​party reverse repurchase agreements (​RRPs) to ensure that this tool will be ready to support the monetary policy objectives of the Federal Open Market Committee (​Committee). RRPs are a tool that can be used for managing money market interest rates, and are expected to provide the Federal Reserve with greater control over short-​term rates. The Desk continues to enhance operational readiness and increase its understanding of the impact of RRPs through technical exercises. As per the September 20, 2013, Statement Regarding Overnight Fixed-​Rate Reverse Repurchase Agreement Operational Exercise, the Committee instructed the Desk to further examine how a potential overnight, fixed-​rate full-​allotment RRP facility might work and how it might affect short-​term interest rates. In further support of this goal, this week the Committee authorized the Desk to modify the terms of the exercise. The maximum allotment cap will be increased to $​3 billion per counterparty per day from its current level of $​1 billion per counterparty per day, effective with the operation on Monday, December 23, 2013. In addition, the fixed rate for the operations will be lowered to 0.​03 percent (​three basis points) from the current 0.​05 percent (​five basis points), also effective on December 23, 2013. The fixed rate is expected to remain at this level through year-​end, but may change in the future. As authorized by the Committee, it will not exceed 0.​05 percent (​five basis points). The operations will remain open to all eligible RRP counterparties, will use Treasury collateral, will settle same-​day, and will have an overnight tenor. The RRP operations will continue to be held from 11:​15 am to 11:​45 am (​Eastern Time). Future changes to the maximum bid amount and rate for these RRP operations, or any other key parameter, will be announced with at least one business day prior notice on the New York Fed’​s public website. Like earlier operational readiness exercises, this work is a matter of prudent advance planning by the Federal Reserve. These operations do not represent a change in the stance of monetary policy, and no inference should be drawn about the timing of any change in the stance of monetary policy in the future."

ICI'​s latest weekly "​Money Market Mutual Fund Assets" says, "Total money market mutual fund assets decreased by $​34.​37 billion to $​2.​675 trillion for the week ending Wednesday, December 18, the Investment Company Institute reported today. Taxable government funds decreased by $​7.​43 billion, taxable non-​government funds decreased by $​29.​98 billion, and tax-​exempt funds increased by $​3.​04 billion.... Assets of retail money market funds increased by $​4.​07 billion to $​925.​77 billion. Taxable government money market fund assets in the retail category increased by $​560 million to $​199.​54 billion, taxable non-​government money market fund assets increased by $​1.​80 billion to $​531.​75 billion, and tax-​exempt fund assets increased by $​1.​72 billion to $​194.​48 billion.... Assets of institutional money market funds decreased by $​38.​45 billion to $​1.​750 trillion. Among institutional funds, taxable government money market fund assets decreased by $​7.​99 billion to $​732.​76 billion, taxable non-​government money market fund assets decreased by $​31.​78 billion to $​941.​34 billion, and tax-​exempt fund assets increased by $​1.​32 billion to $​75.​45 billion." Money fund assets had risen for 3 weeks straight (​up $​47 billion over this period) prior to this decline, which we believe was based on normal mid-​month payroll and tax outflows, coupled with possible weather-​related outflows. YTD, MMF assets are up just $​10 billion, or 0.​4%.

Funds Europe Magazine writes "​New rules may be "​death sentence" for money market funds". The brief says, "Proposals to tighten regulation of money market funds in Europe, particularly the controversial plan to impose a 3% capital buffer on some funds, could deal a fatal blow to this market segment, says a research firm." It quotes Barbara Wall, a Cerulli director, "​Europe wants more safeguards including tighter investment criteria, no short selling, and issuer and securities exposure limits. So far, so reasonable, but other proposals are less palatable and potentially destructive." The piece adds, "The proposal to impose a 3% capital buffer on funds that use a constant net asset value is particularly unwelcome, says Cerulli, because it will cost an extra 30 basis points at a time when many investors are already losing money [​sic] on their money market funds. Other controversial proposals include a ban on money market fund sales to retail customers. Angelos Gousios, a senior analyst at Cerulli, says the buffer proposal is likely to drive all but the biggest groups out of the market."

A press release entitled, "SunGard Offers Corporate Treasurers Portfolio Diversity with Asset Class Expansion of its Short-​Term Cash Management Solution," says, "SunGard has expanded asset class coverage of its SunGard Global Network (​SGN) Short-​Term Cash Management solution to provide customers with increased investment options, operational efficiencies and risk analysis. By working with wholesale market broker Tullett Prebon PLC and its specialized Corporate, Institutional & Public Sector Division, the SGN Short-​Term Cash Management solution is now providing access to bank deposits and certificates of deposit (​CDs) in addition to money market funds (​MMFs) through a single trading connection, as well as aggregate risk analysis across all investments." Bob Santella, president of SunGard'​s brokerage business, comments, "In the current low interest rate environment and regulatory uncertainty, corporate treasurers are seeking diversification and alternatives in their short-​term investment portfolios, and opportunities to maximize yield and automate manual processes. Expanded product access through the SGN Short-​Term Cash Management solution provides treasurers with an automated, multi-​asset execution and risk analysis capability through one portal, and we plan to add dealers and asset classes in the future to offer customers more investment options."

Attorney Melanie Fein wrote last week in American Banker, "​Money Market Madness, Indeed". She comments, "​A recent Wall Street Journal op-​ed by Eric Rosengren ("​Flirting With Money-​Market Madness", Nov. 28) demonstrates how far from reality the Boston Federal Reserve Bank president is willing to go in his quest to blame money market funds for the financial crisis. His remarks would be laughable were they not so outrageous and potentially damaging to the financial system. Almost nothing Mr. Rosengren says or implies about MMFs is true. MMFs had nothing to do with causing the financial crisis, which was a product of central bank blunders, flawed national housing policy, and failed bank supervisory policies. MMFs were victims of the crisis, not perpetrators. They nevertheless performed admirably in providing liquidity to their shareholders amid unprecedented chaos. Rosengren believes the funds should have provided liquidity to big banks instead. He complains that MMFs liquidated their holdings of bank-​sponsored commercial paper rather than holding onto it, even after it became apparent the commercial paper was loaded with subprime mortgages not fit for MMF portfolios. What Rosengren won'​t acknowledge is that the government facilities designed ostensibly to support MMFs during the crisis were little more than a backdoor bailout of big banks, which lacked sufficient capital to hold their own toxic commercial paper after MMFs rejected it. The problem he needs to address is not MMFs but rather excessive short-​term borrowing by banks to fund their "​shadow banking" activities. Rather than fix that problem by appropriate banking reforms, the Fed'​s solution is to demand demolition of MMFs, which likely would worsen the problem."

The asset-​backed securities' industry launches a new conference entitled, ABS Vegas 2014, which will be held Jan. 21-​24, 2014, at the Cosmopolitan Hotel in Las Vegas. (​Note: Our apologies with the scheduling, but Crane'​s Money Fund University takes place during this event, Jan. 23-​24, 2014, at The `​Providence Renaissance. MFU is geared towards new or junior money fund managers, while ABS tends to attract senior analysts. We were not aware of this new event when we scheduled MFU.) The ABS Vegas description says, "The Structured Finance Industry Group (​SFIG) and Information Management Network (​IMN) are proud to announce the debut of ABS Vegas 2014, a brand new conference that will serve the securitization industry as the marquee winter gathering. With over 100 sponsors confirmed and 1,​200+ issuers and investors registered, there has never been a better time to reserve your place for this must-​attend conference. The three-​and-​a-​half day program, developed by leaders who represent the most active firms in ABS, will feature coverage of the most pressing issues facing the marketplace. SFIG and IMN will work together to ensure all stakeholders interests are fairly and equally represented at the event, including investors, issuers, financial intermediaries, regulators, law firms, accounting firms, technology firms, rating agencies, servicers and trustees." The Structured Finance Industry Group (​SFIG) was formed earlier this year after a number of securities firms deserted the former ASF, or American Securitization Forum. (​ASF is having its ASF 2014 at Aria Las Vegas, Jan. 26-​29, 2014.)

ICI'​s latest "Money Market Mutual Fund Assets" shows MMF assets increasing for the third week in a row, a $​46.​6 billion gain since Nov. 20. The release says, "Total money market mutual fund assets increased by $​7.​45 billion to $​2.​710 trillion for week ending Wednesday, December 11, the Investment Company Institute reported today. Taxable government funds decreased by $​1.​40 billion, taxable non-​government funds increased by $​8.​29 billion, and tax-​exempt funds increased by $​560 million.... Assets of retail money market funds increased by $​2.​17 billion to $​921.​66 billion. Taxable government money market fund assets in the retail category increased by $​560 million to $​198.​98 billion, taxable non-​government money market fund assets increased by $​1.​51 billion to $​529.​92 billion, and tax-​exempt fund assets increased by $​100 million to $​192.​76 billion.... Assets of institutional money market funds increased by $​5.​28 billion to $​1.​788 trillion. Among institutional funds, taxable government money market fund assets decreased by $​1.​95 billion to $​740.​75 billion, taxable non-​government money market fund assets increased by $​6.​79 billion to $​973.​11 billion, and tax-​exempt fund assets increased by $​450 million to $​74.​12 billion." Year-​to-​date, money fund assets have increased by $​45 billion, or 1.​7%. Retail assets are down YTD by $​8 billion while Institutional assets are up by $​52 billion.

Bloomberg writes "​Fed Weighs Reserve-​Rate Cut After Repo Fix to Show Easing". The article says, "Federal Reserve officials are renewing a debate over cutting interest paid to banks on excess reserves, a move aimed at convincing investors that tapering its bond-​buying isn'​t the same as tightening its monetary policy. Lowering the rate, now 0.​25 percent, is among "​ideas that are still in play" as the central bank seeks to improve the way it communicates the outlook for interest rates, Atlanta Fed President Dennis Lockhart said on Dec. 5. The debate was revived as the Fed successfully tests a new policy involving so-​called reverse repurchase transactions that would give it greater control over short-​term borrowing costs. That may ease concern that cutting the interest rate on excess reserves could wreak havoc by pushing rates to zero or lower in money markets."

We ran an advertisement in the latest MFI (​page 3) entitled, "SSgA Seeks Intermediate Cash Sales Rep," and mentioned this in our "People" News below. But we thought we'​d mention more of the listing on our website, and we also learned that Wells Fargo is seeking a Money Market Wholesaler. To see the SSgA listing, go to: http://​www.​statestreet.​com/​careers and search for job #​83005. To see the Wells Fargo listing, go to: https://​www.​wellsfargo.​com/​careers/ <​i:​https://​www.​wellsfargo.​com/​careers/>`​_ and search for job #​3816767. The SSgA ad says, "State Street Global Advisors (​SSgA) is currently looking for an Internal Sales Cash Representative in our direct sales channel. ​This is an opportunity to work with SSgA and the global cash management product line. SSgA currently manages approximately $​2 trillion in assets and is a leading cash management provider with approximately $​412 billion in cash assets. We are seeking a driven, self-​motivated and team oriented Internal Sales Cash Representative to help build and grow relationships with corporate treasurers and their staff. Key Responsibilities will include: Working directly with a Senior Sales Cash Representative to coordinate all aspects of territory management, including arranging client meetings and calls, identifying prospects, responding to website inquiries, and executing on prospecting initiatives.... ​Critical Success Factors: Financial services industry experience with money market mutual funds and/​or other investment products.... Licenses / Education: Required: Series 7 and Series 63. Bachelor'​s Degree." The Wells listing says, "This internal sales role is responsible for providing effective sales coverage within a wide Eastern geographic footprint to internal and external distribution partners. This contact base represents multiple business lines that cover institutional clients in need of investment solutions. The Wholesaler Associate 2 is expected to work closely with the Field Wholesaler and assist our channel partners in both identifying and closing new business opportunities."

Entries to the SEC'​s "​Comments on Proposed Rule: Money Market Fund Reform; Amendments to Form PF" website continue to trickle in. The latest, labeled "Senator Jeanne Shaheen, et al., Congress of the United States," comes from the New Hampshire Congressional delegation (​signed by Senators `​Jeanne Shaheen and Kelly Ayotte, and Congresswomen Carol Shea-​Porter and Anne McLane Kuster). It says, "We write as representatives of the State of New Hampshire to express our concern over the current proposal put forth by the Securities and Exchange Commission (​SEC) to impose new regulations on money market mutual funds, particularly municipal funds that are critical to state and local governments. We believe strongly in the SEC'​s mission to protect investors and ensure that our capital markets are fair and efficient for all Americans. We recognize the SEC has been committed to money market fund reform since the financial crisis, and we appreciate its diligence in pursuing reforms to make the product more transparent and resilient. However, we have serious concerns that the proposal will unnecessarily harm municipal money market funds. The proposal appropriately excludes Treasury and Government money market funds, which remained stable during the period following the bankruptcy of Lehman Brothers in 2008. Similarly, municipal money market funds did not experience large redemptions during the crisis and should also be excluded from the proposal. Applying either a floating net asset value (​NAV) or investor redemption restriction to municipal funds is not appropriate and would dramatically reduce investment in these funds, thereby increasing borrowing costs for the already-​strapped state and local governments that depend on money market funds to meet important financing needs. Like Treasury and Government money market funds, municipal funds do not invest in the same types of corporate debt securities in which prime funds invest. As you know, during the financial crisis, prime money market funds held by large institutional investors were the only funds that experienced significant and rapid investor withdrawals."

The Institutional Money Market Funds Association (​IMMFA) posted a link on its "Money Market Funds in the News page to a Recording of the European Parliament ECON Committee Meeting from last Monday (​Dec. 2). The Committee on Economic Affairs video contains a discussion of 5.​0 Money Market Funds (​ECON/​7/​13748) starting around 15:​30 on the recording. (​See the European Union'​s "​New rules for Money Market Funds proposed – Frequently Asked Questions".) Participants of the committee meeting say the "​shadow" banking sector has grown to $​71 trillion and is 1/​4 of global financial assets. Rapporteur Said El Khadraoui of Belgium comments, "​There have been calls for regulation.... The Commission made a proposal on money market funds in September last, and that was very much a part of that call for greater regulation.... As a first exchange of views, I think the EC'​s proposal is a good basis for further work.... While money market funds can be useful ... there'​s no questions of getting rid of these investments." The speaker then comments that he'​d prefer a "​buffer" to be implemented immediately and to eliminate "​CNAV" (​constant NAV funds) in 5 years time. He also added that he wasn'​t crazy about the proposed ban on money fund ratings. They added that next week [​this week] is the deadline for amendments, that there would be a vote in February, and that [​the Committee] should be able to finish before the end of Parliamentary time (​May 2014). However, many observers doubt that action will be taken before there are new elections for Members of the European Parliament (​MEPs) in May.

ICI'​s latest weekly "​Money Market Mutual Fund Assets" shows totals breaking above $​2.​7 trillion for the first time since Jan. 9, 2013. The release says, "Total money market mutual fund assets increased by $​24.​16 billion to $​2.​702 trillion for the eight-​day period ended Wednesday, December 4, the Investment Company Institute reported today. Taxable government funds increased by $​12.​18 billion, taxable non-​government funds increased by $​8.​80 billion, and tax-​exempt funds increased by $​3.​19 billion.... Assets of retail money market funds increased by $​2.​25 billion to $​919.​46 billion. Taxable government money market fund assets in the retail category increased by $​370 million to $​198.​42 billion, taxable non-​government money market fund assets increased by $​120 million to $​528.​38 billion, and tax-​exempt fund assets increased by $​1.​76 billion to $​192.​66 billion.... Assets of institutional money market funds increased by $​21.​92 billion to $​1.​783 trillion. Among institutional funds, taxable government money market fund assets increased by $​11.​81 billion to $​742.​70 billion, taxable non-​government money market fund assets increased by $​8.​68 billion to $​966.​33 billion, and tax-​exempt fund assets increased by $​1.​42 billion to $​73.​67 billion." Money market fund assets are poised to have their second flat (​up slightly) year in a row for 2013. YTD, they'​re up by $​37 billion, or 1.​4%.

The U.​K.-​based Euromoney writes "​Corporate treasurers seek alternatives to money-​market funds". The article comments, "Corporate treasurers are diversifying away from using money-​market funds (​MMFs) to manage short-​term liquidity in response to low rates and proposed regulatory changes that are threatening to impair the MMF industry.... Corporate treasurers have long viewed MMFs as one of the most effective means of managing short-​term intra-​day liquidity and diversifying counterparty risk, but they are now being forced to adjust this strategy and seek alternatives." The piece quotes Andy Nash, senior vice-​president and group treasurer of Netherlands-​based retail group Ahold, "Money-​market funds have traditionally been attractive to corporates because they are liquid, have a credit rating, give diversity of investment -- we are effectively outsourcing our credit research -- and most importantly they were attractive for capital preservation.... We have already made key changes in managing our investments: our counterparty policy has been updated and the total amount of counterparty risk for financial institutions increased to cope with the possibility that we come out of MMFs. We are using alternatives from the treasurer'​s investment instrument toolbox, such as repos/​sticky deposits and other funds offering security; with more use of good old-​fashioned term deposits again." The article adds, "​Nash says Ahold has changed the way in which it uses MMFs, due to the low-​rate environment as well as questions relating to capital preservation.... A similar shift in strategy could be expected among other companies, but changing investment policy can be a laborious process, and one often requiring board-​level approval."

U.​K. Treasury publication GTNews features two articles on "​repos" or repurchase agreements. The first "Repo and the Repo Market," by Richard Comotto of the ICMA Centre, University of Reading, says, "The repo market has seen increasing interest from corporates in recent years, particularly from those looking to reduce their exposure to the banking sector. But new regulations threaten to stall the market, or worse." The second, "Repo for Treasurers," by Tak Eng of RBS Greenwich Capital, explains, "Corporate treasurers may wish to consider making more use of the repo markets as an alternative investment vehicle. They can offer a low-​cost, low-​risk, flexible and efficient way for corporates to invest spare cash for short periods." GTNews' first piece adds, "Over the past few decades, repo has become the key short-​term funding instrument of banks and a growing home for the liquid assets of non-​bank financial and corporate investors. Repo also performs a variety of other functions essential to the efficiency of the financial markets. Also, because of its collateralised nature, regulators have promoted repo as a means of mitigating risk." The second piece adds, "Repo markets are extremely important. They are large and highly liquid. In the US, for example, the daily average outstanding amount is some US$​4.​5 trillion , while in Europe, the total value of repos is over E6 trillion. This high liquidity reflects the vital role repo plays as a lubricant for the financial system. It is used by central banks to manage liquidity, by brokers and dealers to provide short-​term financing for their everyday operations, and by investors and corporates to manage cash."

Federated Investors' latest "​Month in Cash", written by Deborah Cunningham, says, "​One of the challenges of doing these monthly updates the past few years is the underlying narrative hasn'​t really changed all that much. Ever since the Federal Reserve unleashed ultra-​accommodation five years ago this month, we'​ve been dealing with a cash yield curve that shifted rapidly and sharply downward. Periodic eruptions in Europe and Washington have added the occasional drama and subsequent bump up in yields -- and we could get another round of such the next few months as yet another potential showdown over a continuing budget resolution and debt ceiling looms. But the struggle for those who deal with the money markets has been and continues to be how to find value in an extremely low-​rate environment. If we look beyond this reality, however, there are signs this paradigm may be beginning to shift. We got a taste of this in the minutes from late October'​s Federal Reserve policymakers meeting. They contained a more optimistic discussion than many expected, raising the possibility that quantitative-​easing'​s bond purchases could begin to slow as early as December.... To be sure, outgoing Fed Chairman Ben Bernanke and other Fed governors were quick to differentiate between tapering, which impacts the longer end of the yield curve, and tightening, which is largely on the cash portion. Even as the Fed tapers and eventually ends QE, it made clear tightening via increases in the target funds rate isn'​t automatically up next. Labor market and inflation data would have to justify a hike and neither is anywhere close to such now.... Secondly, it appears the overnight reverse repo program the Fed is testing in all likelihood will be extended beyond its January deadline, with the possibility that agency securities will be added to the mix. The reverse repo rates, which started at 1 basis point on Treasuries when the Fed first began offering them in September and now are at the maximum 5 basis points, have acted to set a floor in the marketplace by forcing banks and other overnight repo dealers to raise their rates to attract buyers (​as we’​ve noted before, why would a buyer pay 5 basis points for a low-​risk bank repo if it can get the same rate from the risk-​free Fed)."

Bloomberg radio features "​Arthur Levitt Says SEC Is Failing on Money Market Funds". They write, "Arthur Levitt, former Securities and Exchange Commission chairman, says an S.​E.​C. proposal on money market funds "​would only make matters worse." Levitt talks with Bloomberg'​s Tom Keene on Bloomberg Radio'​s "​Bloomberg Surveillance"." Levitt comments, "I think that the SEC, under tremendous pressure that started with Mary Shapiro with rebellious commissioners, has come out with a series of alternatives that really don'​t answer the problem and will make it a lot worse.... Their proposal ... would apply only to institutional prime funds and what I think is more serious is that they would allow fund directors to charge for redeeming. If anything is going to cause a panic in the money market fund world, it is the threat that investors are going to be charged or held back from redeeming. The redemption fees or what they call gates actually make runs more contagious. If one funds announces a fee or gate, that sends a signal that all its directors are worried about a run. These ideas are just terrible." Levitt also erroneously answers, "​Many times," when asked how many times money funds have broken the buck. (​Only two money funds have ever "​broken the buck." This answer is shocking given Levitt'​s former position as Chair of the SEC.) Levitt adds, "​The only way to deal with this, in my judgment, is to count those funds, mark them to the market, and if they'​re selling for a buck, if they'​re selling for 98 cents, mark them at 98 cents." (​This statement too is baffling since money funds must already round down if the value breaks below 99.​5 cents.)

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