Details on the draft money market fund proposal being considered by the SEC are starting to emerge. News outlets are reporting that the proposal requires prime institutional funds to float their NAV, while retail and government funds could maintain a stable NAV. The proposal is estimated to affect about 35% of the money fund industry. Supporters of the change say that the reform could make prime funds less susceptible to runs because it reduces the incentive for investors to redeem early during a market crisis. However, there are many questions that such a proposal raises, including how the implementation will affect funds with both institutional and retail investors. It is also not clear yet how “institutional” and “retail” investors will be defined.
Luis Aguilar, thought to be the swing vote on the issue, has said he is likely to support the draft proposal although he said his position could change as details are finalized. He also said there is a reach chance that the SEC will issue the proposed rules next month. After the proposed rule is released, the public will have at least 60 days to comment on the proposal. After that the SEC would have to vote a second time to release a final rule.