August 2016

In October 2016 new Securities and Exchange Commission (SEC) rules governing money market funds (MMFs) take effect. Like earlier SEC reforms, they aim to make the MMF industry stronger and more transparent. Under the new rules, institutional prime and municipal MMFs must use market-based net asset value (NAV) for their transactions. (Previously market-based NAVs were calculated and disclosed, but they were not required for transactions). The rules also stipulate that if an MMF’s level of weekly liquid assets falls below 30%, the board may impose a liquidity fee or temporarily suspend (or gate) redemptions. Government MMFs are not required to be subject to the fee and gate provisions.

These regulatory changes are unfolding in a market environment in which interest rates, industry flows and portfolio security supply/demand dynamics may be very much in flux. As investors adapt to the new regulatory environment, they are re-evaluating their liquidity strategies and considering their investment options. Cash segmentation (distinguishing among operating, reserve and strategic cash), coupled with a firm grasp of the new SEC rules, will enable investors to create the most-effective liquidity strategies for their own particular risk tolerances and return objectives.

To find out more, download our white paper, Changing Complexities. You can also download other Liquidity Insights from our J.P. Morgan Global Liquidity website www.jpmgloballiquidity.com With its user-friendly navigation, you’ll find a seamless connection between liquidity investment solutions and our best thinking, which can help you meet your goals in today’s complex investing environment.

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