(Reuters) – Money market funds will suspend “volatility pricing” when Wall Street’s top regulator votes on Wednesday to help rein in systemic risk in money markets and the world of large liquid funds, Bloomberg News reported on Tuesday.
Volatility pricing involves adjusting the value of the fund based on trading activity so that redeeming investors bear the cost of exiting the fund and do not dilute remaining investors’ equity.
The US report, citing people familiar with the matter, said the SEC intends to impose other fees that would affect parts of the $5.5 trillion industry.
A five-member committee will discuss 2021 the proposal to increase the resiliency of money market funds that calls for a bailout for taxpayers at the onset of the coronavirus pandemic.
It initially proposed volatility pricing rules to discourage rush withdrawals during times of stress, but the proposal drew a backlash from the industry.
Asset managers believe this would create operational challenges, impose prohibitive costs on fund sponsors, and reduce investors’ day-to-day liquidity, possibly phasing out some popular product.