Abstract:
Purpose  This paper seeks to explain the possible options detailed in the ÂMoney Market Reform Options report released by the President's Working Group on Financial Markets on October 21, 2010 for consideration by the Financial Stability Oversight Council (FSOC). Design/methodology/approach  The paper discusses reform options in the areas of: floating net asset values, privately sponsored emergency liquidity vehicles, mandatory redemptions in kind, insurance for money market funds (MMFs), a two-tier system providing enhanced protections for stable net asset value (ÂNAVÂ) MMFs, a two-tier system reserving stable NAV MMFs solely for institutional investors, regulating stable NAV MMFs as special purpose banks, and enhancing constraints on unregulated MMF substitutes. Findings  The Report concludes that more should be done to address systemic risks presented by MMFs and the structural vulnerabilities of MMFs to runs, and discusses various reform options for the FSOC to consider, but does not recommend any particular reform. Originality/value  The paper provides expert advice from experienced financial services lawyers.
Purpose  This paper seeks to explain the possible options detailed in the ÂMoney Market Reform Options report released by the President's Working Group on Financial Markets on October 21, 2010 for consideration by the Financial Stability Oversight Council (FSOC). Design/methodology/approach  The paper discusses reform options in the areas of: floating net asset values, privately sponsored emergency liquidity vehicles, mandatory redemptions in kind, insurance for money market funds (MMFs), a two-tier system providing enhanced protections for stable net asset value (ÂNAVÂ) MMFs, a two-tier system reserving stable NAV MMFs solely for institutional investors, regulating stable NAV MMFs as special purpose banks, and enhancing constraints on unregulated MMF substitutes. Findings  The Report concludes that more should be done to address systemic risks presented by MMFs and the structural vulnerabilities of MMFs to runs, and discusses various reform options for the FSOC to consider, but does not recommend any particular reform. Originality/value  The paper provides expert advice from experienced financial services lawyers.