SEC norms for the money market can trigger capital outflows

Fed believes that the provisions of SEC for the money market may trigger outflows, rather than reduce them.

The new rules of the Securities and Exchange Commission (SEC), to reduce the outflows from money market funds, may, on the contrary, to provoke them, said in the Federal Reserve Bank of New York on Monday.

We are talking about the point of new norms SEC, giving the possibility to reduce the outflows of funds – by restricting redemption – when there is insufficient liquidity.

Economists argue that such restrictions could cause premature outflow of investors.

“The possibility of a fine or other measures that would be serious enough to counteract the motivation of investors ‘run’ from the fund during the crisis, will give them an even stronger motivation to” escape “to avoid these measures.”

One member of the SEC voted against the introduction of these rules, expressing concern gusts to redemption.

Fed officials approves the remaining items norms SEC, particularly the staggering net worth of shares of some funds, instead of fixed – $ 1 per share.

Boston Fed President Eric Rosengren last week called the new rules – “significant improvement.”