- In a nice win for money-market fund providers like BlackRock (BLK +1.2%), Federated Investors (FII +4.3%), Invesco (IVZ +0.8%), Legg Mason (LM +2.5%), and Schwab (SCHW +1.1%), there's been a change of heart at the SEC regarding floating asset values.
- The WSJ's Andrew Ackman reports the commission will exempt a majority of funds from a rule requiring them to abandon their $1 share price and float in value like any other mutual fund. Supporters of the rule argue the float would get investors used to their funds "breaking the buck," and thus prevent panicky withdrawals in a crisis. The fund companies have fought hard against the proposal.
- It's also a blow to other regulators, including the Fed, who wanted to expand the floating value idea to more funds, including those catering to retail investors.
- Citi's William Katz on the report: "We believe the trust accounts and non-trading desk liquidity instruments might also get exempt, leaving loosely about $20B in AUM exposure to deeper reform risk. We believe such AUM is far lower than ~15% short interest currently bakes in, setting the stage for a significant short squeeze."