marctomarket.com / By Marc Chandler / June 4, 2013
The disparate views among Federal Reserve officials often commands the market’s attention. Yet there is one area in which all the regional president agree and this will move into the spotlight tomorrow.
The Federal Reserve presidents have endorsed the idea of moving institutional money markets away from the fixed $1 a share approach and toward a variable pricing model. Tomorrow the Securities Exchange Commission will likely formally endorse it as well. Such funds currently hold some $2.6 trillion.
EC is trying a different approach. It is debate how much of a cash buffer fixed share price funds should maintain. The current proposal of 3% met industry objections. There is almost 500 bln euro in such funds. The collateral requirements for funds’ repo operations are also being re-examined. The EC has indicated it is willing to soften its initial stance that funds should not accept maturities of longer than almost 400 days to back repo trades. Such maturities now account for the overwhelming majority of such collateral.