The US Securities and Exchange Commission proposes tighter rules on fund liquidity risk
On September 22 the U.S. Securities and Exchange Commission voted to propose new rules for promoting effective liquidity risk management by open-end and exchange-traded funds. If adopted, these rules would require mutual funds and ETFs, except money market funds, to establish a liquidity risk management program and enhance disclosure on fund liquidity.
Obtain more information on the new proposed liquidity management rules.
MSCI’s multi-asset class liquidity risk analytics can serve as the foundation for an effective liquidity risk management program that aims to satisfy the proposed regulations, including:
- Enhancing liquidity risk management programs with bond liquidity data, including order size, market depth, and bid/ask spread data collected from market participants that can be used together with a fund’s position size to estimate the number of days required to liquidate a position and the expected cost impact.
- Ranking positions by liquidity categories, including the six proposed by the Commission (1 day; 2-3 days; 4-7 days; 8-15 days; 16-0 days).
- Computing whether an asset can be sold within seven days at approximately its current value, using advanced analytics that measure the expected price impact for a given order size and liquidation horizon.
- Producing standard monthly reports on the liquidity of portfolio assets and delivering these in formats such as PDF or structured data that can be incorporated into proposed Form N-PORT reporting requirements.
The above capabilities can be delivered via web-based software, board-ready reports, structured data/flat files, outsourced services or as a combination of software and services. They can also be integrated into existing internal liquidity risk management frameworks.
MSCI’s Thomas Moser explains the SEC proposal
Interview with Thomas Moser, Vice President, MSCI Analytics