We provide further details on the key reforms below.
Applicable to Institutional Prime and Institutional Tax-Exempt Money Market Funds. A mandatory fee is charged to redeeming investors when a fund’s net redemptions in a day exceed 5% of its net assets (subject to a de minimis exception). The liquidity fee applies to all shares that are redeemed, including those redeemed during pricing periods early in the day, on the day the fund has total daily net redemptions that exceed 5% of net assets.
The size of the fee generally is determined by making a good faith estimate of the liquidity costs, including the spread, other transactions and market impact costs the fund would incur if it were to sell a pro rata amount of each security in its portfolio to satisfy the amount of net redemptions.
No liquidity fee is required if the liquidity costs estimated in good faith and supported by data are less than 1 basis point (0.01%) of the value of the shares redeemed. If the estimated liquidity costs are less than one basis point of the value of the shares redeemed, a fund is not required to apply a fee under the de minimis exception contained in the amended Rule.
If a fund cannot make a good faith estimate of the liquidity costs, supported by data, the default liquidity fee is 1% of the value of shares redeemed.
Applicable to Prime and tax-exempt money market funds; government money market funds may opt in. Irrespective of liquidity or redemption levels, a discretionary fee may be imposed on redeeming investors when a fund’s board determines that such a fee is in the best interests of the respective fund. The discretionary fee may not exceed 2% of the value of the shares redeemed.
The Rule increased the DLA requirement from 10% to 25% and the WLA requirement from 30% to 50%. The SEC implemented the liquidity fee structure in lieu of adopting "swing pricing" as part of the amended Rule.
A stable NAV fund will be permitted under the Rule to either convert to a floating NAV or to engage in share cancellation in this scenario (i.e., reducing the number of shares outstanding).
If a stable NAV fund converts to a floating NAV under these circumstances, the fund’s losses will be reflected through a declining share price.
If a fund uses a share cancellation mechanism, the fund will maintain a stable share price, despite losing value, by reducing the number of its outstanding shares. Investors in such a fund would observe a stable share price but a declining number of shares for their investment.
Disclosures must include: (i) advance notification to investors in a fund’s prospectus that the fund plans to use share cancellation in a negative interest rate event and the potential effects on investors; and (ii) when the fund is cancelling shares, information in each account statement identifying that such practice is in use and explaining the impact it has on investors.
Funds will be required to calculate WAM and WAL based on the percentage of each security’s market value in the portfolio (previously, some funds calculated WAM and WAL based on the amortized cost of each security).
The final Rule is effective 60 days after it is published in the Federal Register. Once effective, funds must comply by the following dates:
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without State Street Global Advisors’ express written consent.
The views expressed in this material are the views of the Global Cash Business team through the period ended 14 July 2023 and are subject to change based on market and other conditions.
An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.
This document contains certain statements that may be deemed forward looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.
All information is from State Street Global Advisors unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
Past performance is not a reliable indicator of future performance.
Investing involves risk including the risk of loss of principal.
The trademarks and service marks referenced herein are the property of their respective owners. Third party data providers make no warranties or representations of any kind relating to the accuracy, completeness or timeliness of the data and have no liability for damages of any kind relating to the use of such data.
For US Distribution:
Distributor: State Street Global Advisors Funds Distributors, LLC, member FINRA, SIPC, an indirect wholly owned subsidiary of State Street Corporation. The Fund pays State Street Bank and Trust Company for its services as custodian, transfer agent and shareholder servicing agent and pays SSGA Funds Management, Inc., an affiliate of State Street Bank and Trust Company, for investment advisory services.
Before investing, consider the funds' investment objectives, risks, charges and expenses. To obtain a prospectus or summary prospectus which contains this and other information, download a prospectus now from www.ssga.com/cash, or call 1.877.521.4083. Read it carefully before investing.
Not FDIC Insured –No Bank Guarantee – May Lose Value
For EMEA Distribution: The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
© 2023 State Street Corporation – All rights reserved.
Tracking Code: 5810749.1.1.GBL.INST