Liquidity Risk Management and Swing Pricing: The SEC’s New Rules and Rule Amendments

January 31, 2017
The Investment Lawyer

On October 13, 2016 the Securities and Exchange Commission (SEC or Commission) adopted new rules and rule amendments (Final Rules) designed to promote effective liquidity risk management, reduce the risk that funds would be unable to meet shareholder redemption requests, and to mitigate the dilutive impact of purchase and redemption transactions. Because these changes represent significant revisions to current liquidity risk management requirements and guidance, fund complexes are likely to face substantial and costly changes to their compliance and risk management functions.

Under the Final Rules, registered open-end management investment companies, including exchange-traded funds (ETFs) and exchange-traded managed funds, but excluding money market funds, must establish liquidity risk management programs. The Final Rules also permit, but do not require, registered open-end management investment companies (excluding money market funds and ETFs) to utilize “swing pricing” and include new disclosure and reporting requirements.

Read "Liquidity Risk Management and Swing Pricing: The SEC’s New Rules and Rule Amendments."