Institutional Cash Distributors (ICD) have released their ICD Commentary™ Operational and Accounting Issues with the Floating NAV and the Impact On Money Market Funds. This commentary questions the viability of the SEC's floating Net Asset Valuation proposal for prime Money Market Funds. Fundamental operational and accounting issues would upend the trading process, deter investors from investing in money market fund products, and thereby reduce the availability of affordable short-term financing for corporations, municipalities and state governments.
The main issues ICD identified with floating NAV were:
1. Corporations would have to monitor their mark-to-market value and report on any minute gains or losses resulting in:
- a need for a significant overhaul of general accounting standards; or
- an additional accounting burden on US corporations
2. new settlement alternatives will be required, such as:
- delivering payments post end of day pricing
- pricing several times per day
- day after pricing (or T+1).
The simplest solution is just to drop the SEC's floating NAV proposal. These accounting and operational problems won't go away.
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