Open-End Fund Liquidity Risk Management Programs and Swing Pricing
Summary
SIFMA provided comments to the U.S. Securities and Exchange Commission (SEC) on the above referenced rule proposal. In addition to this letter, the SIFMA Asset Management Group (SIFMA AMG) is submitting two separate letters discussing the overall Proposal.
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Excerpt
February 14, 2023
Ms. Vanessa Countryman
Secretary
Securities and Exchange Commission
100 F Street NE.
Washington, DC 20549-1090
Re: Open-End Fund Liquidity Risk Management Programs and Swing Pricing; Form N-PORT; File Number S7-26-22; Release Nos. 33-11130; IC-34746; RIN 3235-AM98
Dear Ms. Countryman:
Please accept the following comments of the Securities Industry and Financial Markets Association (“SIFMA”)1 on the above referenced rule proposal (the “Proposal”). In addition to this letter, the SIFMA Asset Management Group (“AMG”)2 is submitting two separate letters discussing the overall Proposal. SIFMA agrees with and supports the comments set forth in the AMG letters and writes separately and specifically on behalf of our mutual fund intermediary members with respect to the proposed swing pricing and “hard close” requirements.
I. Executive Summary
We are concerned that the swing pricing requirement and the attendant “hard close” elements of the Proposal will have significant adverse consequences for the millions of investors who invest in mutual funds through intermediaries or retirement plans. As discussed in more detail below, we believe the Proposal will have the following significant negative consequences:
▪ The swing pricing requirement will create investor confusion and introduce new delays into the mutual fund order management infrastructure;
▪ The “hard close” element of the Proposal would require the mutual fund industry to re-engineer the entire process though which mutual fund orders are collected, submitted, and processed by intermediaries and retirement plans, at great cost; and
▪ The “hard close” requirement would also negatively impact or entirely eliminate the ability of investors who transact in mutual funds through intermediaries or retirement plans to purchase or sell shares at the net asset value (“NAV”) of a fund on the same day they submit their orders.
1 SIFMA is the leading trade association for broker-dealers, investment banks, and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s nearly 1 million employees, we advocate for legislation, regulation, and business policy, affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit http://www.sifma.org.
2 SIFMA AMG brings the asset management community together to provide views on U.S. and global policy and to create industry best practices. SIFMA AMG’s members represent U.S. and global asset management firms whose combined assets under management exceed $45 trillion. The clients of SIFMA AMG member firms include, among others, tens of millions of individual investors, registered investment companies, endowments, public and private pension funds, UCITS and private funds such as hedge funds and private equity funds. For more information, visit http://www.sifma.org/amg.