What is meant by liquidity, and what does the report recommend on the matter?
The liquidity of a security refers to the speed at which that security can be sold for approximately the price at which it is valued by the fund. The report recommends that money market funds should have, for the first time, mandated daily and weekly minimum liquidity standards. Taxable money market funds would be required to hold 5 percent of their assets in cash, U.S. Treasury securities, or other securities or repurchase agreements where the proceeds are accessible within one day. All money market funds would be required to hold 20 percent of assets in securities accessible within seven days. These minimum requirements would be supplemented by “stress testing” for the fund’s individual portfolio holdings and shareholder base to determine whether higher liquidity levels are needed.
