Money Market Funds (MMF) Regulation

Money Market Funds are a type of collective fund that invest in short-term debt and provide financing for financial institutions, corporations and governments. During the financial crisis their liquidity and stability were challenged, which prompted discussion on how to make them more shock-resistant.

The MMF Regulation, which is part of the shadow banking initiative by the EC, introduces new rules aimed at making MMFs more resilient. The aim of the regulation is to preserve the integrity and stability of the internal market, by ensuring high standards for liquidity, diversification and transparency to investors.

The Regulation impacts MMFs set up as UCITS, and those that qualify as AIFs, and applies in addition to the existing UCITS and AIFMD frameworks. The Regulation lays down rules concerning the financial instruments eligible for investment by a MMF. The regulation also includes liquidity fees and redemption gates, diversification requirements for MMFs.

2019
2020
2021
2022
2023
2024
4
1
Implementation / enforcement 02/2012 - 09/2013
2
Discussion / consultation 09/2013 - 01/2017
3
Implementation / enforcement 01/2017 - 07/2018
4
In effect 07/2018 -

STATUS
MMFs created after 21 July 2018 must comply with the new rules. Existing MMF's have until 21 January 2019 to comply.

Fund managers that wish to manage and/or offer MMF's should request an extension of their license and register all MMF's it wishes to manage and/or offer. In order to obtain a MMF extension, managers should demonstrate compliance with the requirements following from the MMF Regulation as a manager. These requirements relate to the topics: 1. 'know your client', 2. 'internal credit quality assessment' and 3. 'data reporting'. In order to register an MMF, managers must be able to demonstrate compliance with the MMF Regulation requirements on a fund level. These requirements relate to the funds' the investment policy and valuation method.

New requirements could be introduced after 21 July 2022, when the European Commission will review the Regulation. 

Further information:
European Commission: Money Market Funds
KPMG: Rules for European Money Market Funds are finally agreed

author
Rob Voster Senior Manager
Categories: Financial Market Organisation