Money Market Funds
Operations and Technology
Once Again, Information Moves Markets
By Sean Collins
March 18, 2015
Treasury yields fell sharply today and the stock market jumped. Wouldn’t it be nice if mutual funds could take credit? Unfortunately, they can’t. Any orders that mutual fund investors place to buy or sell shares anytime today before 4:00 p.m. won’t hit the market until 4:00 p.m., just like any other day. And, if you are reading this blog post at the time of its posting, 4:00 p.m. is still 10 minutes away.
Instead, the sharp changes in the market occurred right at 2:00 p.m. (ET) (see chart) when the Federal Reserve released the minutes of its March Federal Open Market Committee (FOMC) meeting, which indicated that it would be unlikely to raise interest rates at its upcoming April meeting.
Yield on 10-Year U.S. Treasury, March 18, 2015
This shows that new information moves the market. I emphasize this point because if things had gone the other way today—if the Fed had indicated tightening and markets had dropped—sure as the sun will shine, some commentators would have incorrectly attributed the drop to shareholders redeeming out of funds—even though that couldn’t possibly be the case because their orders aren’t executed until 4:00 p.m.
Sean Collins is ICI’s senior director of industry and financial analysis.
Does Liquidity in ETFs Depend Solely on Authorized Participants?
By Shelly Antoniewicz and Jane Heinrichs
March 16, 2015
ICI recently conducted a survey of its members that sponsor exchange-traded funds (ETFs) to collect information on authorized participants (APs)—typically market makers or large institutional investors with an ETF trading desk that have entered into a legal contract with an ETF to create and redeem shares of the fund.
Plenty of Players Provide Liquidity for ETFs
By Shelly Antoniewicz
December 2, 2014
A recent article in the Financial Times’ FT Alphaville blog (“Lies, Damned Lies, and Liquidity Expectations”) focused on a paper published by the Committee on the Global Financial System, an organization that monitors developments in global financial markets for central bank governors.
Bloomberg Ignores the Evidence on Bond ETFs
By Mike McNamee
September 26, 2014
In response to “Pimco ETF Probe Spotlighting $270 Billion Market Vexing FSB,” we posted the following comment on Bloomberg News’ website:
A Look Inside ETFs and ETF Trading
By Rochelle Antoniewicz and Jane Heinrichs
September 23, 2014
Investors in exchange-traded funds (ETFs) are trading shares with each other far more than they are turning to authorized participants to create or redeem shares.
The Real Lessons to Be Learned from 1994’s Bond Market
By Brian Reid
July 29, 2014
A recent “Heard on the Street” column in the Wall Street Journal (“Heeding 1994's Bond-Market Lesson,” July 27, 2014) is correct in saying that there’s a lesson to be learned from the 1994 bond market—but it draws the wrong lesson.
SEC Chair White Stresses Need for FSOC to Consult Sources for Necessary Expertise
By Rachel McTague
May 22, 2014
Securities and Exchange Commission (SEC) Chair Mary Jo White today called for the U.S. Financial Stability Oversight Council (FSOC) to use outside expertise to the degree necessary in its process of designating systemically important financial institutions (SIFIs). She asserted that it is “enormously important for FSOC, before it makes any decision of any kind, to make sure it has the necessary expertise on any of those issues.”
“Market Tantrums” and Mutual Funds: A Second Look
By Sean Collins and Chris Plantier
May 19, 2014
Over the past year, policymakers who are focused on financial stability have pursued a theory that mutual fund investors can destabilize financial markets by redeeming from funds when markets decline. According to this theory, redemptions by fund investors lead fund managers to sell securities; those sales drive asset prices down further and, in turn, spur more investor flight, redemptions, and price declines.
ETFs Don’t Move the Market—Information Does
By Shelly Antoniewicz
March 11, 2014
There they go again.