Money Market Funds
Given the size of the Money Market Fund (MMF) industry and its importance in allocating short-term funding to financial institutions, limiting its vulnerability to investor flight is an important step in reducing fragility in financial markets.

An MMF is a type of mutual fund that is required by SEC rules to invest in low-risk securities, such as government securities, certificates of deposit and commercial paper. Unlike a “money market deposit account” at a bank, MMFs are not insured. MMFs seek to maintain a stable “net asset value” (“NAV,” ie the price at which MMF investors can redeem their shares) at usually $1.00 per share, but the NAV may fall below $1.00 per share and thus, investor losses, while rare, are possible.

During times of financial market stress, some financial assets in which MMFs invest may decline in price, or may become difficult to price at all. This may provide an incentive for investors to redeem their shares at the first signs of risk to their initial investments. As a result, these usually stable investment vehicles may become subject to shareholder runs.

The Federal Reserve Bank of New York contributes to the discussion on MMF reform through its analysis of current MMF vulnerabilities and their contribution to systemic risk, as well as its analysis and comment on various MMF industry reform options.
Liberty Street Economic Blog
The Fragility of an MMF-Intermediated Financial System
December 23, 2013

Twenty-Eight Money Market Funds That Could Have Broken the Buck: New Data on Losses during the 2008 Crisis
October 9, 2013

Pick Your Poison: How Money Market Funds Reacted to Financial Stress in 2011
March 6, 2013

The Minimum Balance at Risk: A Proposal to Stabilize Money Market Funds
October 15, 2012

Money Market Funds and Systemic Risk
June 11, 2012
Gates, Fees, and Preemptive Runs, Marco Cipriani, Antoine Martin, Patrick McCabe and Bruno M. Parigi, Federal Reserve Bank of New York Staff Reports, 670
April 2014

Money Market Funds Intermediation and Bank Instability, Marco Cipriani, Antoine Martin and Bruno M. Parigi, Federal Reserve Bank of New York Staff Reports, 599
February 2013

The Minimum Balance at Risk: A Proposal to Mitigate the Systemic Risks Posed by Money Market Funds, Patrick E. McCabe, Marco Cipriani, Michael Holscher, and Antoine Martin, Federal Reserve Bank of New York Staff Reports, 564
July 2012


Chronology of Key Events
September - October 2008
Run on (institutional) prime MMFs. Treasury guaranteed MMF assets, and the Federal Reserve introduced the Asset-Backed Commercial Paper Money Market Fund Liquidation Facility (AMLF) and the Commercial Paper Funding Facility (CPFF).
January 2010
October 2010
July 2011, July 2012
FSOC Annual Reports call for structural reform:
2012 Annual Reportoffsite
2011 Annual Reportoffsite
August 2012
September 2012
November 2012
January 2013
April 2013
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