Swing pricing may be required for most funds by the SEC

The majority of funds would be required to apply swing pricing, which is one of the significant changes in the SEC's proposed regulation This approach charges inflow and outflow costs to investors instead of diluting fund owners, which the SEC believes may help ease liquidity concerns Nevertheless, some things could be improved The first is that funds will have a significant mismatch due to swing pricing because they won't know when they can buy or sell shares until considerably later than when their NAV estimates are made. Matt Carroll Atlanta Braves opinion that the SEC suggests that to address this; pertinent Open-End Funds implement a "hard close" requirement for trades received by their fund firms (or registered transfer agents listed in the fund prospectus or clearing agencies) at the firm's trading cutoff time, which is likely 4 p m This means that, for most funds, trades received after that time will not receive the day's price or trade date

Second, according to the SEC's suggestions, all funds should separate their daily transactions involving derivatives and cash. This is a significant development for leveraged funds that employ derivatives to boost investor returns These funds would need to be in a liquid asset like cash or instruments that exhibit cash characteristics to set aside the cost of each transaction If a fund has a liquidity problem, the idea is that it can then access these assets to satisfy redemptions Many fund managers have, however, swiftly noted that this is a one-size-fits-all approach that places a significant financial burden on all funds The proposal has already drawn criticism from several trade associations, including the CFA Institute, the Society of Fund Management Accountants, and the American Council of Independent Investments

According to some fund managers, this could significantly impact retirement savers who need assistance completing trades for their 401(k) funds This will significantly affect the distribution businesses that support such savings plans. According to the SEC, the suggestions won't impact money market funds or exchange-traded funds. These funds do not have the same liquidity issues as open-end funds, even though they could be subject to swing pricing and hard close.

Additionally, detractors claim that it will be challenging for fund managers to implement swing pricing in a way that meets the requirements of their funds due to the proposed revisions. This is because a fund's requirements could differ significantly based on its investment objectives and, consequently, the assets in its portfolio The possibility that the SEC's proposed revisions may put financial obligations on funds with lower net inflows and outflows, such as small-cap growth or overseas funds, is a crucial criticism of the proposal This is so that the Swing Factor, which is required by the rules and reflects market effect costs, may be calculated; the smaller the net purchases and redemptions, the higher the Swing Factor