Home PageUncategorizedSchwab Is Forcing Cash Out Of Money Market Funds And Into Treasuries

Schwab Is Forcing Cash Out Of Money Market Funds And Into Treasuries

TRANSLATION: “Schwab is telegraphing that brokerages have begun permanently unwinding hundreds of billions if not trillions in money market-funds, and rotating it almost entirely into government securities”

“Schwab will consider a non-response to this notice as your authorization and instruction to change your cash feature.”

OFFICIAL STATEMENT “Charles Schwab has started informing some of its clients that “between June and October 2016, Schwab will update the cash feature on your account(s) from the current retail prime or municipal money market fund sweep to the Schwab Government Money Fund” or the SWGXX, which “will invest at least 99.5% of its total assets in cash, U.S. government securities and/or repurchase agreements that are collateralized fully by cash and/or U.S. government securities; under normal circumstances, at least 80% of the fund’s net assets will be invested solely in U.S. government securities including repurchase agreements. ”

While perhaps not quite as dramatic (or confusing) as last week’s announcement by Scottrade that the discount online broker would no longer allow Canadian citizens to hold accounts, in a new surprising development, another online broker, Charles Schwab has started informing some of its clients that “between June and October 2016, Schwab will update the cash feature on your account(s) from the current retail prime or municipal money market fund sweep to the Schwab Government Money Fund” or the SWGXX, which “will invest at least 99.5% of its total assets in cash, U.S. government securities and/or repurchase agreements that are collateralized fully by cash and/or U.S. government securities; under normal circumstances, at least 80% of the fund’s net assets will be invested solely in U.S. government securities including repurchase agreements. ”

In other words Schwab is telegraphing that brokerages have begun permanently unwinding hundreds of billions if not trillions in money market-funds, and rotating it almost entirely into government securities.

The stated reason for this quiet unwind is the following:

“the U.S. Securities and Exchange Commission (SEC) has made changes to the regulations that govern money market funds. These new rules are intended to increase fund liquidity and to protect investors. The changes include new restrictions related to who will be permitted to invest in “retail” money market funds, which are non-government money market funds that are allowed to maintain a constant net asset value (CNAV). As a result, beginning later this year Schwab Prime Money Market Funds and Municipal Money Market Funds will be required to limit shareholders to natural persons (i.e., individuals, as opposed to businesses, defined benefit plans, or endowments).”

Full Article on ZeroHedge

X