What is SEC Rule 2a 7?
From a maturity perspective, Rule 2a-7 stated that the average dollar-weighted portfolio maturity of investments held in a money market fund cannot exceed 60 days. From a credit rating perspective, no more than 3% of assets can be invested in securities that do not fall within the first or second-highest ranking tier.
Are repurchase agreements investments?
Repurchase agreement transactions (repos) are used by money market funds as short-term investments.
What are repurchase agreements in money market funds?
Repurchase agreements (also commonly referred to as repo agreements) are short-term secured loans frequently obtained by dealers (borrowers) to fund their securities portfolios, and by institutional investors (lenders) such as money market funds and securities lending firms, as sources of collateralised investment.
What is Form N CR?
Form N-CR is the public reporting form that is to be used for current reports of money. market funds required by section 30(b) of the Act and rule 30b1-8 under the Act. A money. market fund must file a report on Form N-CR upon the occurrence of any one or more of the. events specified in Parts B – H of this form.
What is the Money Market Reform Act?
According to the SEC, the new regulations were designed to provide “structural and operational reforms to address risks of investor runs in money market funds while preserving the benefits of the funds.” The rules establish three broad categories of money market funds: retail, governmental, and institutional.
Are repurchase agreements safe?
The assets are meant to be sold right away, unlike a secured deposit. Although repo loans are safe because they’re backed by government securities, there is a risk that the securities will drop in value, hurting the buyer’s investment. With an overnight repo loan, the agreed duration of the loan is one day.
How is money market regulated?
RBI governs and regulates the money market instruments under sections 45K, 45L, and 45W of the RBI Act, 1934. All co-operative banks, scheduled banks, and primary dealers are allowed to take part in the call/notice money market enacting as both lenders and borrowers.
What is meant by repurchase agreement?
A repurchase agreement, or ‘repo’, is a short-term agreement to sell securities in order to buy them back at a slightly higher price. The implicit interest rate on these agreements is known as the repo rate, a proxy for the overnight risk-free rate.
Is a repurchase agreement a loan?
A repurchase agreement (RP) is a short-term loan where both parties agree to the sale and future repurchase of assets within a specified contract period. The seller sells a Treasury bill or other government security with a promise to buy it back at a specific date and at a price that includes an interest payment.
When to treat a repurchase agreement as an acquisition?
In two separate no-action positions issued in 1979 and 1980, the staff stated that, for purposes of sections 12 (d) (3) and 5 (b) (1) of the Act, a fund may treat a repurchase agreement as an acquisition of the underlying collateral if the repurchase agreement is “collateralized fully.”
Is the rule 12d3-1 available for repurchase agreements?
The note appended to rule 12d3-1 has made the rule unavailable for repurchase agreements. With the elimination of this note, funds may rely on rule 12d3-1 even if the repurchase agreement does not meet the requirements for “look-through” treatment in rule 5b-3. 27
Who is the counterparty in a fund repurchase agreement?
In a typical fund repurchase agreement, a fund enters into a contract with a broker, dealer, or bank (the “counterparty” to the transaction) for the purchase of securities. The counterparty agrees to
How is a repo different from a collateralized loan?
BREAKING DOWN ‘Repurchase Agreement – Repo’. Despite the similarities to collateralized loans, repos are actual purchases. However, since the buyer only has temporary ownership of the security, these agreements are often treated as loans for tax and accounting purposes.