Friday, 12 March 2010

Money Market Funds as a Category

Thanks to Joe’s great efforts to navigate us through the ocean of unknown, extracting tangible benefits from our Friday’s seminars, I turned to the Foundation. I started with the building blocks: the Categories, or “what we are talking about.” In Aristotle's logic, categories are adjuncts to reasoning that are designed to resolve equivocations. An equivocation is a variation in meaning, as Aristotle puts it: "Things are said to be named ‘equivocally’ when, though they have a common name, the definition corresponding with the name differs for each". In his view categorizing the object of study was the way to prepare it for the application of logical laws.

I study the impact of financial markets on law and regulation and regulatory response to market developments in the narrow focus of the money market fund (MMF) industry. MMFs that started as a U.S. phenomenon in 1971, in nearly forty years have grown into a $5.8 trillion global industry. In the early 1980s the European investment management community adopted MMFs, but with a great number of variations to fit the local legislations and practices. The market dislocation of 2007 – 2009 exacerbated by the liquidity crisis that followed the bankruptcy of the Lehman Brothers have led financial regulators in all major jurisdictions to review the existing policies. The European Union now is facing even greater challenges due to the fragmented nature of the local markets and the lack of regulatory consistency. The de Larosière report published in February 2009 pointed out that an efficient Single Market should have a harmonized set of core rules.

Following up on our previous discussions, I’d like to share my article that focuses on the recent initiative undertaken by the Committee of European Securities Regulators to execute on the de Larosière’s report recommendations in introducing a common definition for European MMFs. The paper is an initial step in my much larger research project, which starts with an attempt to define MMFs as a subject of regulation.

The paper can be accessed following the link:


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