criticized the purported benefits of enhanced Form PF reporting.\771\
Importantly, compliance with reporting requirements may involve
significant fixed costs. As a result, the elimination of one or several
items from the final amendments may not lead to a proportional
reduction in direct costs. Moreover, these alternatives would not align
reporting of large liquidity funds with that of money market funds,
which invest in the same short-term funding markets. The final
amendments may present a more complete and comparable picture of the
short-term financing markets in which liquidity funds invest, and in
turn, enhance the Commission and FSOC's ability to monitor and assess
short-term financing markets and facilitate better regulatory oversight
of those markets and their participants.
---------------------------------------------------------------------------

    \770\ See supra note 709 and accompanying text; see also NYC Bar
Comment Letter on File No. S7-01-22.
---------------------------------------------------------------------------

12. Disclosures
a. Eliminating Website Disclosure of Fund Liquidity Levels
    The final amendments could have eliminated the requirement that
money market funds post their daily and weekly liquid asset levels on
their websites. As discussed above, the Commission understands that the
public nature of fund liquid asset disclosures, in combination with the
regulatory thresholds for the potential imposition of fees and gates,
may have triggered a run on institutional money market funds and made
other funds reluctant to use liquid assets to absorb redemptions if it
meant approaching or falling below the regulatory threshold. Commenters
have generally not discussed this alternative, although one commenter
stated that the website disclosure should not be eliminated because,
once the link of a potential fee or gate imposition is removed, the
incentive for investors to monitor and redeem based

on liquidity is mitigated. The final amendments would partly mitigate
run incentives surrounding disclosures of weekly liquid assets, by
removing the tie between weekly liquid assets and the potential
imposition of fees and gates, but also increasing minimum daily and
weekly liquidity requirements and imposing a requirement to promptly
report liquidity threshold events. Moreover, money market funds play an
important asset transformation role and inherently carry liquidity
risks. We continue to believe that public disclosures of money market
fund liquidity convey important information to investors about the
liquidity risks of their investments.
b. Alternatives to Form N-MFP Amendments
    The Commission could have adopted Form N-MFP amendments without
including some or all of the new reporting requirements.\772\ While
these alternatives may have reduced compliance burdens compared to the
final amendments, compliance with disclosure requirements may involve
significant fixed costs. As a result, the elimination of one or several
items from the final amendments may not lead to a proportional
reduction in compliance burdens. Moreover, information about repurchase
agreement transactions, fund liquidity management, investor
concentration and composition, and sales of securities into the market
would provide important benefits of transparency for investors and
would enhance Commission oversight.
---------------------------------------------------------------------------

    \772\ See, e.g., Federated Hermes Comment Letter I; ICI Comment
Letter; SIFMA AMG Comment Letter; BlackRock Comment Letter; CCMR
Comment Letter.
---------------------------------------------------------------------------

    The final amendments will require the disclosure of every liquidity
fee in the reporting period by date. Alternatively, the final
amendments could have required the disclosure of less information about
when the fund applied liquidity fees. For example, the final amendments
could have required disclosure of the lowest, median, and highest
liquidity fee a fund applied in a given reporting period. Commenters
did not generally discuss such alternatives or alternatives to similar
proposed reporting requirements for swing pricing. Alternatives
involving less information about fund liquidity fee practices and
eliminating current website disclosures of daily fund flows would
reduce the scope of the economic benefits and costs of the final
amendments described above. To the degree that disclosures of liquidity
fees may make liquidity fees more salient to investors and may lead
funds to compete on fees, alternatives involving less disclosure about
liquidity fees can reduce those effects. Moreover, to the degree that
granular disclosure about historical liquidity fees can incentivize or
inform strategic redemption behavior, alternatives involving less
disclosure about liquidity fees can reduce those effects.
c. Alternatives to Form N-CR Amendments
    The final amendments could have defined a liquidity threshold event
for purposes of board notification and/or Form N-CR reporting to
reflect a specified percentage decline from a fund's preferred weekly
liquid asset and daily liquid asset.\773\ Relative to the final rule,
such an approach could offer additional flexibility for funds in
setting up their board reporting and oversight of liquidity management.
The magnitude of such benefits may be small if board notification
thresholds are lower than Form N-CR reporting thresholds because fund
managers are likely to keep the board apprised of any liquidity events
triggering Form N-CR reporting. In addition, to the degree that these
alternatives would allow funds to set up different Form N-CR reporting
thresholds, they would reduce comparability of Form N-CR reported
events for investors. Moreover, funds and fund managers may be
incentivized by competitive pressures to reduce the salience of their
liquidity threshold events, leading them to select thresholds for board
and Form N-CR reporting that are lower than those in the final rule.
---------------------------------------------------------------------------

    \773\ See, e.g., ICI Comment Letter.
---------------------------------------------------------------------------

    The final amendments could also have required money market funds to
make notices concerning liquidity threshold events public with a delay
(e.g., 15, 30, or 60 days). As a related alternative, the Commission
could have triggered the Form N-CR reporting requirement in the final
rule if a fund is 50% below each of the daily and weekly liquidity
requirements for a period of consecutive days.\774\ As another
alternative, the final amendments could have required that some or all
information about the liquidity threshold event be kept confidential
upon filing. Under the baseline, such funds are required to report
daily and weekly liquid assets daily on fund websites. Relative to the
final rule, these alternatives would introduce delays to the reporting
of liquidity threshold events to investors on Form N-CR, reduce the
frequency of such reporting, or decrease the amount of information in
liquidity threshold event notices available to investors. To the degree
that the publication of such notices provides investors with additional
information about fund liquidity management and can trigger investor
redemptions out of funds with low levels of weekly and daily liquid
assets, the alternatives may reduce the risk of redemptions around
liquidity thresholds and the increase the willingness of funds to
absorb redemptions out of their weekly liquid assets relative to the
final amendments.\775\ However, relative to the final amendments, the
alternatives would reduce the availability of a central source that
investors could use to identify when money market funds fall more than
50% below liquidity requirements and understand the circumstances
leading to the decline in liquidity. The delayed reporting alternative
also would reduce the amount of information available to investors
surrounding the context for the liquidity threshold events as notices
are likely to clarify reasons for the threshold event. Thus, the
alternative would reduce transparency for investors around liquidity
management of affected money market funds, which may reduce allocative
efficiency. Notably, a delay in publication of the notices may increase
staleness of the information in the notices available to investors.
---------------------------------------------------------------------------

    \774\ See, e.g., Federated Hermes Comment Letter I.
    \775\ See, e.g., Dechert Comment Letter.
---------------------------------------------------------------------------

    In addition, the final rule could have amended Form N-CR to include
some of the new collections of information on Form N-MFP. For example,
the final rule could have amended Form N-CR to include information
about sales of securities into the market of prime funds that exceed a
particular size. This alternative would enhance the timeliness of such
reporting. Thus, the alternative may enhance transparency about fund
liquidity management for investors, which may enhance informational and
allocative efficiency and Commission oversight. However, the
alternative would increase direct reporting burdens related to the
filing of Form N-CR--costs that may flow through in part or in full to
end investors in the form of fund expenses. Moreover, timely reporting
of prime funds' sales of portfolio securities may signal fund liquidity
stress to investors even where funds may be able to maintain their
daily and weekly liquidity levels. This may influence investor
decisions to redeem out of reporting funds; thus, relative to the final
amendments, the alternative may place heavier redemption pressure on
reporting funds.

    With respect to the structured data requirement for Form N-CR, the
final amendments could have required Form N-CR to be submitted in the
Inline eXtensible Business Reporting Language (Inline XBRL), rather
than in N-CR-specific XML. We did not receive any comments on this
alternative. As with N-CR-specific XML, Inline XBRL is a structured
data language and would provide similar benefits to investors (e.g.,
facilitating analysis of the event-related disclosures reported by
money market funds on Form N-CR and thereby providing more transparency
into potential risks associated with money market funds). From a filer
compliance perspective, money market funds have experience complying
with Inline XBRL compliance requirements, because they are required to
tag prospectus risk/return summary disclosures on Form N-1A in Inline
XBRL.\776\ This existing experience would counter the incremental
implementation cost of complying with an Inline XBRL requirement under
the alternative.
---------------------------------------------------------------------------

    \776\ See Instruction C.3.g to Form N-1A; 17 CFR 232.405(b)(2).
Effective July 2024, money market funds will also be subject to
Inline XBRL requirements for shareholder reports they file on Form
N-CSR. See Tailored Shareholder Reports Adopting Release, supra note
347; 17 CFR 232.405(b)(2).
---------------------------------------------------------------------------

    However, unlike N-CR-specific XML, which the Commission would
create specifically for Form N-CR submissions on EDGAR, Inline XBRL is
an existing data language that is maintained by a public standards
setting body, and it is used for different disclosures across various
Commission filings (and for uses outside of regulatory disclosures).
Due to the number of individual transactions that might be reported as
Form N-CR data and the constrained nature of the content of Form N-CR
and the absence of a clear need for the N-CR disclosures to be used
outside the Form N-CR context, the alternative to include an Inline
XBRL requirement might result in formatting for human readability of
tabular data within a web browser that provides no additional
analytical insight. This would likely include more complexity than is
called for by the disclosures on Form N-CR, thus potentially making the
disclosures more burdensome to use for analysis and possibly muting the
benefits to investors of a structured data requirement, compared to the
final rule's N-CR-specific XML requirement.
13. Sponsor Support
    The final amendments could have required money market fund sponsors
to provide explicit sponsor support to cover dilution costs. As
discussed in the Proposing Release, dilution occurs because
shareholders remaining in the fund effectively buy back shares at NAV
from redeeming investors. The assets underlying those shares are
eventually sold at a price that may differ from that NAV for the
reasons described in the baseline, causing dilution in some cases. This
alternative may significantly change incentives around the liquidity
mismatch between money market fund assets and liabilities.
Specifically, this alternative would give fund sponsors a more direct
incentive to manage the amount of dilution risk they impose on a fund
via their choice of fund investments.
    As discussed in the Proposing Release, directly exposing the
sponsor, rather than money market fund investors, to the dilution risk
associated with the difference between NAV and the ultimate liquidation
value of the fund's underlying securities could have several benefits.
First, money market funds may have a stronger incentive to overcome any
operational impediments that expose them to unnecessary risk. Second,
the amount of required operating capital to process redemptions/
subscriptions would be higher for money market funds that held
relatively less liquid securities, and money market funds would have to
charge higher fees to raise that capital. Such fees would externalize
the costs of investing in less liquid assets via money market funds. As
those fees increase, money market funds that hold less liquid assets
might become less desirable to investors, and money market fund
investors might select into other structures, such as closed-end funds,
that are a more natural fit with illiquid assets. These benefits may be
reduced to the degree that the sponsor support requirement may
incentivize money market funds to take additional risks to recoup the
sponsor's costs or may incentivize fund managers to increase risk
taking due to the backstop of the sponsor support.
    The effects of sponsor support on investors may be mixed. Sponsor
support may increase the ability of investors to redeem their shares in
full without bearing liquidity costs. However, sponsor support could
lead some investors to believe that their investments carry no risk and
may make investors less discerning in their choice of money market fund
allocations. Moreover, sponsor support reduces investor risk only to
the degree that fund sponsors are well capitalized and easily capable
of providing sponsor support. Uncertainty surrounding the ability of
the sponsor to provide support to the money market fund could trigger a
wave of shareholder redemptions, particularly during stressed
conditions.
    The Commission has received comment that such an alternative
approach may significantly disrupt the money market fund industry.\777\
First, it would make sponsoring money market funds a capital intensive
business, which may create barriers to entry into the money market fund
industry, disadvantage smaller funds and fund complexes, and increase
concentration. Second, it may cause fund sponsors to opt, instead, for
other open-end funds, ETFs, or closed-end funds as vehicles for certain
less liquid assets. Third, since the costs of sponsor support may be
passed along to investors in part or in full in the form of, for
example, higher expense ratios, it may reduce fund yields after
expenses. These factors are, thus, likely to reduce the attractiveness
of money market funds to investors and the number of available money
market funds, adversely impacting investor choice and the efficiency of
investors' portfolio allocations. The alternative, may thus,
significantly reduce the number of fund sponsors offering money market
funds and the number of money market funds available to investors.
These adverse effects may flow through to institutions, such as banks,
and to leveraged participants, such hedge funds, that rely on banks for
liquidity and capital formation.
---------------------------------------------------------------------------

    \777\ See, e.g., CCMR Comment Letter, Fidelity Comment Letter;
see also 87 FR 7320.
---------------------------------------------------------------------------

14. Capital Buffers
    The final amendments could have required that money market funds
maintain a capital or ``NAV'' buffer,\778\ or a specified amount of
additional assets available to absorb daily fluctuations in the value
of the fund's portfolio securities. For example, one option would
require that stable NAV money market funds have a risk-based NAV buffer
of up to 1% to absorb day-to-day fluctuations in the value of the
funds' portfolio securities. Floating NAV money market funds could
reserve their NAV buffers to absorb fund losses under rare
circumstances only, such as when a fund suffers a large drop in NAV or
is closed. The required minimum size of a fund's NAV buffer could be
determined based on the composition of the money market fund's
portfolio, with specified buffer requirements for daily

liquid assets, other weekly liquid assets, and all other assets.
---------------------------------------------------------------------------

    \778\ Capital (or ``NAV'') buffers, which could be structured in
a variety of ways, can provide dedicated resources within or
alongside a fund to absorb losses and can serve to absorb
fluctuations in the value of a fund's portfolio, reducing the cost
to taxpayers in case of a run. See President's Working Grp. on Fin.
Mkts., supra note 544.
---------------------------------------------------------------------------

    Some commenters supported the use of capital buffers as a mechanism
to stabilize money market funds in times of market stress.\779\ One
commenter indicated that operationalizing the capital buffer by adding
a loss-bearing, subordinated class of liabilities would not require
changing the structure of current money market fund shares, but would
make them less risky by converting them into senior liabilities.\780\
Some commenters suggested the use of a bank safety standard that would
implement a capital requirement of 3 to 4% of unsecured, non-government
assets and suggested that such a buffer would only depress returns by
approximately 5 basis points (0.05%).\781\ One commenter indicated that
capital buffers would aid money market funds by providing a layer of
protection for investors, reducing the incentive to run in a crisis,
and reducing the incentive for prime money market funds to take
excessive risk.\782\ This commenter also suggested the use of a
subordinated share class that would absorb losses ahead of longer-term
investors and, in exchange for bearing potential losses, the
subordinated shareholders would be paid a risk premium.\783\ This
commenter also suggested an alternative approach that would require
funds to buy capital protection from a regulated bank.\784\ Other
commenters stated that capital buffers would allow money market funds
to sustain broad-based declines in asset values and to continue funding
shareholder redemptions without resorting to fire sales that further
depress share values in times of stress.\785\ One commenter suggested
that a mandatory buffer would reduce moral hazard and increase
discipline in the management of money market funds, increasing investor
confidence that money market funds could weather market stress.\786\
---------------------------------------------------------------------------

    \779\ See, e.g., Profs. Ceccheti and Schoenholtz Comment Letter;
Prof. Hanson et al. Comment Letter; Better Markets Comment Letter;
Systemic Risk Council Comment Letter.
    \780\ See Profs. Ceccheti and Schoenholtz Comment Letter.
    \781\ See, e.g., Profs. Ceccheti and Schoenholtz Comment Letter;
Prof. Hanson et al. Comment Letter.
    \782\ See Prof. Hanson et al. Comment Letter.
    \783\ Id.
    \784\ Id.
    \785\ See, e.g., Better Markets Comment Letter; Systemic Risk
Council Comment Letter.
    \786\ See Better Markets Comment Letter.
---------------------------------------------------------------------------

    The capital buffer alternative may have four benefits. First,
capital buffers may add ex ante loss-absorption capacity to a money
market fund that could mitigate money market fund investors' risk of
losses.\787\ This may reduce the incentive to redeem shares quickly in
response to small losses or concerns about the liquidity of the money
market fund portfolio, particularly during periods of severe liquidity
stress.
---------------------------------------------------------------------------

    \787\ See, e.g., President's Working Grp. on Fin. Mkts., supra
note 544.
---------------------------------------------------------------------------

    Second, a NAV buffer would require money market funds to provide
explicit sponsor support rather than the implicit and uncertain support
under the current baseline. This would require funds to internalize
some of the cost of the discretionary capital support sometimes
provided to money market funds and to define in advance how losses will
be allocated. In addition, a NAV buffer could reduce fund managers'
incentives to take risk beyond what is desired by fund shareholders
because investing in less risky securities reduces the probability of
buffer depletion.
    Third, a NAV buffer may also provide counter-cyclical capital to
the money market fund industry because once a buffer is funded it
remains in place regardless of redemption activity. With a buffer,
redemptions increase the relative size of the buffer because the same
dollar buffer now supports fewer assets. The NAV buffer, thus,
strengthens the ability of the fund to absorb further losses, reducing
investors' incentive to redeem shares.
    Fourth, by reducing the NAV variability in money market funds, a
NAV buffer may facilitate and protect capital formation in short-term
financing markets during periods of modest stress. A NAV buffer could
enable funds to absorb small losses and thus could reduce the need to
trade into stressed markets. Thus, by adding resiliency to money market
funds and enhancing their ability to absorb losses, a NAV buffer may
benefit capital formation in the long term. A more stable money market
fund industry may produce more stable short-term funding markets, which
could provide more reliability as to the demand for short-term credit
to the economy.
    The Commission has also received comments that did not support the
use of capital buffers and suggesting that such a mechanism would
decrease the utility and attractiveness of money market funds and cause
fund sponsors to exit the industry.\788\ One commenter suggested that
capital buffers are unnecessary and would severely and negatively
impact shareholders, stating that capital buffers would not have been
useful in March 2020 because buffers pertain to asset quality rather
than liquidity, and noting also that institutional prime funds already
operate with a floating NAV, which effectively addresses asset quality
in a manner analogous to capital buffers.\789\ This commenter suggested
that if buffers are funded by retaining rather than distributing
income, the buffers would take a significant amount of time to
accumulate and, if funded by fund sponsors, managing money market funds
would no longer be economically feasible.\790\ Some commenters stated
that even modestly sized capital buffers would substantially increase
the cost of operating prime money market funds, to an extent that would
likely prevent sponsors from offering such funds.\791\
---------------------------------------------------------------------------

    \788\ See, e.g., ICI Comment Letter; Fidelity Comment Letter;
CCMR Comment Letter.
    \789\ See Fidelity Comment Letter.
    \790\ Id.
    \791\ See, e.g., CCMR Comment Letter.
---------------------------------------------------------------------------

    The Commission continues to believe that this alternative may give
rise to significant direct and indirect costs. In terms of direct
costs, capital buffer requirements may be challenging to design and
administer. First, from the standpoint of design of capital buffers,
calibrating the appropriate size of the buffer as well as establishing
the parameters for when a floating NAV fund should use its NAV buffer
could present operational and implementation difficulties and, if not
done effectively, could contribute to self-fulfilling runs on funds
experiencing large redemptions. Second, from the standpoint of
administering capital buffers, floating NAV funds would need to
establish policies and procedures around the use of buffers,
replenishing capital buffers when they are depleted and raising
requisite financing, regulatory reporting, and investor disclosures
about buffers, among other things. Depending on how a capital buffer is
structured (e.g., as sponsor provided capital or as a subordinated
share class requiring shareholder approval), the alternative may
involve other administrative, accounting, tax, and legal challenges and
costs for fund sponsors and investors.
    Importantly, the alternative may also involve three sets of
indirect costs. First, the Commission continues to believe that the
alternative would result in opportunity costs associated with
maintaining a NAV buffer. Those contributing to the buffer would deploy
valuable scarce resources to maintain a NAV buffer rather than being
able to use the funds elsewhere. Estimates of these opportunity costs
are not possible because the relevant data is not currently available
to the Commission.

    Second, entities providing capital for the NAV buffer, such as the
fund sponsor, would expect to be paid a return that sets the market
value of the buffer equal to the amount of the capital contribution.
Since a NAV buffer is designed to absorb the same amount of risk
regardless of its size, the promised yield, or cost of the buffer,
increases with the relative amount of risk it is expected to absorb
(also known as a leverage effect).
    Third, money market funds with buffers may avoid holding riskier
short-term debt securities (like commercial paper) and instead hold a
higher amount of low yielding investments like cash, Treasury
securities, or Treasury repos. This could lead money market funds to
hold more conservative portfolios than investors may prefer, given
tradeoffs between principal stability, liquidity, and yield. Moreover,
the costs of establishing and maintaining a capital buffer would
decrease returns to fund investors. The increased costs and decreased
returns of a capital buffer requirement may decrease the size of the
money market fund sector, which would affect short-term funding
markets, and could lead to increased industry concentration. Moreover,
this may alter competition in the money market fund industry as capital
buffer requirements may be easier to comply with for bank-sponsored
funds, funds that are members of large fund families, and funds that
have a large parent.
    Crucially, a NAV buffer does not protect shareholders completely
from the possibility of heightened rapid redemption activity during
periods of market stress, particularly in periods where the buffer is
at risk of depletion, such as during March 2020. As the buffer becomes
impaired (or if shareholders believe the fund may suffer a loss that
exceeds the size of its NAV buffer), shareholders have an incentive to
redeem shares quickly because, once the buffer fails, shareholders will
experience sudden losses. Thus, the Commission continues to believe
that capital buffers are unlikely to have prevented the liquidity
stresses that arose in March 2020. At the same time, capital buffers
could lead some investors to believe that their investments carry no
risk, which may influence investor allocations and adversely impact
allocative efficiency.
15. Minimum Balance at Risk
    The final amendments could have required that a portion of each
shareholder's recent balance in a money market fund be available for
redemption only with a time delay. Under the alternative, all
shareholders could redeem most of their holdings immediately without
being restricted by the minimum balance at risk. This alternative also
could include a requirement to put a portion of redeeming investors'
holdback shares first in line to absorb losses that occur during the
holdback period. A floating NAV fund could be required to use a minimum
balance at risk mechanism to allocate losses only under certain rare
circumstances, such as when the fund has a large drop in NAV or is
closed.
    Such an alternative could provide some benefits to money market
funds. First, it would subordinate a portion of redeeming investors'
shares to put them at greater risk if the fund suffers a loss, forcing
redeeming shareholders to absorb liquidity costs during periods of
severe market stress when liquidity is particularly costly and
allocating liquidity costs to investors demanding liquidity when the
fund itself is under stress.\792\ Redeeming shareholders would bear
first losses when the fund first depletes its buffer and then the
fund's value falls below its stable share price within 30 days after
their redemption. If the fund sells assets to meet redemptions, the
costs of doing so would be incurred while the redeeming investor is
still in the fund because of the delay in redeeming holdback shares.
Third, it would provide the fund with a period of time to obtain cash
to satisfy the holdback portion of a shareholder's redemption. This may
provide time for potential losses in fund portfolios to be avoided
since distressed securities could trade at a heavy discount in the
market but may ultimately pay in full at maturity.
---------------------------------------------------------------------------

    \792\ See, e.g., President's Working Grp. on Fin. Mkts., supra
note 544.
---------------------------------------------------------------------------

    The Proposing Release recognized that implementing such an
alternative would involve operational challenges and direct
implementation costs. Such costs include costs of converting existing
shares or issuing new holdback and subordinated holdback shares;
changes to systems that would allow record-keepers to account for and
track the minimum balance at risk and allocation of unrestricted,
holdback, or subordinated holdback shares in shareholder accounts; and
systems to calculate and reset average account balances and restrict
redemptions of applicable shares. In addition, commenters indicated
that such costs would extend to intermediaries and service providers
and would be significant.\793\ Funds subject to a minimum balance at
risk may also have to amend or adopt new governing documents to issue
different classes of shares with different rights: unrestricted shares,
holdback shares, and subordinated holdback shares.
---------------------------------------------------------------------------

    \793\ See, e.g., Fidelity Comment Letter.
---------------------------------------------------------------------------

    Moreover, this alternative would give rise to a number of indirect
costs. First, the alternative may have different and unequal effects on
investors in stable NAV and floating NAV money market funds. During the
holdback period, investors in a stable NAV fund would only experience
losses if the fund breaks the buck. Investors in a floating NAV fund,
however, are always exposed to changes in the fund's NAV and would
continue to be exposed to such risk for any shares held back. These
differential effects could reduce investor demand for floating NAV
money market funds.
    Second, under the MBR alternative, there would still be an
incentive to redeem in times of fund and market stress. The alternative
could force shareholders that redeem more than a certain percent of
their assets to pay for any losses, if incurred, on the entire
portfolio on a ratable basis. The contingent nature of the way losses
are distributed among shareholders forces early redeeming investors to
bear the losses they are trying to avoid. Money market funds may choose
to meet redemptions by selling assets that are the most liquid and have
the smallest capital losses. Once a fund exhausts its supply of liquid
assets, it may sell less liquid assets to meet redemption requests,
possibly at a loss. If in fact assets are sold at a loss, the value of
the fund's shares could be impaired, motivating shareholders to be the
first to leave.
    Third, the minimum balance at risk alternative would involve a loss
of liquidity for redeeming investors akin to a partial redemption gate,
which may reduce the utility of money market funds for investors and
may cause fund sponsors to exit the industry.\794\ Commenters stated
that the alternative would alter money market funds significantly and
drive investors and intermediaries away from the product to unregulated
or less-regulated investment options, causing disruption to the short-
term financing markets.\795\ Another commenter also opposed the
alternative and suggested that it reduces liquidity for retail and
institutional investors.\796\
---------------------------------------------------------------------------

    \794\ Id.
    \795\ Id.
    \796\ See Americans for Tax Reform Comment Letter.
---------------------------------------------------------------------------

    Fourth, the alternative may not have addressed the liquidity
stresses that

occurred in March 2020.\797\ The minimum balance at risk alternative
generally impairs the liquidity of money market fund investments. To
the degree that many investor redemptions in March 2020 were driven by
exogenous liquidity needs (arising out of the Covid-19 pandemic), the
Commission continues to believe that, under the alternative, investors
would still have strong incentives to redeem assets they could in order
access liquidity.
---------------------------------------------------------------------------

    \797\ See, e.g., Fidelity Comment Letter; ICI Comment Letter.
---------------------------------------------------------------------------

16. Liquidity Exchange Bank Membership
    In the Proposing Release, the Commission discussed an alternative
requiring prime and tax-exempt money market funds to be members of a
private liquidity exchange bank (``LEB''). The LEB would be a chartered
bank that would provide a liquidity backstop during periods of market
stress. Money market fund members and their sponsors would capitalize
the LEB through initial contributions and ongoing commitment fees, for
example. During times of market stress, the LEB would purchase eligible
assets from money market funds that need cash, up to a maximum amount
per fund. The intent of the LEB would be to diminish investors'
incentive to redeem in times of market stress while having the benefit
of pooling liquidity resources rather than requiring each money market
fund to hold higher levels of liquidity separately.
    This alternative, as well as broader industry-wide insurance
programs, could mitigate the risk of liquidity runs in money market
funds and their detrimental impacts on investors and capital formation.
In the Proposing Release, the Commission discussed how the alternative
could replace money market funds' historical reliance on discretionary
sponsor support, which has covered capital losses in money market funds
in the past but, as discussed above, also contributes to these funds'
vulnerability to liquidity runs. In addition, some sort of collective
emergency insurance fund could be helpful to reduce the moral hazard of
funds that may be reliant on future Federal Reserve facilities in times
of market stress.
    The Commission has received several comments in response to the
proposal, which discussed the LEB alternative, and these comments did
not support the LEB alternative as a realistic solution to improve
money market funds' resiliency or limit future runs on money market
funds.\798\ Commenters emphasized two key sets of costs. First, a LEB
would be complicated and require significant time and money to develop
and operate.\799\ Second, pooling capital from various money market
funds could raise moral hazard and conflict of interest concerns,
because money market funds relying on the LEB would not have an
incentive to improve their own liquidity management.\800\
---------------------------------------------------------------------------

    \798\ See, e.g., ICI Comment Letter; Fidelity Comment Letter;
Americans for Tax Reform Comment Letter.
    \799\ See, e.g., Fidelity Comment Letter; Americans for Tax
Reform Comment Letter.
    \800\ Id.
---------------------------------------------------------------------------

    As discussed in the proposal, the LEB alternative may not
significantly reduce the contagion effects from heavy redemptions at
money market funds without undue costs. Specifically, because of the
difficulties and costs involved in creating effective risk-based
pricing for insurance and additional regulatory structures necessary to
offset adverse incentive effects of membership in the LEB, this
alternative has the potential to create moral hazard and encourage
excessive risk-taking by money market funds. If the alternative
increases moral hazard and decreases corresponding market discipline,
it may in fact increase rather than decrease money market funds'
susceptibility to liquidity runs. These incentives may be countered by
imposing a very costly regulatory structure and risk-based pricing
system; however, related costs are likely to be passed along to
investors and may reduce the attractiveness of money market funds
relative to bank products and other cash management tools. Finally, it
may be difficult to create private insurance at an appropriate cost and
of sufficient capacity for a several trillion-dollar industry that
tends to have highly correlated tail risk.
17. Alternative Compliance and Filing Periods
    The Commission considered alternative compliance dates for various
aspects of the final amendments. First, the removal of the existing
redemption gate provision and the link between weekly liquid assets and
the imposition of a liquidity fee in rule 2a-7 are effective when the
final rule is effective. As an alternative, the Commission could have
adopted these provisions with a longer (such as a 6 month or a 12
month) effective date. Such alternatives would provide affected money
market funds with more time to comply with these amendments. We believe
that the removal of these provisions will be simple to implement.\801\
Moreover, as discussed throughout this release, the Commission
understands that the tie between weekly liquid asset thresholds and
fees and gates did not provided intended benefits during March of 2020,
but likely contributed to investor redemptions during the peak of
market stress. Thus, these amendments may reduce self-fulfilling run
incentives that may arise out of the tie between weekly liquid assets
and redemption gates or fees, and alternatives delaying the effective
date of these amendments may contribute to run risk in affected money
market funds.
---------------------------------------------------------------------------

    \801\ See State Street Comment Letter.
---------------------------------------------------------------------------

    Second, the final amendments to minimum liquidity requirements have
a compliance date that is 6 months after the effective date. As an
alternative, these amendments could have been adopted with a longer
compliance period, such as 12 months.\802\ This alternative would
provide additional time for affected funds to comply with the amended
minimum liquidity requirements. For example, to the degree that some
affected money market funds would have to change their portfolio
composition by holding new assets, such funds would be required to make
a determination that each security is an ``eligible'' security
presenting minimal credit risk to the fund and have corresponding
written records about the review. In addition, money market funds
typically roll over assets when they mature and, if funds are required
to change their portfolio composition to comply with the final rule,
they may have to adjust this rollover process in favor of shorter-term
securities of the same or similar issuers. To the degree that some
investors may seek to reallocate their investments out of affected
money market funds and into other cash management tools, a longer
compliance period may allow funds time to stabilize their portfolios in
the aftermath of potential investor redemptions. Finally, a longer
compliance period may be especially valuable for funds most affected by
other requirements of the final rule, such as the liquidity fee and
reporting requirements. However, as discussed in section II.H,
amendments to the liquidity minimums under rule 2a-7 represent
increases to an existing framework, and as quantified in sections
IV.C.2 and IV.D.2, many funds already maintain daily and weekly
liquidity levels close to the newly adopted minimums. Moreover, the
current rising rate environment may incentivize

affected money market funds to increase their daily and weekly
liquidity and decrease the overall fund maturity, to take advantage of
the increase in yields. To the degree that many affected funds may
already be in compliance with the new thresholds, the benefits of these
alternative compliance periods relative to the final rule may be
limited. For instance, weighted average daily liquid asset level of
affected funds is currently above 50%, with weighted average weekly
liquid asset level currently above 60% of a fund's portfolio, well
above the thresholds imposed by the final rule.\803\
---------------------------------------------------------------------------

    \802\ See, e.g., ICI Comment Letter; State Street Comment
Letter.
    \803\ See Money Market Fund Statistics Form N-MFP Data,
available at https://www.sec.gov/files/mmf-statistics-2023-03.pdf.
---------------------------------------------------------------------------

    Third, the Commission could have adopted alternative compliance
dates for the mandatory and discretionary liquidity fee requirements.
Under the final rule, affected funds will have to comply with the
mandatory liquidity framework within 12 months after the effective
date, and the discretionary liquidity framework within 6 months of that
date. The Commission considered several related alternatives. For
example, the final rule could have included a 2-year compliance period
for the mandatory liquidity fee framework, as recommended by commenters
for the proposed swing pricing requirement.\804\ As another
alternative, the final rule could have included a 1-year compliance
period for the discretionary liquidity framework. Similarly, the final
rule could have included the same 2-year or 1-year compliance period
for both the mandatory and the discretionary liquidity frameworks.
These alternatives would provide affected money market funds with
additional time to adapt their operations and systems, coordinate with
intermediaries and third party vendors, and implement the required
policies and procedures. Notably, unlike the swing pricing framework,
affected funds may already be familiar with liquidity fees due to their
baseline ability to impose liquidity fees when the fund's weekly liquid
assets fall below 30% under the current rules and the current
requirement to impose a default liquidity fee when a fund's weekly
liquid assets fall below 10% unless the board determines such a fee is
not in the fund's best interests. Thus, many funds and their
intermediaries may be positioned to more efficiently comply with the
amended liquidity fee framework compared to the proposed swing pricing
requirements. Importantly, such alternatives would delay the
implementation of liquidity fees as an anti-dilution tool and reduce
the amount of dilution recaptured by funds benefitting non-redeeming
investors until the compliance date, relative to the final rule.
---------------------------------------------------------------------------

    \804\ See, e.g., SIFMA AMG Comment Letter; ICI Comment Letter;
Invesco Comment Letter; State Street Comment Letter; Bancorp Comment
Letter; Federated Hermes Comment Letter I; Capital Group Comment
Letter; CCMR Comment Letter.
---------------------------------------------------------------------------

    Fourth, the Commission has considered alternative effective dates
for the disclosure requirements in the final rule. For example, the
final rule could have included a 12 month implementation period for any
new and revised reporting requirements as suggested by some commenters
in response to the proposal.\805\ As another alternative, the final
rule could have included an 18 or 24 month implementation period for
all reporting and disclosure requirements as suggested by other
commenters.\806\ Similar to the above alternatives regarding longer
compliance periods for the liquidity fee framework, such alternatives
could reduce costs and provide greater flexibility to affected money
market funds in complying with the final amendments. However, as
discussed in section II.H, the final rule removes several of the
proposed reporting requirements that are likely to be among the most
burdensome for affected funds, including the proposed requirements
about lot-level reporting and disaggregated reporting for repurchase
agreements in Form N-MFP and Form PF. Such modifications to the final
amendments may reduce compliance burdens on filers relative to the
proposal. While the final disclosure and reporting requirements will
still pose cost increases on affected funds, as estimated in section V
(PRA), the Commission continues to believe that the final disclosure
and reporting amendments will result in important benefits for
transparency to investors and Commission oversight. As discussed in
section II.H, we believe that the implementation period for amendments
to disclosures in the final rule provides adequate time for affected
funds and advisers to compile and review the information that must be
disclosed. The Commission also could have adopted alternative filing
periods for various forms. For example, the Commission could have
extended the filing period for Form N-MFP to 7, 8, or 10 business days
after the end of each month instead of the current 5 business day
filing period. Such alternatives would increase the amount of time
affected funds have to review and verify reported data and information,
which can reduce the risk of error in the submitted data and
information to the Commission. Importantly, as discussed in section II,
the final rule will remove some of the most data intensive reporting
requirements of lot-level reporting and disaggregated reporting of
repurchase agreements, which may reduce these benefits of the
alternatives relative to the final rule. Moreover, such alternatives
would increase filing delays and reduce the timeliness of information
available to investors and to the Commission. These effects may be
particularly acute in times of market stress, when there may be greater
investor scrutiny of money market funds and their liquidity risk.
---------------------------------------------------------------------------

    \805\ See, e.g., ICI Comment Letter; Invesco Comment Letter;
State Street Comment Letter.
    \806\ See T. Rowe Comment Letter.
---------------------------------------------------------------------------

E. Effects on Efficiency, Competition, and Capital Formation

    The final amendments are intended to reduce run risk, mitigate the
liquidity externalities transacting investors impose on non-transacting
investors, and enhance the resilience of money market funds, which may
serve to protect money market fund investors. To the degree that the
final amendments would increase the resilience of money market funds,
they may also enhance the availability of wholesale funding liquidity
to market participants and increase their ability to raise capital,
particularly during severe market stress, facilitating capital
formation. In addition, the final amendments may reduce the probability
that runs would result in future government interventions in securities
markets, inform investors about liquidity risks of their money market
fund investments, and enhance the ability of investors to optimize
their portfolio allocations, contributing to greater informational and
allocative efficiency.
    The final amendments may enhance the efficiency of liquidity
provision. Specifically, money market funds and issuers of short-term
debt that money market funds hold benefit from perceived government
backstops and the safety and soundness of the financial system. When
the liquidity of underlying assets in money market fund portfolios is
impaired, investors benefit from selling money market fund shares
before or instead of selling assets that funds hold. Thus, in times of
market stress, liquidity demand may be directed to money market funds
even though the relative cost of liquidity in money market funds may be
greater, resulting in inefficient provision of liquidity. While the
final amendments would not result in money market funds fully
internalizing the costs of investing

in illiquid assets, to the degree that the final amendments would
reduce the need for future implicit government backstops in times of
stress, the final amendments may result in more efficient provision of
liquidity.
    Moreover, the final liquidity fee framework may enhance allocative
efficiency. To the degree that some institutional investors may not be
aware of the dilution risk of affected money market funds, the
liquidity fee requirement may increase investor awareness of such
risks. As discussed above, the liquidity fee requirement could cause
some investors to move their assets to government money market funds to
avoid the possibility of paying liquidity costs of redemptions.
Government money market funds may be a better match for these
investors' preferences, however, in that government money market funds
face lower liquidity costs and these investors may be unwilling to bear
any liquidity costs. In addition, the liquidity fee framework may also
attract new investors, such as investors that tend to redeem
infrequently, into prime and tax-exempt money market funds. Moreover,
this aspect of the final rule may dampen spillovers of run risk from
money market funds to other vehicles and markets in times of stress.
    The final disclosure requirements are expected to enhance
informational efficiency. To the degree that some investors may
currently be uninformed about liquidity risks of money market fund
investments, the liquidity fee and disclosure requirements may increase
transparency about liquidity costs transacting investors impose on
remaining fund investors and liquidity risks in money market funds.
While many investors may use money market funds as cash equivalents,
money market funds use capital subject to daily or intraday redemptions
to invest in portfolios that may include less liquid assets. This gives
rise to liquidity risk and liquidity externalities between transacting
and non-transacting investors, as discussed throughout the release. The
possibility that a fund may charge a liquidity fee as a result of net
redemptions, as well as the final disclosure requirements may help
inform investors about the liquidity risks inherent in money market
funds and liquidity costs of redemptions, particularly during times of
stress. To the degree that greater transparency about liquidity risk of
money market funds may lead some risk averse investors to use other
instruments, such as banking products, in lieu of money market funds
for cash management, allocative efficiency may increase.
    The final amendments may have three groups of competitive effects.
First, amendments to liquidity requirements may affect competition
among prime money market funds. As discussed in detail in section
IV.C.2, many affected funds already have liquidity levels that would
meet or exceed the final minimum daily and weekly liquid asset
thresholds. However, other funds would have to rebalance their
portfolios to come into compliance with the final amendments, which may
reduce the yields they are able to offer investors. The final
amendments may, thus improve the competitive standing of funds that
currently have higher levels of daily and weekly liquidity relative to
funds that currently do not and may, thus, be able to offer higher
yields to investors.
    Second, the final amendments may influence the competitive standing
of prime money market funds relative to government money market funds.
The elimination of redemption gates and removal of the link between
weekly liquid assets and liquidity fees may reduce the risk of runs on
prime money market funds and may protect the value of investments of
non-transacting shareholders. However, the final amendment's liquidity
fee framework may increase the variability of prime money market funds
returns, while higher liquidity requirements may reduce the yields they
are able to offer to investors. This may reduce their attractiveness to
investors and may result in a greater reallocation of capital from
prime to government funds, bank deposit accounts, and other types of
liquid vehicles.
    Third, due to economies of scale, costs of the final amendments may
be more easily borne by larger money market fund families and their
service providers.\807\ To the degree that such costs may be
significant for some money market fund families, this may contribute to
consolidation in the money market fund industry and reduce the number
of intermediaries offering non-government money market funds to
investors. Some or all of the costs of the final amendments may also be
passed along to fund investors in the form of higher expense ratios or
reduced availability of certain fund offerings. However, as discussed
throughout this release, the final amendments have been tailored to
reduce compliance costs, while preserving the benefits to investors,
funds, and securities markets, which may partly mitigate these effects.
---------------------------------------------------------------------------

    \807\ See, e.g., Federated Hermes Comment Letter I.
---------------------------------------------------------------------------

    The final amendment's increases to the minimum liquidity thresholds
may reduce access to and increase costs of raising capital for some
issuers of short-term debt, thereby potentially negatively affecting
capital formation. Moreover, to the degree that raising liquidity
thresholds may reduce money market fund yields and to the extent that
liquidity fees may increase uncertainty about investors' redemption
costs, the final amendments may reduce the viability of prime money
market funds as an asset class. This reallocation may be efficient to
the extent that government money market funds or banking products, if
insured and if such insurance is correctly priced, may be more suitable
for cash management by liquidity risk averse investors. Moreover,
banking entities insured by the Federal Deposit Insurance Corporation
(FDIC) pay deposit insurance assessments, whereas money market funds do
not internalize any portion of government interventions or
externalities they impose on other investors in the same asset
classes.\808\
---------------------------------------------------------------------------

    \808\ If some of the funds flow out of the money market fund
sector and into the banking sector, and if potential future stresses
in the banking sector require government intervention, this could,
under some circumstances, increase the magnitude of such
intervention. See, e.g., Federated Hermes Comment Letter I. However,
flows between the banking and money market fund sectors may be
highly sensitive to, among others, the spread between money market
fund and bank rates. In addition, during the recent stresses in the
banking sector in 2023, funds flowed out of certain banks and into
certain money market funds, pointing to a trend to diversify
portfolios across asset classes, as discussed in further detail in
section IV.B.1.b.
---------------------------------------------------------------------------

    Nevertheless, potential decreases in the size of the prime money
market fund sector may have adverse follow-on effects on capital
formation and the availability of wholesale funding liquidity to
issuers and institutions seeking to arbitrage mispricings across
markets. Issuers may respond to such changes by shifting their
commercial paper and certificate of deposit issuance toward longer
maturity instruments, which may reduce their exposure to rollover risk.
    These aspects of the final amendments may be borne
disproportionately by global or foreign banking organizations that rely
on money market funds for dollar funding. Specifically, some research
has explored the effects of outflows from prime money market funds into
government money market funds around the 2014 money market fund reforms
on business models and lending activities of foreign banking
organizations in the U.S. To the degree that the final amendments would
result in further outflows from prime money market funds, banking
organizations reliant on unsecured funding from money market funds may

reduce arbitrage positions and investments in illiquid assets, rather
than reducing lending.\809\ However, reduced wholesale dollar funding
from money market funds may also lead to a reduction in capital
formation through dollar lending by affected banks, which may reduce
the dollar borrowing ability of firms reliant on affected banks.\810\
---------------------------------------------------------------------------

    \809\ See, e.g., Alyssa Anderson et al., Arbitrage Capital of
Global Banks (Finance and Economics Discussion Series 2021-032.
Washington: Board of Governors of the Federal Reserve System, May
2021), available at https://doi.org/10.17016/FEDS.2021.032. See also
Thomas Flanagan, Funding Stability and Bank Liquidity (Working
Paper, Mar. 2020), available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3555346 (retrieved from SSRN Elsevier
database).
    \810\ See, e.g., Victoria Ivashina, et al., Dollar Funding and
the Lending Behavior of Global Banks, 130 Q.J. Econ. 1241, 1241-1281
(2015).
---------------------------------------------------------------------------

    The final amendments related to the methods of calculation of
weighted average maturity and weighted average life may increase
consistency and comparability of disclosures by money market funds in
data reported to the Commission and provided on fund websites. These
amendments, therefore, may reduce informational asymmetries between
funds and fund investors about interest rate and liquidity risk
exposures across fund portfolios. To the degree that consistency and
comparability of WAM and WAL information may inform investors and may
influence their capital allocation decisions, the final amendments may
improve allocative efficiency. The final amendments related to the
calculation of WAM and WAL are not expected to affect competition and
capital formation.
    The final amendments related to Form PF reporting requirements for
large liquidity fund advisers may enhance the Commission's and FSOC's
oversight, which may promote better functioning and more stable short-
term funding markets and may, thus, lead to increases in efficiency of
such markets and may facilitate capital formation in large liquidity
funds. The additional, more granular, and timely data collected on the
amended Form PF about large liquidity fund advisers may help reduce
uncertainty about risks in the U.S. financial system and inform and
frame regulatory responses to future market events and policymaking. It
may also help develop regulatory tools and mechanisms that could
potentially be used to make future systemic crisis episodes less likely
to occur and less costly and damaging when they do occur. In addition,
these amendments may improve the efficiency and effectiveness of the
Commission's and FSOC's oversight of large liquidity fund advisers by
enabling them to manage and analyze information related to the risks
posed by large liquidity funds more quickly, more efficiently, and more
consistently. Form PF amendments for large liquidity fund advisers are
not expected to have significant effects on competition.

V. Paperwork Reduction Act

A. Introduction

    Certain provisions of the final amendments to rule 2a-7 and Forms
N-1A, N-CR, N-MFP, and PF contain ``collection of information''
requirements within the meaning of the PRA.\811\ The Commission
published a request for comment on changes to these collection of
information requirements in the Proposing Release and the Form PF
Proposing Release and submitted these requirements to the Office of
Management and Budget (``OMB'') for review in accordance with the
PRA.\812\ The titles for the existing collections of information are:
(1) ``Rule 2a-7 under the Investment Company Act of 1940, Money market
funds'' (OMB Control No. 3235-0268); (2) ``Form N-1A under the
Securities Act of 1933 and under the Investment Company Act of 1940,
registration statement of open-end management investment companies''
(OMB Control No. 3235-0307); (3) ``Rule 30b1-8 under the Investment
Company Act of 1940, Current report for money market funds and Form N-
CR, Current report, money market fund material events'' (OMB Control
No. 3235-0705); (4) ``Rule 30b1-7 under the Investment Company Act of
1940, Monthly report for money market funds and Form N-MFP, Monthly
schedule of portfolio holdings of money market funds'' (OMB Control No.
3235-0657); (5) ``Form PF and Rule 204(b)-1'' (OMB Control Number 3235-
0679); and (6) ``Rule 31a-2: Records to be preserved by registered
investment companies, certain majority-owned subsidiaries thereof, and
other persons having transactions with registered investment
companies'' (OMB Control No. 3235-0179).\813\ An agency may not conduct
or sponsor, and a person is not required to respond to, a collection of
information unless it displays a currently valid OMB control number.
---------------------------------------------------------------------------

    \811\ 44 U.S.C. 3501 through 3521.
    \812\ 44 U.S.C. 3507(d); 5 CFR 1320.11.
    \813\ For the Commission's notice requesting comment on changes
to the collection of information requirements in Form PF, see Form
PF Proposing Release, supra note 14.
---------------------------------------------------------------------------

B. Rule 2a-7

    The final amendments to rule 2a-7 create new collection of
information requirements and modify or remove existing requirements.
These final amendments include: (1) removing the provisions that link
liquidity thresholds and board determinations regarding potential
imposition of redemption gates and liquidity fees, and related changes
to website disclosure requirements; (2) new provisions that require
institutional prime and institutional tax-exempt money market funds to
adopt a liquidity fee framework and allow non-government money market
funds to apply discretionary liquidity fees, and the associated board
review, approved guidelines, and ongoing oversight; (3) new provisions
requiring a money market fund to identify in its written stress testing
procedures the minimum liquidity levels for stress testing; and (4) new
provisions that permit a stable NAV fund to engage in share
cancellation in a negative interest rate environment and the associated
board determination and investor disclosure requirements.
    The respondents to these collections of information will be money
market funds. We estimate that there are 294 money market funds subject
to rule 2a-7, although the new collections of information would each
apply to certain subsets of money market funds, as reflected in the
below table.\814\ The new collections of information are mandatory for
the identified types of money market funds that rely on rule 2a-7,
except that the collection related to use of share cancellation will be
necessary only for those funds seeking to use share cancellation
instead of converting to a floating NAV. The final amendments are
designed to enable Commission staff in its examinations of money market
funds to determine compliance with the rule. To the extent the
Commission receives confidential information pursuant to the
collections of information, such information will be kept confidential,
subject to the provisions of applicable law.\815\
---------------------------------------------------------------------------

    \814\ Based on Form N-MFP filings, there were 294 money market
funds as of Mar. 2023.
    \815\ See, e.g., 5 U.S.C. 552. Exemption 4 of the Freedom of
Information Act provides an exemption for trade secrets and
commercial or financial information obtained from a person and
privileged or confidential. Exemption 8 of the Freedom of
Information Act provides an exemption for matters that are contained
in or related to examination, operating, or condition reports
prepared by, or on behalf of, or for the use of an agency
responsible for the regulation or supervision of financial
institutions.
---------------------------------------------------------------------------

    In our most recent PRA submission for rule 2a-7, we estimated the
annual aggregate compliance burden to comply

with the collection of information requirement of rule 2a-7 is 293,516
burden hours with an internal cost burden of $73,612,364 and an
external cost burden estimate of $52,300,000.\816\
---------------------------------------------------------------------------

    \816\ The most recent rule 2a-7 PRA submission was approved in
2022 (OMB Control No. 3235-0268). This includes a correction of a
typographical error regarding the currently approved external cost
estimate, which is reflected as $73,612,364 but should have been
$52,300,000 as shown in the supporting statement. The estimates in
the Proposing Release were based on earlier approved estimates
(337,328 hours and $38,100,454 external cost burden), and these
earlier approved estimates are reflected in the ``Proposed
Estimates'' section of Table 15.
---------------------------------------------------------------------------

    While the Commission did not receive any comments specifically
addressing the estimated PRA burdens in the Proposing Release
associated with the amendments to rule 2a-7, it did receive comments
suggesting that implementation of some of the elements of the proposed
amendments, including the associated collections of information, may be
more burdensome than the Commission estimated at proposal.\817\
However, several of the revisions made to the final amendments help
alleviate many of the burdens commenters discussed in relation to the
proposal, including for instance, burdens related to the proposed swing
pricing requirements. We have adjusted the proposal's estimated annual
burden hours and total time costs to reflect changes from the proposal,
changes in the number of money market funds, and updated wage rates.
---------------------------------------------------------------------------

    \817\ See, e.g., ICI Comment Letter; SIFMA AMG Comment Letter;
Western Asset Comment Letter.
---------------------------------------------------------------------------

    The table below summarizes our PRA initial and ongoing annual
burden estimates associated with the amendments to rule 2a-7.

[GRAPHIC] [TIFF OMITTED] TR03AU23.041

[GRAPHIC] [TIFF OMITTED] TR03AU23.042

C. Form N-MFP

    The final amendments to Form N-MFP include additional data
collection and certain technical improvements that will assist our
monitoring and analysis of money market funds. We are adopting
amendments to: (1) increase the frequency of certain data points from
weekly to daily; (2) collect new information about securities that have
been disposed of before maturity; (3) collect new information about the
composition and concentration of money market funds' shareholders; (4)
collect new information about the use of liquidity fees and share
cancellation; and (5) collect additional information about repurchase
agreement transactions, as well as certain other information about the
fund's portfolio securities. We are also adopting amendments to improve
identifying information about the fund, including changes to better
identify different categories of government money market funds, changes
to identify privately offered funds that are used for internal cash
management purposes, and amendments to provide the name and other
identifying information for the registrant, series, and class. The
final amendments to Form N-MFP also include several changes to clarify
current instructions or items. In a change from the proposal, we are
not adopting amendments to require funds to report lot-level
information about portfolio securities (e.g., the acquisition date for
each security) or report disaggregated information about securities
subject to repurchase agreements in all circumstances, among other
changes.
    The information collection requirements on Form N-MFP are designed
to improve the availability of information about money market funds and
assist the Commission in analyzing the portfolio holdings of money
market funds, and thereby augment our understanding of the risk
characteristics of individual money market funds and money market funds
as a group, as well as industry trends. The final amendments enhance
our oversight of money market funds and our ability to monitor and
respond to market events. Preparing a report on Form N-MFP is mandatory
for money market funds, and responses to the information collections
will not be kept confidential.
    The respondents to these collections of information will be money
market funds. The Commission estimates there are 294 money market funds
that report information on Form N-MFP although certain components of
the proposed new collections of information would apply to certain
subsets of money market funds, as reflected in the below table. We
estimate that 35% of money market funds (or 103 money market funds)
license a software solution and file reports on Form N-MFP in house. We
estimate that the remaining 65% of money market funds (or 191 money
market funds) retain the services of a third party to provide data
aggregation and validation services as part of the preparation and
filing of reports on Form N-MFP on the fund's behalf. We understand
that the required data in the final amendments to Form N-MFP generally
are already maintained by money market funds pursuant to other
regulatory requirements or in the ordinary course of business.
Accordingly, for the purposes of our analysis, we do not believe that
the final amendments add significant burden hours for filers of Form N-
MFP.
    In our most recent PRA submission for Form N-MFP, we estimated the
annual aggregate compliance burden to comply with the collection of
information requirement of Form N-MFP is 44,263 burden hours with an
internal cost burden of $14,385,475 and an external cost burden
estimate of $2,613,300.\818\
---------------------------------------------------------------------------

    \818\ This estimate is based on the last time the PRA submission
for the rule's information collection was approved in 2022 (OMB
Control No. 3235-0657). The estimates in the Proposing Release were
based on earlier approved estimates (64,667 hours and $3,179,700
external cost burden), and these earlier approved estimates are
reflected in the ``Proposed Estimates'' section of Table 16.
---------------------------------------------------------------------------

    In the Proposing Release, we estimated that the proposed amendments
would require a money market fund to spend up to an additional 9 burden
hours complying with the proposed amendments.\819\ The Commission did
not receive public comment regarding the PRA estimates for Form N-MFP
in the Proposing Release. We did, however, receive comments suggesting
that lot-level reporting and reporting disaggregated information about
securities subject to repurchase agreements when the securities are
issued by the same issuer would be burdensome.\820\ After considering
comments, we are not adopting those proposed requirements. We are
revising our PRA estimates for the final amendments to reflect the
changes from the proposed amendments, and updated data and wage rates.
---------------------------------------------------------------------------

    \819\ As reflected in Table 16, certain components of the
proposed amendments would apply to certain subsets of money market
funds and therefore, the estimated additional annual hour burdens of
the full scope of the proposed new collections of information would
apply to the subject fund.
    \820\ See, e.g., ICI Comment Letter; SIFMA AMG Comment Letter;
BlackRock Comment Letter; CCMR Comment Letter; Federated Hermes
Comment Letter I.
---------------------------------------------------------------------------

    The table below summarizes our PRA initial and ongoing annual
burden estimates associated with the amendments to Form N-MFP.

[GRAPHIC] [TIFF OMITTED] TR03AU23.043

D. Form N-CR

    The amendments to Form N-CR will require a fund to file a report
publicly when its investments are more than 50% below the minimum
weekly liquid asset or daily liquid asset requirements. The amendments
also remove the reporting events that relate to liquidity fees and
redemption gates, as money market funds will no longer be permitted to
impose redemption gates under rule 2a-7, and we believe other
disclosure about the imposition of liquidity fees is more appropriate
than Form N-CR disclosure under the final

rule's amended liquidity fee framework. In addition, the final
amendments will require money market funds to file Form N-CR reports in
a custom XML data language. The information collection requirements are
designed to assist Commission staff in its oversight of money market
funds and its ability to respond to market events. We estimate that
there are 294 money market funds subject to Form N-CR reporting
requirements, but a fund is required to file a report on Form N-CR only
when a reportable event occurs.\821\ Compliance with the disclosure
requirements of Form N-CR is mandatory for money market funds, and the
responses to the disclosure requirements will not be kept confidential.
---------------------------------------------------------------------------

    \821\ Based on Form N-MFP filings, there were 294 money market
funds as of Mar. 2023.
---------------------------------------------------------------------------

    In our most recent PRA submission for Form N-CR, we estimated that
we would receive, in the aggregate, an average of 6 reports filed on
Form N-CR per year. We also estimated the annual aggregate compliance
burden to comply with the collection of information requirement of Form
N-CR is 51 burden hours with an internal cost burden of $19,839, and an
external cost burden estimate of $6,111.\822\
---------------------------------------------------------------------------

    \822\ The most recent Form N-CR PRA submission was approved in
2021 (OMB Control No. 3235-0705).
---------------------------------------------------------------------------

    The Commission did not receive public comment regarding the PRA
estimates for Form N-CR in the Proposing Release. We have adjusted the
proposal's estimated annual burden hours and total time costs, however,
to reflect updated data and wage rates.
    Our most recent PRA submission for Form N-CR based the burden
estimates on the number of Form N-CR reports filed between 2018 and
2020, and no funds filed reports related to liquidity fees or
suspensions of redemptions during that period (or at any other time).
As a result, we do not believe that removing the items from Form N-CR
related to liquidity fees and suspensions of redemptions would affect
the current burden estimates.
    The table below summarizes our PRA initial and ongoing annual
burden estimates associated with the amendments to Form N-CR.

[GRAPHIC] [TIFF OMITTED] TR03AU23.044

E. Form N-1A

    The final amendments to Form N-1A modify the narrative risk
disclosure that money market funds must provide in their summary
prospectuses. The modifications affect all types of money market funds
and include changes pertaining to liquidity fees and suspensions of
redemptions that are more likely to affect prime and tax-exempt money
market funds. Further, the amendments streamline the information a fund
will be required to disclose in its SAI about any liquidity fees
imposed during the prior 10 years and removes SAI disclosure related to
the suspension of redemptions. We estimate that streamlining the
required SAI disclosure will not affect the current estimated burdens
of Form N-1A because while we are reducing the amount of information a
fund must report when it has imposed a liquidity fee, the mandatory
liquidity fee requirement in the final rule will likely result in
institutional funds imposing liquidity fees more frequently than under
the current rule. Compliance with the disclosure requirements of Form
N-1A is mandatory for money market funds, and the responses to the
disclosure requirements will not be kept confidential.
    The purpose of the information collection requirements on Form N-1A
is to meet the filing and disclosure requirements of the Securities Act
and the Investment Company Act and to enable funds to provide investors
with information necessary to evaluate an investment in the fund. The
final amendments to Form N-1A are designed to provide investors with
information about a fund's use of liquidity fees, which investors can
use to inform their investment decisions.
    The respondents to these collections of information will be money
market funds. The Commission estimates there are 294 money market funds
that are subject to Form N-1A, although aspects of the new collections
of information related to liquidity fees and the removal of temporary
suspensions of redemptions generally will only apply to prime and tax-
exempt money market funds. The Commission estimates there are 111 prime
and tax-exempt money market funds.
    In our most recent PRA submission for Form N-1A, we estimated the
annual aggregate burden to comply with the collection of information
requirement of Form N-1A is 1,672,077 burden hours with an internal
cost burden of $474,392,078, and an external cost burden estimate of
$132,940,008.\823\
---------------------------------------------------------------------------

    \823\ The most recent Form N-1A PRA submission was approved in
2019 (OMB Control No. 3235-0307).
---------------------------------------------------------------------------

    The Commission did not receive public comment regarding the PRA
estimates for Form N-1A in the Proposing Release. We have adjusted the
proposal's estimated annual burden hours and internal time costs,
however, to reflect changes in the final rule (e.g., the removal of the
proposed swing pricing requirement, which means affected money market
funds will not be required to provide swing pricing disclosure) and
updated wage rates and data.
    The table below summarizes our PRA initial and ongoing annual
burden estimates associated with the amendments to Form N-1A.

[GRAPHIC] [TIFF OMITTED] TR03AU23.045

F. Form PF

    The final amendments to Form PF revise existing reporting
requirements for large liquidity fund advisers. Large liquidity fund
advisers generally include any adviser managing a liquidity fund and
having at least $1 billion in combined regulatory assets under
management attributable to liquidity funds and registered money market
funds as of the end of any month in the prior fiscal quarter.\824\
---------------------------------------------------------------------------

    \824\ See Instruction 3 to Form PF.
---------------------------------------------------------------------------

    The final amendments are designed to provide the Commission and
FSOC with a more complete picture of the short-term financing markets
in which liquidity funds invest and, in turn, enhance the Commission's
and FSOC's ability to assess the potential market and systemic risks
presented by liquidity funds' activities and facilitate our oversight
of those markets and their participants. The final amendments will
update reporting requirements in section 3 of Form PF, which relates to
reporting requirements for large liquidity fund advisers. Therefore,
the final amendments will affect large liquidity fund advisers and the
estimated collection of information burdens below are limited to this
affected group of Form PF filers. The

revised collection of information is mandatory for large liquidity fund
advisers.
    Responses to the information collection will be kept confidential
to the extent permitted by law.\825\ Form PF elicits non-public
information about private funds and their trading strategies, the
public disclosure of which could adversely affect the funds and their
investors. The SEC does not intend to make public Form PF information
that is identifiable to any particular adviser or private fund,
although the SEC may use Form PF information in an enforcement action
and to assess potential systemic risk.\826\ SEC staff issues certain
publications designed to inform the public of the private funds
industry, all of which use only aggregated or masked information to
avoid potentially disclosing any proprietary information.\827\ The
Advisers Act precludes the SEC from being compelled to reveal Form PF
information except (1) to Congress, upon an agreement of
confidentiality; (2) to comply with a request for information from any
other Federal department or agency or self-regulatory organization for
purposes within the scope of its jurisdiction; or (3) to comply with an
order of a court of the United States in an action brought by the
United States or the SEC.\828\ Any department, agency, or self-
regulatory organization that receives Form PF information must maintain
its confidentiality consistent with the level of confidentiality
established for the SEC.\829\ The Advisers Act requires the SEC to make
Form PF information available to FSOC.\830\ For advisers that are also
commodity pool operators or commodity trading advisers, filing Form PF
through the Form PF filing system is filing with both the SEC and
Commodity Futures Trading Commission (CFTC).\831\ Therefore, the SEC
makes Form PF information available to FSOC and the CFTC, pursuant to
Advisers Act section 204(b), making the information subject to the
confidentiality protections applicable to information required to be
filed under that section. Before sharing any Form PF information, the
SEC requires that any such department, agency, or self-regulatory
organization represent to the SEC that it has in place controls
designed to ensure the use and handling of Form PF information in a
manner consistent with the protections required by the Advisers Act.
The SEC has instituted procedures to protect the confidentiality of
Form PF information in a manner consistent with the protections
required in the Advisers Act.\832\
---------------------------------------------------------------------------

    \825\ See 5 CFR 1320.5(d)(2)(vii) and (viii).
    \826\ See 15 U.S.C. 80b-10(c).
    \827\ See, e.g., Private Funds Statistics, issued by staff of
the SEC Division of Investment Management's Analytics Office, which
we have used in this PRA as a data source, available at https://www.sec.gov/divisions/investment/private-funds-statistics.shtml.
    \828\ See 15 U.S.C. 80b-4(b)(8).
    \829\ See 15 U.S.C. 80b-4(b)(9).
    \830\ See 15 U.S.C. 80b-4(b)(7).
    \831\ See 2011 Form PF Adopting Release, supra note 494.
    \832\ See 5 CFR 1320.5(d)(2)(viii).
---------------------------------------------------------------------------

    In our most recent PRA submission for Form PF, we estimated the
annual aggregate burden to comply with the collection of information
requirement of Form PF is 409,768 burden hours and an external cost
burden estimate of $3,628,850.\833\
---------------------------------------------------------------------------

    \833\ The most recent Form PF PRA submission was approved in
2021 (OMB Control No. 3235-0679).
---------------------------------------------------------------------------

    We did not receive public comment regarding the estimated burdens
of the proposed amendments to section 3 of Form PF, which is the only
section affected by the final amendments. However, in the broader
context of the Commission's proposed amendments to Form PF, we received
general comments indicating that we underestimated the burdens to
implement the proposed amendments to the form.\834\ We are not
adjusting our estimates in response to these comments because it is
unclear that these commenters were referring to the proposed amendments
to section 3 and, moreover, we are not adopting certain proposed
reporting requirements, such as required lot-level reporting and
disaggregated reporting for securities subject to repurchase agreements
in all circumstances, which may reduce the burden for filers. We have
adjusted the proposal's estimated annual burden hours and total time
costs to reflect updated wage rates and data.
---------------------------------------------------------------------------

    \834\ See, e.g., Alternative Investment Management Association
Limited and the Alternative Credit Council Comment Letter (Mar. 21,
2022) on File No. S7-0122; Investment Adviser Association Comment
Letter (Mar. 21, 2022) on File No. S7-01-22; Form PF Proposing
Release, supra note 14. The comment letters on Form PF Proposing
Release (File No. S7-01-22) are available at: https://www.sec.gov/comments/s7-01-22/s70122.htm.
---------------------------------------------------------------------------

    The tables below summarize our PRA initial and ongoing annual
burden estimates associated with the amendments to Form PF.

                  Table 19--Annual Hour Burden Proposed and Final Estimates for Initial Filings
----------------------------------------------------------------------------------------------------------------
                                          Number of
                                        respondents =                             Hours per      Aggregate hours
            Respondent \1\                aggregate     Hours per                 response      amortized over 3
                                          number of      response             amortized over 3      years \4\
                                        responses \2\                             years \3\
----------------------------------------------------------------------------------------------------------------
Large Liquidity Fund Advisers:
    Proposed Estimate................           \5\ 1          202    / 3 =                 67                67
    Final Estimate...................           \6\ 1          202    / 3 =                 67                67
    Previously Approved..............               2          200  ........               588             1,176
    Change...........................             (1)            2  ........             (521)           (1,109)
----------------------------------------------------------------------------------------------------------------
Notes:
\1\ We expect that the hourly burden will be most significant for the initial report because the adviser will
  need to familiarize itself with the new reporting form and may need to configure its systems in order to
  efficiently gather the required information. In addition, we expect that some large liquidity fund advisers
  will find it efficient to automate some portion of the reporting process, which will increase the burden of
  the initial filing but reduce the burden of subsequent filings.
\2\ This concerns the initial filing; therefore, we estimate one response per respondent. The proposed and final
  changes are due to using updated data to estimate the number of advisers.
\3\ We amortize the initial time burden over three years because we believe that most of the burden would be
  incurred in the initial filing. We use a different methodology to calculate the estimate than the methodology
  staff used for the previously approved burdens. We believe the previously approved burdens for initial filings
  inflated the estimates by using a methodology that included subsequent filings for the next two years, which,
  for quarterly filers, included 11 subsequent filings. For the requested burden, we calculate the initial
  filing, as amortized over the next three years, by including only the hours related to the initial filing, not
  any subsequent filings. This approach is designed to more accurately estimate the initial burden, as amortized
  over three years. Changes are due to using the revised methodology, and changes to section 3 of Form PF.
\4\ (Number of responses) x (hours per response amortized over three years) = aggregate hours amortized over
  three years. Changes are due to (1) using updated data to estimate the number of advisers and (2) the new
  methodology to estimate the hours per response, amortized over three years.
\5\ In the case of the proposed estimates, Private Funds Statistics show 23 large liquidity fund advisers filed
  Form PF in the fourth quarter of 2020. Based on filing data from 2016 through 2020, an average of 1.5 percent
  of them did not file for the previous due date. (23 x 0.015 = 0.345 advisers, rounded up to 1 adviser.)
\6\ In the case of the final estimates, Private Funds Statistics show 21 large liquidity fund advisers filed
  Form PF in the third quarter of 2022. Based on filing data from 2017 through 2021, an average of 1.5 percent
  of them did not file during the prior year. (21 x 0.015 = 0.32 advisers, rounded up to 1 adviser.)

                                 Table 20--Annual Hour Burden Proposed and Final Estimates for Ongoing Quarterly Filings
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Number of                 Number of
                          Respondent \1\                             respondents                responses              Hours per              Aggregate
                                                                    (advisers) \2\                 \3\                  response                hours
--------------------------------------------------------------------------------------------------------------------------------------------------------
Large Liquidity Fund Advisers:
    Proposed Estimate............................................           \4\ 22        x              4        x            71        =         6,248
    Final Estimate...............................................           \5\ 20        x              4        x            71        =         5,680
    Previously Approved..........................................               20        x              4        x            70        =         5,600
    Change.......................................................                0  ........             0  ........            1  ........           80
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\1\ We estimate that after an adviser files its initial report, it will incur significantly lower costs to file ongoing quarterly reports, because much
  of the work for the initial report is non-recurring and likely created system configuration and reporting efficiencies.
\2\ Changes to the number of respondents are due to using updated data to estimate the number of advisers.
\3\ Large liquidity fund advisers file quarterly.
\4\ In the case of the proposed estimates, Private Funds Statistics show 23 large liquidity fund advisers filed Form PF in the fourth quarter of 2020.
  We estimated that one of them filed an initial filing, as discussed in Table 19: Annual Hour Burden Proposed and Final Estimates for Initial Filings.
  (23 total large liquidity fund advisers--1 adviser who made an initial filing = 22 advisers who make ongoing filings.)
\5\ In the case of the final estimates, Private Funds Statistics show 21 large liquidity fund advisers filed Form PF in the third quarter of 2022. We
  estimated that one of them filed an initial filing, as discussed in Table 19: Annual Hour Burden Proposed and Final Estimates for Initial Filings. (21
  total large liquidity fund advisers--1 adviser who made an initial filing = 20 advisers who make ongoing filings.)

                                      Table 21--Proposed and Final Annual Monetized Time Burden of Initial Filings
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Aggregate
                                                                                Per response             Aggregate              monetized
                                                                     Per response               amortized              number of             time burden
                          Respondent \1\                                 \2\                  over 3 years             responses              amortized
                                                                                \3\                    \4\                   over 3
                                                                                years
--------------------------------------------------------------------------------------------------------------------------------------------------------
Large Liquidity Fund Advisers:
    Proposed Estimate............................................      \5\ $64,893    / 3 =        $21,631        x             1        =       $21,631
    Final Estimate...............................................       \6\ 73,391    / 3 =         24,644        x    1 response        =        24,644
    Previously Approved..........................................           63,460  ........  ............        x             2        =       126,920
    Change.......................................................            9,931  ........  ............  ........          (1)  ........    (102,276)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\1\ We expect that the monetized time burden will be most significant for the initial report, for the same reasons discussed in Table 19: Annual Hour
  Burden Proposed and Final Estimates for Initial Filings. Accordingly, we anticipate that the initial report will require more attention from senior
  personnel, including compliance managers and senior risk management specialists, than will ongoing annual and quarterly filings. Changes are due to
  using (1) updated hours per response estimates, as discussed in Table 19: Annual Hour Burden Proposed and Final Estimates for Initial Filings, (2)
  updated aggregate number of responses, as discussed in Table 19: Annual Hour Burden Proposed and Final Estimates for Initial Filings, and (3) updated
  wage estimates. Changes to the aggregate monetized time burden, amortized over three years, also are due to amortizing the monetized time burden,
  which the previously approved estimates did not calculate, as discussed below.
\2\ For the hours per response in each calculation, see Table 19: Annual Hour Burden Proposed and Final Estimates for Initial Filings.
\3\ We amortize the monetized time burden for initial filings over three years, as we do with other initial burdens in this PRA, because we believe that
  most of the burden would be incurred in the initial filing. The previously approved burden estimates did not calculate this.
\4\ See Table 19: Annual Hour Burden Proposed and Final Estimates for Initial Filings.
\5\ In the case of the proposed estimates, for large liquidity fund advisers, we estimated that for the initial report, of a total estimated burden of
  202 hours, approximately 60 percent would most likely be performed by compliance professionals and approximately 40 percent would most likely be
  performed by programmers working on system configuration and reporting automation (that is approximately 121 hours for compliance professionals and 81
  hours for programmers). Of the work performed by compliance professionals, we anticipated that it would be performed equally by a compliance manager
  at a cost of $316 per hour and a senior risk management specialist at a cost of $365 per hour. Of the work performed by programmers, we anticipated
  that it would be performed equally by a senior programmer at a cost of $339 per hour and a programmer analyst at a cost of $246 per hour. (($316 per
  hour x 0.5) + ($365 per hour x 0.5)) x 121 hours = $41,200.50. (($339 per hour x 0.5) + ($246 per hour x 0.5)) x 81 hours = $23,692.50. $41,200.50 +
  $23,692.50 = $64,893.
\6\ In the case of the final estimates, for large liquidity fund advisers, we estimate that for the initial report, of a total estimated burden of 202
  hours, approximately 60 percent will most likely be performed by compliance professionals and approximately 40 percent will most likely be performed
  by programmers working on system configuration and reporting automation (that is approximately 121 hours for compliance professionals and 81 hours for
  programmers). Of the work performed by compliance professionals, we anticipate that it will be performed equally by a compliance manager at a cost of
  $360 per hour and a senior risk management specialist at a cost of $416 per hour. Of the work performed by programmers, we anticipate that it will be
  performed equally by a senior programmer at a cost of $386 per hour and a programmer analyst at a cost of $280 per hour. (($360 per hour x 0.5) +
  ($416 per hour x 0.5)) x 121 hours = $46,948. (($386 per hour x 0.5) + ($280 per hour x 0.5)) x 81 hours = $26,973. $46,958 + $26,973 = $73,931.

             Table 22--Proposed and Final Annual Monetized Time Burden of Ongoing Quarterly Filings
----------------------------------------------------------------------------------------------------------------
                                                                           Aggregate                 Aggregate
               Respondent \1\                  Per response                number of              monetized time
                                                    \2\                    responses                  burden
----------------------------------------------------------------------------------------------------------------
Large Liquidity Fund Advisers:
    Proposed Estimate.......................     \3\ $20,022        x           \4\ 88        =       $1,761,936
    Final Estimate..........................      \5\ 22,791        x           \6\ 80        =        1,823,280
    Previously Approved.....................       29,216.25        x     80 responses        =        2,337,300
    Change \7\..............................      (6,425.25)        0        (514,020)
----------------------------------------------------------------------------------------------------------------
Notes:
\1\ We expect that the monetized time burden will be less costly for ongoing quarterly reports than for initial
  reports, for the same reasons discussed in Table 20: Annual Hour Burden Proposed and Final Estimates for
  Ongoing Quarterly Filings. Accordingly, we anticipate that senior personnel will bear less of the reporting
  burden than they would for the initial report. Changes are due to using (1) updated wage estimates, (2)
  updated hours per response estimates, as discussed in Table 20: Annual Hour Burden Proposed and Final
  Estimates for Quarterly Filings, and (2) updated aggregate number of responses. Changes to estimates
  concerning large liquidity fund advisers primarily appear to be due to correcting a calculation error, as
  discussed below.
\2\ For the proposed estimates, we estimated that quarterly reports would be completed equally by (1) a
  compliance manager at a cost of $316 per hour, (2) a senior compliance examiner at a cost of $243, (3) a
  senior risk management specialist at a cost of $365 per hour, and (4) a risk management specialist at a cost
  of $203 an hour. ($316 x 0.25 = $79) + ($243 x 0.25 = $60.75) + ($365 x 0.25 = $91.25) + ($203 x 0.25 =
  $50.75) = $281.75, rounded to $282 per hour. For the final estimates, we estimate that quarterly reports would
  be completed equally by (1) a compliance manager at a cost of $360 per hour, (2) a senior compliance examiner
  at a cost of $276, (3) a senior risk management specialist at a cost of $416 per hour, and (4) a risk
  management specialist at a cost of $232 an hour. ($360 x 0.25 = $90) + ($276 x 0.25 = $69) + ($416 x 0.25 =
  $104) + ($232 x 0.25 = $58) = $321. To calculate the cost per response for each respondent, we used the hours
  per response from Table 20: Annual Hour Burden Proposed and Final Estimates for Quarterly Filings.
\3\ In the case of the proposed estimates, cost per response for large liquidity fund advisers: $282 per hour x
  71 hours per response = $20,022 per response.
\4\ In the case of the proposed estimates, 22 large liquidity fund advisers x 4 responses annually = 88
  aggregate responses.
\5\ In the case of the final estimates, cost per response for large liquidity fund advisers: $321 per hour x 71
  hours per response = $22,791 per response.
\6\ In the case of the final estimates, 20 large liquidity fund advisers x 4 responses annually = 80 aggregate
  responses.

\7\ The previously approved estimates appear to have mistakenly used a different amount of hours per response
  (105 hours), rather than the actual estimate for large liquidity fund advisers (which was 70 hours per
  response), causing the monetized time burden to be inflated in error. Therefore, the extent of these changes
  are primarily due to using the correct hours per response, which we now estimate as 71 hours, as discussed in
  Table 20: Annual Hour Burden Proposed and Final Estimates for Quarterly Filings. Correcting for the error in
  the previously approved estimates would result in a prior estimate of approximately $19,460 per quarterly
  filing ($278 per hour x 70 hours per response = $19,460) and a change of approximately $3,331 per quarterly
  filing associated with the final amendments ($22,791--$19,460 = $3,331).

                                        Table 23--Proposed and Final Annual External Cost Burden for Ongoing Quarterly Filings as Well as Initial Filings
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Aggregate
                                                                                External                                external
                                                                                Filing                    External              cost of                                 cost of       Total
                                                           Number of             fee per           Total    cost of               initial            Number of            initial     aggregate
                    Respondent \1\                       responses per            filing           filing   initial                filing             initial              filing      external
                                                         respondent \2\            \3\              fees     filing              amortized          filings \6\          amortized     cost \8\
                                                                                \4\                  over 3                                  over 3
                                                                                years \5\                               years \7\
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Large Liquidity Fund Advisers
    Proposed Estimate.................................                4     x        $150     =      $600    $50,000    / 3 =       $16,667     x             1     =       $16,667  \9\ $30,467
    Final Estimate....................................                4     x         150     =       600     50,000    / 3 =        16,667     x             1     =        16,667  \10\ 29,267
    Previously Approved...............................                4     x         150     =       600     50,000                            x             2     =       100,000      113,200
    Change............................................                0                 0               0          0                                        (1)            (83,333)     (83,933)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\1\ We estimate that advisers would incur the cost of filing fees for each filing. For initial filings, advisers may incur costs to modify existing systems or deploy new systems to support
  Form PF reporting, acquire or use hardware to perform computations, or otherwise process data required on Form PF.
\2\ Large liquidity fund advisers file quarterly.
\3\ The SEC established Form PF filing fees in a separate order. Since 2011, filing fees have been and continue to be $150 per quarterly filing. See Order Approving Filing Fees for Exempt
  Reporting Advisers and Private Fund Advisers, Advisers Act Release No. 3305 (Oct. 24, 2011) [76 FR 67004 (Oct. 28, 2011)].
\4\ In the previous PRA submission for the rules, staff estimated that the external cost burden for initial filings would range from $0 to $50,000 per adviser. This range reflected the fact
  that the cost to any adviser may depend on how many funds or the types of funds it manages, the state of its existing systems, the complexity of its business, the frequency of Form PF
  filings, the deadlines for completion, and the amount of information the adviser must disclose on Form PF. We continue to estimate that the same cost range would apply.
\5\ We amortize the external cost burden of initial filings over three years, as we do with other initial burdens in this PRA, because we believe that most of the burden would be incurred in
  the initial filing. The previously approved burden estimates did not calculate this.
\6\ See Table 19: Annual Hour Burden Proposed and Final Estimates for Initial Filings.
\7\ Changes to the aggregate external cost of initial filings, amortized over three years are due to (1) using updated data and (2) amortizing the external cost of initial filings over three
  years, which the previously approved PRA did not calculate.
\8\ Changes to the total aggregate external cost are due to (1) using updated data and (2) amortizing the external cost of initial filings over three years, which the previously approved PRA
  did not calculate.
\9\ In the case of the proposed estimates, Private Funds Statistics show 23 large liquidity fund advisers filed Form PF in the fourth quarter of 2020. (23 large liquidity fund advisers x $600
  total filing fees) + $16,667 total external costs of initial filings, amortized over three years = $30,467 aggregate cost.
\10\ In the case of the final estimates, Private Funds Statistics show 21 large liquidity fund advisers filed Form PF in the third quarter of 2022. (21 large liquidity fund advisers x $600
  total filing fees) + $16,667 total external costs of initial filings, amortized over three years = $29,267 aggregate cost.

G. Rule 31a-2

    Section 31(a)(1) of the Investment Company Act requires registered
investment companies and certain others to maintain and preserve
records as prescribed by Commission rules. Rule 31a-1 specifies the
books and records that must be maintained. Rule 31a-2 specifies the
time periods that entities must retain certain books and records,
including those required to be maintained under rule 31a-1. The
retention of records, as required by rule 31a-2, is necessary to ensure
access by Commission staff to material business and financial
information about funds and certain related entities. This information
will be used by the Commission staff to evaluate fund compliance with
the Investment Company Act and regulations thereunder. We are adopting
amendments to require money market funds to retain books and records
containing schedules evidencing and supporting each computation of a
liquidity fee pursuant to rule 2a-7(c)(2). The respondents to these
collections of information will be money market funds. The new
collections of information are mandatory for the money market funds
subject to rule 2a-7(c)(2). We estimate that there are 111 money market
funds that will be subject to the collection of information
requirements related to liquidity fees. To the extent the Commission
receives confidential information pursuant to the collections of
information, such information will be kept confidential, subject to the
provisions of applicable law.\835\
---------------------------------------------------------------------------

    \835\ See supra note 815.
---------------------------------------------------------------------------

    In our most recent Paperwork Reduction Act submission for rule 31a-
2, we estimated the annual aggregate compliance burden to comply with
the collection of information requirement of rule 31a-2 is 606,982
burden hours with an internal cost burden of $52,200,418 and an
external cost burden estimate of $111,751,674.\836\
---------------------------------------------------------------------------

    \836\ The most recent rule 31a-2 PRA submission was approved in
2022 (OMB Control No. 3235-0179). The estimates in the Proposing
Release were based on earlier approved estimates (696,464 hours and
$115,372,485 external cost burden), and these earlier approved
estimates are reflected in the ``Proposed Estimates'' section of
Table 24.
---------------------------------------------------------------------------

    The Commission did not receive public comment regarding the PRA
estimates for the proposed amendments to rule 31a-2 in the Proposing
Release. We have adjusted the proposal's estimated annual burden hours
and internal time costs, however, to reflect changes in the final rule
(e.g., providing for mandatory and discretionary liquidity fees under
rule 2a-7, instead of the proposed swing pricing requirement, which
applied to a smaller subset of funds) and updated wage rates and data.
    The table below summarizes our PRA annual burden estimates
associated with the proposed amendments to rule 31a-2.

[GRAPHIC] [TIFF OMITTED] TR03AU23.046

VI. Regulatory Flexibility Act Certification

    The Commission certified, pursuant to section 605(b) of the
Regulatory Flexibility Act of 1980 (``RFA'') \837\ that, if adopted,
the proposed amendments to rule 2a-7, rule 31a-2, Forms N-MFP and N-CR
under the Investment Company Act, Form N-1A under the Investment
Company Act and the Securities Act, and Form PF under the Investment
Advisers Act would not have a significant economic impact on a
substantial number of small entities. The Commission included these
certifications in section V of the Proposing Release and section V of
the Form PF Proposing Release and requested comment on the
certifications. Commenters did not respond to the requests for comment
regarding the Commission's certifications, although some commenters
discussed the potential effects of the proposed amendments on smaller
money market funds or smaller private funds.\838\ While we considered
these comments, we continue to believe that the economic impact of the
amendments on small entities will not be significant. With respect to
the amendments for money market funds, only one money market fund is a
small entity based on information in filings submitted to the
Commission.\839\ As for the Form PF amendments affecting large
liquidity fund advisers, by definition no small entity on its own would
be a large liquidity fund adviser subject to reporting on Form PF.\840\
Large liquidity fund advisers that are required to report on Form PF
are SEC-registered

investment advisers that advise at least one liquidity fund and manage,
collectively with their related persons, at least $1 billion in
combined liquidity fund and money market fund assets.\841\
---------------------------------------------------------------------------

    \837\ 5 U.S.C. 605(b).
    \838\ See, e.g., Federated Hermes Comment Letter I; IDC Comment
Letter; see also 2023 Form PF Adopting Release, supra note 494, at
n.432.
    \839\ Under the Investment Company Act, an investment company is
considered a small business or small organization if it, together
with other investment companies in the same group of related
investment companies, has net assets of $50 million or less as of
the end of its most recent fiscal year. See 17 CFR 270.0-10.
    \840\ For purposes of the Advisers Act and the RFA, an
investment adviser generally is a small entity if it: (1) has assets
under management having a total value of less than $25 million; (2)
did not have total assets of $5 million or more on the last day of
the most recent fiscal year; and (3) does not control, is not
controlled by, and is not under common control with another
investment adviser that has assets under management of $25 million
or more, or any person (other than a natural person) that had total
assets of $5 million or more on the last day of its most recent
fiscal year. See 17 CFR 275.0-7.
    \841\ See Instruction 3 to Form PF.
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    While the final amendments include some modifications to the
Commission's proposal, as discussed more fully above in section II, we
believe these modifications generally will reduce the burdens of the
proposal. Moreover, we do not believe that these modifications alter
the basis upon which the certifications in the Proposing Release and
the Form PF Proposing Release were made. Accordingly, we certify that
the final rule will not have a significant economic impact on a
substantial number of small entities.

Statutory Authority

    The Commission is adopting the rule and form amendments contained
in this document under the authority set forth in the Investment
Company Act, particularly sections 6, 8, 22, 24, 30, 31, and 38 thereof
[15 U.S.C. 80a-1 et seq.]; the Advisers Act, particularly sections
204(b) and 211(e) thereof [15 U.S.C. 80b-1 et seq.]; the Securities
Act, particularly sections 5, 6, 7, 10, and 19 thereof [15 U.S.C. 77a
et seq.]; and the Exchange Act, particularly section 23 thereof [15
U.S.C. 78a et seq.].

List of Subjects in 17 CFR Parts 270, 274, and 279

    Investment companies, Reporting and recordkeeping requirements,
Securities.

Text of Rule and Form Amendments

    For the reasons set out in the preamble, title 17, chapter II of
the Code of Federal Regulations is amended as follows:

PART 270--RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940

0
1. The general authority citation for part 270 continues to read as
follows:

    Authority:  15 U.S.C. 80a-1 et seq., 80a-34(d), 80a-37, 80a-39,
and Pub. L. 111-203, sec. 939A, 124 Stat. 1376 (2010), unless
otherwise noted.
* * * * *

0
2. Amend Sec.  270.2a-7 by:
0
a. Revising paragraph (c)(2);
0
b. Adding paragraph (c)(3);
0
c. Revising paragraphs (d)(1)(ii) and (iii) and (d)(4)(ii) and (iii);
0
d. Adding paragraph (f)(4);
0
e. In paragraphs (g)(8)(i) introductory text and (g)(8)(ii)(A),
removing the words ``have invested at least ten percent of its total
assets in weekly liquid assets'' and adding, in their place, the words
``maintain the sufficient liquidity levels identified in its written
procedures''; and
0
f. Revising paragraphs (h)(10) introductory text, (h)(10)(i)(B)(2),
(h)(10)(iii), (iv), and (v), and (j).
    The revisions and additions read as follows:

Sec.  270.2a-7  Money market funds.

* * * * *
    (c) * * *
    (2) Liquidity fees. Except as provided in paragraph (c)(2)(v) of
this section, and notwithstanding section 27(i) of the Act (15 U.S.C.
80a-27(i)) and Sec.  270.22c-1:
    (i) Discretionary liquidity fees. If the fund's board of directors,
including a majority of the directors who are not interested persons of
the fund, determines that a liquidity fee is in the best interests of
the fund, the fund must institute a liquidity fee (not to exceed two
percent of the value of the shares redeemed).
    (A) Duration and application of discretionary liquidity fee. Once
imposed, a discretionary liquidity fee must be applied to all shares
redeemed and must remain in effect until the money market fund's board
of directors, including a majority of the directors who are not
interested persons of the fund, determines that imposing such liquidity
fee is no longer in the best interests of the fund.
    (B) Government money market funds. The requirements of this
paragraph (c)(2)(i) do not apply to a government money market fund. A
government money market fund may, however, choose to rely on the
ability to impose discretionary liquidity fees consistent with the
requirements of this paragraph (c)(2)(i) and any other requirements
that apply to liquidity fees (e.g., Item 4(b)(1)(ii) of Form N-1A
(Sec.  274.11A of this chapter)).
    (ii) Determination, duration, and application of mandatory
liquidity fees. If a money market fund that is not a government money
market fund or a retail money market fund has total daily net
redemptions that exceed five percent of the fund's net assets, or such
smaller amount of net redemptions as the board determines, based on
flow information available within a reasonable period after the last
computation of the fund's net asset value on that day, the fund must
apply a liquidity fee to all shares that are redeemed at a price
computed on that day, in an amount determined pursuant to paragraph
(c)(2)(iii) of this section.
    (iii) Amount of mandatory liquidity fees. The amount of a mandatory
liquidity fee must be determined pursuant to paragraph (c)(2)(iii)(A)
of this section, except as provided in paragraph (c)(2)(iii)(C) or (D)
of this section.
    (A) Good faith estimate of liquidity costs. The fee amount must be
based on a good faith estimate, supported by data, of the costs the
fund would incur if it sold a pro rata amount of each security in its
portfolio to satisfy the amount of net redemptions, including:
    (1) Spread costs, such that the fund is valuing each security at
its bid price, and any other charges, fees, and taxes associated with
portfolio security sales; and
    (2) Market impacts for each security. The fund must determine
market impacts by first establishing a market impact factor for each
security, which is a good faith estimate of the percentage change in
the value of the security if it were sold, per dollar of the amount of
the security that would be sold if the fund sold a pro rata amount of
each security in its portfolio to satisfy the amount of net redemptions
under current market conditions and, second, multiplying the market
impact factor by the dollar amount of the security that would be sold.
A fund may assume a market impact of zero for its daily liquid assets
and weekly liquid assets.
    (B) Cost estimates by type of security. For purposes of paragraph
(c)(2)(iii)(A) of this section, a fund may estimate costs and market
impacts for each type of security with the same or substantially
similar characteristics and apply those estimates to all securities of
that type rather than analyze each security separately.
    (C) Default fee amount. If the costs of selling a pro rata amount
of each portfolio security cannot be estimated in good faith and
supported by data, the liquidity fee amount is one percent of the value
of shares redeemed.
    (D) De minimis exception. A fund is not required to apply a
liquidity fee if the amount of the fee determined under paragraph
(c)(2)(iii)(A) of this section is less than 0.01% of the value of the
shares redeemed.
    (iv) Variable contracts. Notwithstanding section 27(i) of the Act
(15 U.S.C. 80a-27(i)), a variable insurance contract issued by a
registered separate account funding variable insurance contracts or the
sponsoring insurance company of such separate account may apply a
liquidity fee pursuant to paragraph (c)(2) of this section to contract
owners who allocate all or a portion of their contract value to a
subaccount of the separate account that is either a money market fund
or

that invests all of its assets in shares of a money market fund.
    (v) Master feeder funds. Any money market fund (``feeder fund'')
that owns, pursuant to section 12(d)(1)(E) of the Act (15 U.S.C. 80a-
12(d)(1)(E)), shares of another money market fund (``master fund'') may
not impose liquidity fees under paragraph (c)(2) of this section,
provided however, that if a master fund, in which the feeder fund
invests, imposes a liquidity fee pursuant to paragraph (c)(2) of this
section, then the feeder fund shall pass through to its investors the
fee on the same terms and conditions as imposed by the master fund.
    (3) Share cancellation. A money market fund may not reduce the
number of its shares outstanding to seek to maintain a stable net asset
value per share or stable price per share unless:
    (i) The money market fund calculates its share price pursuant to
paragraph (c)(1)(i) of this section;
    (ii) The fund has negative gross yield as a result of negative
interest rates (``negative interest rate event'');
    (iii) The board of directors determines that reducing the number of
the fund's shares outstanding is in the best interests of the fund and
its shareholders; and
    (iv) Timely, concise, and plain English disclosure is provided to
investors about the fund's share cancellation practices and their
effects on investors, including:
    (A) Advance notification to investors in the fund's prospectus that
the fund plans to use share cancellation in a negative interest rate
event and the potential effects on investors; and
    (B) When the fund is cancelling shares, information in each account
statement or in a separate writing accompanying each account statement
identifying that such practice is in use and explaining its effects on
investors.
    (d) * * *
    (1) * * *
    (ii) Maintain a dollar-weighted average portfolio maturity
(``WAM'') that exceeds 60 calendar days, with the dollar-weighted
average based on the percentage of each security's market value in the
portfolio; or
    (iii) Maintain a dollar-weighted average portfolio maturity that
exceeds 120 calendar days, determined without reference to the
exceptions in paragraph (i) of this section regarding interest rate
readjustments (``WAL'') and with the dollar-weighted average based on
the percentage of each security's market value in the portfolio.
* * * * *
    (4) * * *
    (ii) Minimum daily liquidity requirement. The money market fund may
not acquire any security other than a daily liquid asset if,
immediately after the acquisition, the fund would have invested less
than twenty-five percent of its total assets in daily liquid assets.
This provision does not apply to tax exempt funds.
    (iii) Minimum weekly liquidity requirement. The money market fund
may not acquire any security other than a weekly liquid asset if,
immediately after the acquisition, the fund would have invested less
than fifty percent of its total assets in weekly liquid assets.
* * * * *
    (f) * * *
    (4) Notice to the board of directors. (i) The money market fund
must notify its board of directors within one business day following
the occurrence of:
    (A) The money market fund investing less than twelve and a half
percent of its total assets in daily liquid assets; or
    (B) The money market fund investing less than twenty-five percent
of its total assets in weekly liquid assets.
    (ii) Following an event described in paragraph (f)(4)(i) of this
section, the money market fund must provide its board of directors with
a brief description of the facts and circumstances leading to such
event within four business days after occurrence of the event.
* * * * *
    (h) * * *
    (10) Website disclosure of portfolio holdings and other fund
information. The money market fund must post prominently on its website
the following information:
    (i) * * *
    (B) * * *
    (2) Category of investment (indicate the category that identifies
the instrument from among the following: U.S. Treasury Debt; U.S.
Government Agency Debt, if categorized as coupon-paying notes; U.S.