The associated forced sales of fund assets contributed to a sharp deterioration in fixed-income market liquidity that necessitated additional emergency interventions by the Federal Reserve. In assessing possible reforms to address this run risk, swing pricing could be helpful, because it reduces the first-mover advantage for running from a fund by imposing a cost when redemptions are high.
Swing pricing has been used for more than a decade in European mutual funds, where it has been shown to slow redemptions in stress events. 5 In the United States, mutual funds have not adopted swing pricing, in part because of technical obstacles.