Brian McCabe Discusses SEC Swing Pricing Rule

In late 2022, the Securities and Exchange Commission (“SEC”) proposed amendments to its liquidity risk management rule that included mandatory swing pricing.

Asset management partner Brian McCabe commented on the rule in Ignites, noting that "It's eminently possible" that the SEC will drop swing pricing for open-end funds and replace it with a liquidity fee. "It'll be something mandatory, which I suspect is not going to be viewed as something beneficial. It will be less detrimental [than] the original proposal, but it doesn't make it a great idea."

The agency may also evaluate the liquidity fee in relation to the fund's level of cash holdings, Brian said. If the liquidity fee imposed is tied to the percentage of cash on hand in a fund, the SEC would also have to weigh whether that includes interfund lending agreements and lines of credit at banks, both of which are common.