European Money Market Funds: A Comparative Analysis of U.S. And European De Facto and De Jure Micro-Processes
The Columbia Journal of European Law, Vol. 19, No. 2 (Spring 2013)
Posted: 20 Oct 2013
Date Written: March 31, 2013
This Article presents European money market funds from multiple dimensions and shows the diversity of these funds — a diversity rooted in the historical developments of diverse European financial markets. The events of the financial crisis and liquidity squeeze confronting European money market funds in the fall of 2007 have brought money markets to the fore of Europe’s regulatory agenda. The fragmentation of the European money market fund industry is not only a source of confusion for investors, but also a significant impediment to developing a single market for financial services. The near future of the European money market fund industry rests on the outcomes of two divergent trends: (1) harmonization of investment products toward convergence of investment; and (2) regulatory practices and a desire for product differentiation driven by the local nature of collective investments — especially with regard to retail investors’ preferences. These trends underscore two transformations related to the development of money market funds in Europe: (1) the market practices that exist de facto to their capture and replication de jure; and (2) de jure ideals of fair rules that encourage further and deeper de facto market developments. These transformations from de facto to de jure and from de jure to de facto present a continuous isomorphic dynamic that if balanced properly can result in both the creation of new products under fair rules of transparency that drive new and more resilient markets. At the ground level, these trends will be shaped by the costs and benefits they present for asset managers and investors seeking optimal efficiency in the contest between national laws, including applicable tax regulation. Moreover, European sovereign debt and the on-going problem of high-risk political dis-resolution have profound consequences for money market funds in the U.S. and Europe. These unquantifiable, intangible risks mark major unknowns for the future state of Europe and, in turn, the continued existence and development of the money market fund sector.
Keywords: money market fund, European Money market funds, MMF, European Union
JEL Classification: D8, E4, E5, G2
Suggested Citation: Suggested Citation