European Union: MMFR: Introducing A New EU Framework For Money Market Funds

The Money Market Funds Regulation (EU) 2017/1131 ("MMFR") was published in the Official Journal of the EU on 30 June 2017 and comes into force on 20 July 2017. It will apply from 21 July 2018 (with the exception of Article 11(4), Article 15(7), Article 22 and Article 37(4)) which shall apply from 20 July 2017 and is a broad set of new regulatory measures that apply to money market funds ("MMFs") established, managed or marketed in the EU.

In light of the perceived systemic risk presented by MMFs, the MMFR aims to make these investment products more resilient and resistant to contagion risks. It does this by imposing rules on eligible assets, portfolio diversification, portfolio maturity and valuation of assets and introduces new categories of MMFs that can offer a constant net asset value ("NAV") per share if they meet certain requirements.


1. In scope funds

Both UCITS and AIFs that invest in short term assets (assets with a maturity not exceeding two years) and have an objective of offering returns in line with money market rates and/or preserving the value of the investment will be in scope of the MMFR.

The MMFR will also impact non-EU MMFs as they will not be permitted to be marketed in the EU as a MMF.

2. Types of MMFs

A MMF may be established as a:

MMF Type Standard MMF Short Term MMF
Variable NAV MMF ("VNAV MMF")
Low volatility NAV MMF ("LVNAV MMF") X
Public debt constant NAV MMF ("Public Debt CNAV MMF") X

The key differences between the three types of MMFs are set out below.

3. Use of "money market fund", "MMF" designation and labelling

Only UCITS and AIFs authorised under the MMFR will be permitted to use the designation "money market fund" or "MMF" in any documents, prospectus, advertisements or communications.

A MMF must clearly indicate whether it is a short term MMF or standard MMF in any external document, written communication or advertisement distributed to investors.

4. Eligible investments

MMFs will be permitted in the below categories of investments:

(a) Money market instruments;
(b) Deposits (on demand or less than 12 month maturity) with eligible credit institutions;
(c) Eligible securitisations and asset backed commercial paper ("ABCPs");
(d) Reverse repurchase agreement ("reverse repos") (with the ability to close out the agreement on no more than two working days' notice);
(e) Repurchase agreements (for liquidity management purposes, with the ability to close out the agreement on no more than two working days' notice);
(f) Financial derivative instruments (to hedge interest rate or exchange rate risks only); and
(g) Units of other MMFs (subject to short term MMFs only investing in units of other short term MMFs).

As discussed below, Public Debt CNAV MMFs are subject to further restrictions.

4. Investment restrictions

MMFs will be prohibited from:

(a) Shortselling money market instruments, securitisations, ABCPs and units of other MMFs;
(b) Entering into securities lending agreements or securities borrowing agreements;
(c) Taking direct or indirect exposure to equities or commodities; and
(d) Borrowing or lending cash.

5. Diversification and concentration

MMFs will be subject to detailed rules on the diversification of eligible investments, including issuer concentration limits, limits on exposure to credit institutions and counterparties and investment in other MMFs.

6. Portfolio maturity

To reduce portfolio risk, strengthen MMFs ability to face redemptions, and prevent MMFs assets from being liquidated at heavily discounted prices, MMFs will be subject to portfolio maturity limitations.

MMF type Weighted average maturity ("WAM") Weighted average life ("WAL")
Short-term MMFs (Public Debt CNAV, LVNAV and VNAV MMFs) ≤ 60 days ≤ 120 days
Standard MMFs (VNAV MMFs) ≤ 6 months ≤ 12 months

MMFs will also be required to hold a minimum amount of liquid assets that mature daily and weekly.

MMF type Daily maturing assets Weekly dealing assets
Public Debt CNAV and LVNAV MMFs ≥ 10% of NAV ≥ 30% of NAV
VNAV MMFs ≥ 7.5% of NAV ≥ 15% of NAV

Daily maturing assets include reverse repos (capable of being terminated within one working day) or cash (capable of being withdrawn within one working day).

Weekly maturing assets include reverse repos (capable of being terminated within five working days) or cash (capable of being withdrawn within five working days).

7. Credit assessment

The manager of a MMF will be required to apply an internal credit quality assessment procedure to determine the credit quality of investments taking into account the issuer and the characteristics of the investment itself. Regard to credit ratings of an instrument will be permitted, provided the manager does not solely or mechanically rely on such ratings.

8. Valuation

MMFs will be required to value assets on a daily basis using mark to market whenever possible and otherwise mark to model (the "Market Valuation"). In addition to valuing assets on a Market Valuation basis, Public Debt CNAV MMFs and LVNAV MMFs will also be permitted to value assets on the amortised basis (the "Amortised Valuation").

9. External support

In order to mitigate contagion risks, MMFs are prohibited from receiving external support from any third party, including the sponsor of the MMF.

10. Reporting to regulators

In addition to reporting already required for UCITS and AIFs under the UCITS Directive1 /AIFMD2, the manager of a MMF will be required to report a detailed list of information on the MMF, including the type and characteristics of the MMF, portfolio indicators and information on the assets held in the portfolio to its competent authority. This information helps ensure that competent authorities are able to detect, monitor and respond to risks in the MMF market.


The VNAV MMF will be the most flexible type of MMF. It will be capable of being established as a short term MMF or a standard MMF and will issue and repurchase shares at a variable NAV using the Market Valuation.

The LVNAV MMF will also be a flexible type of MMF. Unlike the VNAV MMF it will only be capable of being established as a short term MMF. It will have the ability to issue and repurchase shares at a constant NAV per share and to use the Amortised Valuation. As LVNAV MMFs will not be subject to further restrictions on eligible investments, their ability to offer a constant NAV and use the Amortised Valuation will be subject to certain conditions. The Amortised Valuation will only be permitted if the assets of the LVNAV MMF have a residual maturity up to 75 days. Also, if the Amortised Valuation of the assets deviates from the Market Valuation by more than ten basis points, the Amortised Valuation will not be permitted to be used. Further, shares will be capable of being issued and redeemed at a constant NAV per share only as long as the constant NAV per share does not deviate from the Market Valuation by more than 20 basis points.

The Public Debt CNAV MMF will be the most restrictive type of MMF. Similar to the LVNAV MMF it will only be capable of being established as a short term MMF. It will also be permitted to issue and repurchase shares at a constant NAV per share and use the Amortised Valuation. Unlike LVNAV MMFs, it will be subject to further rules in respect of eligible investments and it will be required to invest at least 99.5% of its assets in certain public debt securities3, reverse repos secured by eligible public debt securities and cash. Due to these restrictions on eligible investments, Public Debt CNAV MMFs are not subject to further conditions relating to offering a constant NAV per share and use of the Amortised Valuation.

LVNAV MMFs and Public Debt CNAV MMFs are also subject to procedures to be followed where the proportion of daily and/or weekly maturing assets fall below certain thresholds, including escalation procedures, application of gates and suspension of redemptions. When, within a period of 90 days, the total duration of suspensions exceeds 15 days a Public Debt CNAV MMF or LVNAV MMF will be required to automatically cease to be a Public Debt CNAV MMF or a LVNAV MMF. VNAV MMFs are not subject to corresponding requirements.

The appendix to this update includes a further summary of the key differences between the three types of MMF.


The MMFR builds on the existing regulatory regime operating under the UCITS Directive, AIFMD and the 2010 ESMA "Guidelines on a common definition of European money market funds".4 This means that funds in scope of the MMFR will have to comply with obligations under the UCITS Directive/AIFMD (as applicable) and an additional layer of specific MMF rules under the MMFR. Once the MMFR applies, this will be factored into the authorisation process/existing regulatory regime for new UCITS/AIF MMFs, rather than introducing an additional layer of authorisation.


The MMFR will apply from 21 July 2018, 12 months after coming into effect. As noted above, existing MMFs can avail of a further six month transition period to submit an application to the competent authority demonstrating compliance with the MMFR.


Yes. MMFR provides that where a MMF comprises more than one investment compartment, each compartment shall be regarded as a separate MMF for the purposes of certain provisions of MMFR.


(a) Consider which of the new model MMFs is most suitable for your fund to operate as going forward;
(b) Assess the key characteristics of your fund that will need to be adapted;
(c) Consider all operational as well as legal and regulatory implications of making necessary changes;
(d) Initiate a project to convert your MMF, capturing all operational and legal aspects and factoring shareholder approval into the timing where appropriate; and
(e) Manage timing to ensure the project's completion precedes Q1 2019.


1 Directive 2009/65/EC.

2 Directive 2011/61/EU.

3 Money market instruments issued or guaranteed by the European Union, national, regional and local administrations of EU member states or their central banks, certain EU and international institutions and central authorities or central banks of third countries.

4 CESR/10-049.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Peter Stapleton
Stephen Carty
Ian Conlon
Emma Conaty
Pádraig Brosnan
In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.