Federal Reserve

New SEC regulations allows money market funds to refuse redemption.

"Moments ago the gates arrived, when following a close 3-2 vote (with republican commissioner Piwowar and democrat Stein dissenting), the SEC adopted new rules designed to curb the risk of investor runs on money market funds, capping the end of a years-long heated debate between regulators and the industry dating to the financial crisis according to Reuters.
Among the changes, funds will have to switch to a floating share price instead of the current $1/share (hence the term breaking the buck). But the key part: “The SEC’s rule will require prime money market funds to move from a stable $1 per share net asset value, to a floating NAV. It also will let fund boards lower redemption “gates” and fees in times of market stress.”"

It gets worse every day.

"But forget about our opinion, or even that of the SEC, because while on the surface this now enacted proposal to establish withdrawal limits is spun as benign, it was the Fed itself who warned in April of 2014 that “the possibility of suspending convertibility, including the imposition of gates or fees for redemptions, can create runs that  would not otherwise occur… Rules that provide intermediaries, such as MMFs, the ability to restrict redemptions when liquidity falls short may threaten financial stability by setting up the possibility of preemptive runs.”"

Oops.

"Clearly, everyone understand that the only purpose behind implementing “gates” is to redirect the herd. And with some $2.6 trillion in assets, money markets can serve as a convenient source of “forced buying” now that QE is tapering if only for the time being. The only question is whether the herd will agree to this latest massive behavioral experiment by the Fed, and allocate their funds to a stock market which is now trading at a higher P/E multiple than during the last market peak.
And should this particular exercise in inflating stock bubbles fail, then gating bond funds, another “reform” which as we reported last month is in the works, should certainly force equities to unseen bubble proportions."

Or gold could skyrocket in an unintended consequence.