For financial experts, but also for people from throughout the world, the year of 2008, represented the year of doom, due to the economic crisis. Well, not many people are aware of this, but after around two years of preparations, new legislation and rules meant to avoid such a new crisis have been imposed on the financial market this Friday.
To put things better into perspective, investors from throughout the world will need to adjust some of their money management tactics, in order to ensure lasting benefits for them, their investments and businesses. While the new rules shouldn’t cause lasting disruptions, there are a couple of implications that traders need to be aware of.
To put things better into perspective, funds which are meant to invest into the debt of the private sector (certificates of deposit or commercial paper) will be required to let their share prices float now. In return, this will end the practice of setting share prices at $1, and enforcing them on the market.
This added transparency will also potentially encourage investors to adjust their holdings, based to the changing asset values on the market. The idea behind all this new legislation is to avoid a mass exit from money-market funds, in the unfortunate case that some shares drop below the $1 threshold.
There are also a couple of rules that will potentially put a bit more strains on the net-interest margins for banks, but their profitability shouldn’t take a massive hit.
Based on everything that has been outlined so far, the bulk of the adjustment is already behind traders and investors, as noted by analysts at the Commerzbank. Have you read the new rules? If yes, what is your opinion on them? Let us know your thoughts in the comment section below.