The SEC may demand swing pricing for most funds.

Swing pricing would be required for most funds, one of the most significant changes in the SEC's proposed regulation. Matt Carroll Atlanta Braves believes that the charging inflow and outflow costs to investors rather than diluting fund owners will help alleviate liquidity difficulties. However, several things could be improved. The first is that due to swing pricing, funds will have a substantial mismatch because they won't know when they can buy or sell shares until much later than when their NAV estimations are produced. To address this, the SEC recommends that relevant Open-End Funds impose a "hard close" requirement for trades received by their fund firms (or registered transfer agents mentioned in the fund prospectus or clearing agencies) at the firm's trading cutoff time, which is likely to be 4 p.m. This means that, for most funds, trades received after that time will not receive the day's price or trade date.

Second, the SEC recommends that all funds separate daily transactions involving derivatives and cash. This is an important breakthrough for leveraged funds that use derivatives to increase investor returns. To set aside the cost of each transaction, these funds would need to be in a liquid asset such as cash or products with cash characteristics. If a fund runs out of cash, the notion is that it can use these assets to meet redemptions.

However, many fund managers have quickly pointed out that this is a one-size-fits-all strategy that imposes a substantial financial burden on all funds. Several trade organizations have previously criticized the idea, including the CFA Institute, the Society of Fund Management Accountants, and the American Council of Independent Investments.

According to some fund managers, this could dramatically harm retirement savers who need assistance executing trades for their 401(k) funds. This will significantly impact the distribution companies that promote such savings programs. According to the SEC, the recommendations will not affect money market funds or exchange-traded funds. Even though they may be prone to swing pricing and hard closing, these funds do not have the same liquidity difficulties as open-end funds.

Furthermore, critics believe that the planned adjustments will make it difficult for fund managers to adopt swing pricing to satisfy their funds' needs. This is because a fund's requirements may vary dramatically depending on its investment objectives and, as a result, the assets in its portfolio. A vital objection to the proposal is that the SEC's proposed modifications may impose financial requirements on funds with fewer net inflows and outflows, such as small-cap growth or foreign funds. This is done to compute the Swing Factor, which is mandated by the rules and reflects market affect costs; the smaller the net purchases and redemptions, the higher the Swing Factor.