WASHINGTON (Reuters] – U.S. assets managers are attempting to halt draft rules aimed towards fixing systemic risks within the $5 trillion industry of money market funds. Executives told Reuters that the proposal would cause the death of popular products.

This industry now faces renewed regulation scrutiny, after the taxpayers have rescued money market funds (a critical source of municipal and short-term funding during the panic-induced chaos of 2020), for the second consecutive year.

Money market funds are short-term, high-quality debt instruments that offer day-to-day redemptions. Investors look for immediate liquidity and low price volatility. They are also spooked when they don’t meet their expectations during market stress.

Investors pulled $130 billion out of some money market funds in March 2020 to stop the economic collapse. According to a Treasury analysis disputable by the funds industry, this contributed to short-term stress.

Securities and Exchange Commission proposed in December that money market funds be more resilient by, among others, setting a value adjustment for funds to reflect trading activity. This would allow redeeming investors to bear the exit fees and not dilute other investors. The theory is that this swing pricing reduces the temptation to seek out the exit.

Monday’s deadline is for comment submissions. Industry is fighting back on swing pricing. It argues that they will be difficult to operate, increase costs for fund sponsors, reduce liquidity and make it more challenging for investors.

Jane Heinrichs (associate general counsel, Investment Company Institute), which represents asset managers, stated that “we really believe it would kill the product.” Funds will decide it is not worthwhile to change it for a product which does not meet investors’ needs.

Heinrichs stated that the SEC had not provided any data supporting Heinrichs’ idea.

Although swing pricing has been used in some European funds, the concept is not familiar to U.S. investors. Peter Yi is a director at Northern Trust Asset Management. Swing pricing will be difficult to comprehend for investors, “as it is without a doubt.”

A spokesperson for the SEC did not respond immediately.

The Federal Reserve and Treasury launched emergency liquidity funds in March 2020 to help stabilize the market and calm panicked investors. This panic reminded me of 2008 when the U.S. government was forced to support the market after a similar run on money markets funds.

In response to the bailout, the SEC adopted rules that would reduce the possibility of investors running in 2010, and 2014. However, experts in regulatory affairs said these rules were not adequate for 2020.

Advocacy groups assert that money market funds have an implicit government guarantee and are not subject to the liquidity or capital requirements required by such guarantees.

Dennis Kelleher of Better Markets, a Washington advocacy group said that the government literally gives private businesses – money market fund sponsor – billions or billions per year for no reason. “And then when there’s market stress, they don’t have to cover the downside.”

His group advocates for comprehensive reforms beyond what the SEC proposes. These include bank-like capital buffers.

The Investment Company Institute is opposed to swing pricing. However, the Institute supports the SEC’s proposal to increase funds’ liquidity requirements and allow fund boards greater flexibility to charge or suspend redemptions when there’s stress. This is known as a “gate” for fund management.

As funds approached the minimum liquidity threshold under current rules that allows fund boards gate redemptions, investor runs increased. That bright line could be erased by the SEC rules.

Heinrichs stated that by removing fees and gates of liquidity thresholds, and increasing liquidity levels you can directly address these issues starting in 2020.