CHAPTER IVValuation rules

Article 29Valuation of MMFs

1.

The assets of an MMF shall be valued on at least a daily basis.

2.

The assets of an MMF shall be valued by using mark-to-market whenever possible.

3.

When using mark- to-market:

(a)

the asset of an MMF shall be valued at the more prudent side of bid and offer unless the asset can be closed out at mid-market;

(b)

only good quality market data shall be used; such data shall be assessed on the basis of all of the following factors:

  1. (i)

    the number and quality of the counterparties;

  2. (ii)

    the volume and turnover in the market of the asset of the MMF;

  3. (iii)

    the issue size and the portion of the issue that the MMF plans to buy or sell.

4.

Where use of mark-to-market is not possible or the market data is not of sufficient quality, an asset of an MMF shall be valued conservatively by using mark-to-model.

The model shall accurately estimate the intrinsic value of the asset of an MMF, based on all of the following up-to-date key factors:

(a)

the volume and turnover in the market of that asset;

(b)

the issue size and the portion of the issue that the MMF plans to buy or sell;

(c)

market risk, interest rate risk, credit risk attached to the asset.

When using mark-to-model, the amortised cost method shall not be used.

5.

A valuation carried out in accordance with paragraphs 2, 3, 4, 6 and 7 shall be communicated to the F1FCA.

6.

Notwithstanding paragraphs 2, 3 and 4, the assets of public debt CNAV MMFs may additionally be valued by using the amortised cost method.

7.

By way of derogation from paragraphs 2 and 4, in addition to the mark-to-market referred to in paragraphs 2 and 3 and the mark-to-model referred to in paragraph 4, the assets of LVNAV MMFs that have a residual maturity of up to 75 days may be valued by using the amortised cost method.

The amortised cost method shall only be used for valuing an asset of a LVNAV MMF in circumstances where the price of that asset calculated in accordance with paragraphs 2, 3 and 4 does not deviate from the price of that asset calculated in accordance with the first subparagraph of this paragraph by more than 10 basis points. In the event of such a deviation, the price of that asset shall be calculated in accordance with paragraphs 2, 3 and 4.