EQ Liquidity Risk

EQ Liquidity Risk provides funds with analytics to help them comply with regulations, including the new SEC Liquidity Risk rule 22e-4.

SEC Liquidity Risk

SEC Liquidity Risk rule 22e-4 requires each open-ended fund to report on its liquidity.

A fundamental part of this is to classify each of its holdings into one of four Liquidity Buckets:

  • Highly Liquid – can convert to cash, by disposal and settlement, within 3 business days
  • Moderately Liquid – can convert to cash in 4 to 7 calendar days
  • Less Liquid – can dispose of holding within 1 week, but settlement will take longer
  • Illiquid – cannot dispose of holding within 1 week

The percentage weighting of the fund’s net assets in each Liquidity Bucket is to be calculated daily and reported monthly to the SEC.

Of particular interest for Liquidity Risk is the weighting of the Highly Liquid and Illiquid buckets.

EQ Liquidity Risk

The core capabilities of EQ Execution Tools are:

  • EQvolume – a forecast of tomorrow’s volume
  • EQimpact Model – a market impact model

These are used as a basis for EQ Liquidity Risk which provides:

  • EQimpact Volume – the maximum volume which can be traded within a target market impact