- State Street Global Advisors "Market Timing"
The federal securities laws require that a registered mutual fund's purchase and redemption orders received before the fund's close of business (usually 4:00 p.m. EST ) are processed at a price based on the fund's net asset value as of the close of business on the day received. All purchase and redemption orders received by a fund or its appointed financial intermediary after the close of business are processed at a price based on the next day's net asset value.
Although SSgA's commingled and common trust funds are NOT subject to these federal securities laws, the Declaration of Trust establishing the commingled or common trust fund sets forth the fund's operating policies and procedures.
Using the federal securities laws as guidance, SSgA has established a policy similar to that required for mutual funds and seeks to limit market timing in our commingled and common trust funds to the extent such market timing may have a material impact on the fund. Moreover, many of our index funds permit us to isolate costs of trading to clients initiating the activity. This seeks to protect the fund and its other shareholders from costs associated with traders that are more active. In addition, certain of SSgA's funds charge clients expenses for a transaction that exceeds 5% of the assets of the fund. This fee is intended to protect existing shareholders from large movements of other shareholders.
In early 2003, before any of the current regulatory scrutiny, it became apparent as a result of the net participant activity provided to us by certain defined contribution accounts that market timing activity of 401(k) plan participants in certain of our commingled funds was affecting the ability of those funds to track their indices. As a result, in February 2003, for those funds, SSgA created the Series T Funds, which require that the turnover rate for any plan be limited. This has proven effective thus far.
With respect to “after hours trading,” SSgA's Shareholder Servicing Group, which processes trades in our commingled and common trust funds, has documented guidelines in place requiring that today's commingled and common trust funds' prices be given only for requests received before a certain point in time.*
*With respect to “after hours trading,” SSgA's Shareholder Servicing Group, which processes trades in our commingled and common trust funds, has documented guidelines in place requiring that today's commingled and common trust funds' prices be given only for requests received before a certain point in time With respect to our “as of” funds, utilized mostly by 401(k) plans, participant requests must be received by the appropriate plan administrator by 4:00 p.m. on Day 1 and relayed to SSgA by 8:30 a.m. on Day 2, in order for the participant to receive the Day 1 closing price. On the remainder of our daily priced funds, requests must be received by SSgA by 7:30 p.m. on Day 1 in order to receive the Day 2 closing price.