Integrating your treasury system and MMF portal

Money Market Funds (MMFs) are popular short-term investments. As trade volumes increase, treasurers look to automate the trading process. This article explains what MMFs are, why they gain popularity and the benefits of integrating your treasury system and your MMF portal.

What are MMFs?

Money Market Funds (MMFs) are fixed income-mutual funds that invest in highly liquid, short-term instruments with a low level of risk. MMFs are flexible and safe. That makes them an attractive investment option for corporate treasuries.

MMFs are invested in instruments such as short-term commercial bonds, commercial paper, and overnight bank deposits. They can be grouped into different types of funds, depending on attributes such as asset class and maturity period.

During the COVID-19 pandemic, corporate investors poured even more cash into MMFs for safety, flexibility, and liquidity. As interest rates begin to rise, the attractiveness of MMFs may even increase further. Also, the opportunity cost of not investing excess cash into MMFs is high.

Benefits of automating your MMF experience

As trade volumes increase, the easy handing of MMFs becomes more important to corporate treasuries. Commonly, treasury teams use dedicated portals provided by banks or other vendors to access a wide range of funds, covering different currencies and types of MMFs. These MMF portals can be integrated with their Treasury Management System (TMS). Here are the key benefits of integrating both systems:

1. Increase the visibility of the trade life cycle

   Connecting TMS and the MMF portal helps treasurers manage all of their investments in one place. They get a more accurate, consolidated view of their cash flows. Real-time workflows automate daily activities to ensure the accuracy of investments along their whole life cycle. Manual entry and human error are eliminated.

2. Stay on top of regulator change

   Following the financial crisis in 2008, several MMF reforms were introduced, increasing the complexity of managing funds. For example, in 2016: “Prime” MMFs that invest in floating-rate debt and commercial paper of non-treasury assets moved from a fixed to floating net asset value (NAV) price. Corporate investors were impacted by the introduction of liquidity fees, taking effect in times of market stress. And there is more to come: Re-regulation of MMFs is likely to occur in 2023. Integrating TMS and MMF portal increases visibility and helps you stay on top of market developments.

3. Time savings for treasury and IT

   Time savings are also another significant benefit of a tight integration between the TMS and MMF portal. If you invest in MMFs via phone, chat, or an online portal, you are likely taking unnecessary steps to manage your investments. Integration can create a fully automated trade lifecycle within the TMS. Processes including receipt creation, calculating NAV, sending rebate messages, and exposure reporting are automated.The Treasury team and IT resources can save time because of the connectivity offered as a managed service. Benefits of a managed service include having technical support at hand, quickly reacting to any integration failures, providing KYC, and sending notifications and messages for various treasury processes. Furthermore, the TMS and MMF portal providers work together to ensure high support levels and continuously improve their offerings.

Overall, the benefits of integrating your TMS with an MMF portal cannot be ignored. The increased visibility and simplicity of managing these investments all in one place improves efficiency and accuracy when carrying out your day-to-day treasury operations. As a managed service, you can be confident in the integration itself, as dedicated support teams are on hand to assist along the way. Integration partners are constantly looking at ways to improve their offering for customers, so you can be assured that you maximize the benefits of integration.