27. In the SEC release setting forth the new rules adopted in July 2014 requiring a floating NAV for certain types of MMFs, the SEC explained that the intent of the new requirement was not to deter redemptions that constitute “rational risk management by shareholders or that reflect a general incentive to avoid loss.” Instead, the SEC said that the purpose of the new rule was to reduce the first-mover advantage inherent in a stable NAV fund by removing the incentive for redemption activity that could result from investors seeking to exploit an opportunity to redeem shares at a stable share price even if the portfolio suffered a loss.

a. What types of MMFs are required to have a floating NAV?

b. Explain what is meant by a “first-mover advantage,” and why a floating NAV reduces the likelihood of redemption activity that the SEC indicates is harmful to investors.