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Swing Pricing et dynamique des flux au regard de la crise Covid-19

Author

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  • Antoine Baena
  • Thomas Garcia

Abstract

Swing pricing is a recent liquidity management tool designed to reallocate the liquidity cost from remaining to transacting investors, by adjusting share prices of investment funds. Based on unique text-mining data, we observe that its use is spreading among French funds, is systematically associated with an activation threshold, and is regularly associated with swing factor caps. We find that swing pricing had only a limited impact on the financial stability of funds during the Covid-19 turmoil. By disentangling the impact of the different types of swing pricing and analyzing situations of potential acute dilution, we identify that the observed limited effectiveness of swing pricing is mainly explained by the use of swing factor cap that prevents the stabilizing effect to offset a stigma effect. We thus conclude that while swing pricing has the potential to increase financial stability, funds should refrain from using swing factor caps so as not to mitigate stabilizing effects.

Suggested Citation

  • Antoine Baena & Thomas Garcia, 2023. "Swing Pricing et dynamique des flux au regard de la crise Covid-19," Working papers 914, Banque de France.
    • Handle: RePEc:bfr:banfra:914
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    More about this item

    Keywords

    Liquidity Management Tools; Swing Pricing; Investment Funds; Runs;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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