A liquidity risk management program where every bucket is cited, every limit is watched daily and no filing trigger is missed
Every holding bucketed monthly, every override explained, no filing trigger missed.
See one case, screen by screen ↓A liquidity risk management program is the written program every US open-end fund and ETF, other than money market funds, must run under SEC Rule 22e-4 of the Investment Company Act of 1940, the liquidity risk management program rule: classify every holding into one of four liquidity buckets at least monthly (in-kind ETFs are exempt from the bucketing), keep illiquid investments at or below 15% of net assets, keep a highly liquid investment minimum where required, file Form N-RN after a breach and report to the board every year. Liquidity Risk Management Program is liquidity risk management software that puts seven agents on that work — bucketing every holding, writing each override's reason from its source and watching the limits daily — while an analyst proposes and the Program Administrator approves.
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A liquidity risk management program under SEC Rule 22e-4 asks a lot of a small team. Every holding in a US open-end fund or ETF goes into one of four liquidity buckets at least monthly, and sooner when markets move; only money market funds and in-kind ETFs are spared the bucketing. Illiquid investments stay at or below 15% of net assets, funds that are not mostly highly liquid keep a highly liquid investment minimum, a breach means Form N-RN within one business day, and the board gets a written report every year. Most teams still pull vendor buckets into spreadsheets, then work through hundreds of overrides by hand: restricted securities, lock-ups, trading suspensions, local-market closures, defaulted bonds and positions far larger than daily volume.
The risk sits in what the spreadsheet cannot show. An override reason written as a one-line comment, often from a notice in another language. An intra-month move nobody re-classified, though the rule asks for a review more often than monthly when market, trading or investment-specific changes could materially affect a classification, and the SEC's 2024 guidance repeated it. The same bond in two buckets in two funds, with no explanation. A board report that lists events but not evidence. In the SEC's first liquidity rule case, the SEC alleged a fund held 21% to 26% illiquid against the 15% limit, that its largest illiquid holding was relabeled "less liquid", and that the board never received a plan to get back under 15%.
Estimated split for one monthly Rule 22e-4 cycle at a fund group of about 90 funds, by hand and with the solution.
Seven agents bucket every holding, write each override's reason from its source, check each other and watch the limits daily; an analyst proposes and the Program Administrator approves.
Thursday, October 15, 2026, at Quillfield Capital. The Quillfield Emerging Debt Fund — $4.82 billion, 412 holdings, a 20% highly liquid minimum — is about to feel a sell-off in Argentine bonds. Robert Kim, the Program Administrator, works with the agents in conversation beside every screen: they explain what they did, cite where each fact came from and hold every action until a person approves it. Here is the day, screen by screen, in the working solution.
Robert's day opens on 90 funds and $449.4B of net assets: 2 early warnings, 37 overrides to approve, 9 open challenges from the Checker agent and 60,418 holdings classified for September 30. At the top of his list is escalation E-2026-114 for the Emerging Debt Fund, due today. Beside it, the agents' day is on the record, step by step since 10:12 a.m.
Trigger agent: “Good afternoon. One fund needs you: the Emerging Debt Fund is at 13.6% illiquid against the 15% limit. Everything else is within limits.”
Argentine 2035s widened 410 bp in two days and dealers quoting fell from 11 to 4. That crosses the program's triggers, so the Market Watch agent opens an intra-month review of the 7 funds with Argentine risk. The Classification agent re-tests 1,846 holdings in those funds with fresh quotes, volumes and settlement routes; 9 change bucket, 5 of them in the Emerging Debt Fund.
“Trigger: spread move above 150 bp and quotes down more than 50% (program section 3.2).”
The fund opens as four shelves, one per Rule 22e-4 bucket, with each holding on its shelf and arrows on the five that moved since September 30. Argentina 2030 and 2041 drop from highly to moderately liquid; the 2035s to less liquid; Provincia de Río Alto 2031 and Transandina Gas 2029 to illiquid. The gauges read illiquid 13.6% against the 15% limit, $67.5M of headroom, and highly liquid 23.1%, $149.4M above the 20% minimum.
Gauges mark the 12.5% early warning and the 14% point where new illiquid buys pause.
At the reasonably anticipated trade size of $14.3M — 10% of the $142.6M position — the fund can still sell in 6 days at a 150 bp impact. But the four dealers left bid only for local settlement, so dollars arrive in 9 to 12 days. The same security in every fund is compared: less liquid in two funds, moderately liquid in four where small trades still find offshore bids, which the Checker agent cleared as explained by size.
“Sold within 7 days, settled later: less liquid.”
The Checker agent finds Transandina Gas 2029 illiquid in the Emerging Debt Fund ($54.3M) but less liquid in the Global High Yield Fund ($47.9M) at a similar trade size — same dealers, same day. It raises challenge CH-2291 and cannot close it itself. Priya Raman accepts it at 3:31 p.m. with reason code CF-01, and both funds carry the bond as illiquid.
Back-tests run too: 164 real sales in September from the order system, 158 within their bucket.
Río Alto 2031 needs an override the model cannot see. The Override agent writes it from the trustee's notice: trading is suspended on the local market while the province runs a consent solicitation until November 12, 2026, and off-market sales need prior registration and settle in up to 15 business days. Each claim cites its page; the agent's confidence is 97%, and the override waits for Robert's approval with a reason code.
“Checker agent: source supports the reason; no other fund holds it in a different bucket.”
One click opens the notice as received, in Spanish, with the English reading line by line and the three lines the reason rests on pinned — including “El período de la solicitud vence el 12 de noviembre de 2026, salvo prórroga.” The same view holds the program's other sources in Portuguese, Chinese and German: a lock-up agreement, an exchange suspension notice, a promissory note loan agreement.
Net redemptions were $186.0M in five days, $37.2M a day, paid from highly liquid holdings. At that pace the fund reaches its 20% minimum in 5 business days, on October 22, and illiquid rises to 14.1% as the fund shrinks. If the 2035s lose two more of their four dealers they turn illiquid and the fund would be at 16.6% — a breach. The Checker agent re-adds the bucket totals and the flow file at 3:55 p.m.: no differences.
“The projection uses the last five days, not the worst week of the year.”
The Trigger agent's escalation comes with a plan, each item tied to its program section: pause new illiquid purchases in the order system now, raise $120M of highly liquid assets over five days by selling Brazil 2034 and Colombia 2034, add no new Argentine risk, classify the fund daily until illiquid is back under 12.5%, send a cited courtesy notice to the board's risk chair and hold a Form N-RN Part B draft. Priya proposes it at 4:02 p.m.; at 4:05 Diego Salazar, the portfolio manager, adds market color but cannot approve.
Diego Salazar: “Two dealers told us they will make markets in the 2035s again after the auction.”
Robert approves with reason code ES-02, “Early warning: approaching the 15% limit.” Under his approval new illiquid purchases pause in the order system at 4:11 p.m., the cited notice reaches Margaret Ellison, chair of the Audit and Risk Committee, at 4:12 p.m., daily classification switches on and the desk is asked to raise the $120M. The Form N-RN draft stays held: it files only above 15%, after two signatures.
“The Trigger agent keeps this draft current each day. It never files; a person files after both signatures.”
The same escalation, seen by five of the people who carry it — in their own words, and what their day looks like now.
Seven agents bucket every holding, write each override's reason from its source, check each other and watch the limits daily; an analyst proposes and the Program Administrator approves.
Proposes a Rule 22e-4 bucket for every holding from days to cash at the reasonably anticipated trade size, value impact, dealer quotes, trade volume, settlement cycle and position size — 60,418 holdings a month here.
Writes the override reason for restricted, locked-up, suspended, thin-market, local-market and defaulted holdings from offering documents, lock-ups, notices and loan agreements, in their own language.
Watches spreads, dealer quote counts, trading halts, market closures and local-language notices every day, and opens an intra-month review when the program's triggers fire.
Re-tests every proposal: the same security across all 90 funds, back-tests of real sales from the order system against the bucket they carried, stale data and low confidence.
Watches the 15% limit and every highly liquid minimum daily, projects when a limit would break at the current redemption pace, and drafts the escalation, the board notice and Form N-RN.
Drafts the monthly committee materials, the Form N-PORT liquidity fields and the annual adequacy and effectiveness report for the board from the year's sealed records.
Seals every decision with its sources in a hash-chained trail and builds the regulator pack for an SEC exam.
Maker, checker, co-signature, oversight. The agents propose; a named person decides.
The agents' conversation sits beside the shelves, the holding, the escalation and the board report. Ask in plain words; every answer points to its source.
Why did illiquid rise?
Illiquid rose from 11.2% on September 30 to 13.6%: Río Alto 2031 ($61.4M) and Transandina 2029 ($54.3M) moved in, +2.4 points. The 2035s moved to less liquid, not illiquid.
What would breach the 15% limit?
If the 2035s lose two more dealers they turn illiquid: 16.6%, a breach. At current redemptions alone, illiquid reaches 14.1% in 5 business days, because the fund shrinks as it pays.
Are other funds consistent?
Seven funds hold Argentine risk. The 2035s are less liquid in two funds (Emerging Debt, Short Duration EM Bond ETF) and moderately liquid in four: small trades still find offshore bids. One real inconsistency today was Transandina 2029, now fixed (CH-2291).
Where does the cash come from?
The plan raises $120M of highly liquid assets over five days by selling Brazil 2034 and Colombia 2034 (moderately liquid, cash in 4 days) and adds no Argentine risk. After five more days of redemptions at today's pace, highly liquid stays near 22.6% instead of falling to 20.0%.
13 screens from the working solution, on its sample data. Pick one to see it large.
Thresholds, trade sizes and value impacts come from the board-approved program (v4.2 here). A change is proposed and approved by a second person, and every change is logged.
| Setting | Default | Choose from |
|---|---|---|
| Illiquid early warning | 12.5% of net assets | Proposed and approved by a second person — for example 12.0% for emerging-market funds |
| Order system pauses new illiquid buys | 14.0% | A pre-trade rule in the order system; an approved escalation can bring the pause forward once a fund passes the 12.5% early warning |
| Rule limit | 15% (Rule 22e-4) | Set by the rule |
| Minimum headroom warning | 2.0 points | Per fund minimum, 31 funds, reviewed at least annually; a minimum cannot be lowered during a shortfall without the board |
| Auto-confirm a bucket | Unchanged and confidence 90% or more | For example raise to 92%; nothing is auto-confirmed on a stale price |
| Intra-month review triggers | Spread move over 150 bp · quotes down over 50% | Also trading halt · market closure · capital controls |
| Trade size and value impact | 10% of position · 150 bp for high-yield and EM bonds | 50 bp investment-grade · 100 bp municipal · 1.0× average spread equities · 200 bp loans · an ETF's trade size is its worst 5-day redemption × 2 |
| Record retention | 7 years | The rule asks for at least 5, the first 2 easily accessible; legal hold per fund or event, set by the CCO |
Every figure is labelled: a target the solution is built to, an estimate, a typical published result, or a proven one.
“demo” = seen in the working solution, on its sample fund data · “target” = the design goal, measured in the live solution · “estimated” = our estimate · “typical” = published figures (SEC Rule 22e-4 and adopting release 33-10233; the SEC's estimate of about $240 million a year to run liquidity programs; SEC press release 2023-90 on the first liquidity rule case — 21% to 26% illiquid against the 15% limit; SEC Form N-PORT amendments and liquidity guidance, August 2024). People, funds, issuers and identifiers named on this page are fictional — characters and sample data in the working solution; sovereign issuers appear only as sample holdings with invented identifiers.
A liquidity risk management program is the written program every US open-end fund and ETF, other than money market funds, must run under SEC Rule 22e-4 of the Investment Company Act of 1940, the liquidity risk management program rule: classify every holding into one of four liquidity buckets at least monthly (in-kind ETFs are exempt from the bucketing), keep illiquid investments at or below 15% of net assets, keep a highly liquid investment minimum where required, file Form N-RN after a breach and report to the board every year. Liquidity Risk Management Program is liquidity risk management software that puts seven agents on that work — bucketing every holding, writing each override's reason from its source and watching the limits daily — while an analyst proposes and the Program Administrator approves.
Highly liquid: convertible to cash in 3 business days or less. Moderately liquid: convertible to cash in more than 3 business days but within 7 calendar days. Less liquid: can be sold within 7 calendar days, but settles later. Illiquid: cannot be sold within 7 calendar days without significantly changing its market value. The Classification agent does the liquidity bucketing for you, testing each holding at the reasonably anticipated trade size and value impact your program sets, and shows the four tests behind every bucket.
At least monthly, and more often when market, trading or investment-specific changes could materially affect a classification, as Rule 22e-4 asks and the SEC's 2024 guidance repeated. The Market Watch agent watches spreads, dealer quotes, trading halts, market closures and local notices daily and opens an intra-month review when your program's triggers fire, as it did for the Argentine sell-off in the working solution.
The Trigger agent checks every fund every business day and projects forward at the current redemption pace. In the working solution it showed the Emerging Debt Fund reaching its 20% minimum in 5 business days and drafted the escalation, a cited board notice and a Form N-RN draft before anything broke. Your early warning and order-system pause points are settings.
Form N-RN is due within one business day when illiquid investments exceed 15% of net assets, or when a fund has been below its highly liquid minimum for more than 7 days. The Trigger agent keeps a draft current daily but never files: the Program Administrator signs it as ready, the Chief Compliance Officer co-signs, and a person files through the filing agent.
Yes. For Form N-PORT liquidity reporting, the Report agent prepares the liquidity fields — Item C.7 for each holding's bucket and Item B.7 for funds with a minimum — from each month's sealed classification, and drafts the annual adequacy and effectiveness report section by section from the year's records. Trustees get a read-only view and can ask the report questions.
Yes. The agents propose, check and draft; they never approve, file, notify the board or block trading on their own. The analyst proposes, the Program Administrator approves with a reason code, the portfolio manager adds market color but never approves his own funds, and the CCO co-signs every filing.
The Agentic Solution Engine builds and deploys it from your requirements and documents — your written program, fund list, trade size and value-impact rules and minimums — and it goes live once every quality gate has passed. Setup in the working solution takes about two weeks with your team, a dry run against a past month's filed buckets, then a parallel month.
Each fund's breach day found and evidenced, and the quarterly pack signed in a day.
1-min demoDerivatives Risk Management ProgramEvery daily VaR test explained in plain words, every escalation signed, no late N-RN.
1-min demoStress Testing and Scenario AnalysisNew scenarios drafted in hours, every portfolio run weekly, every loss explained.
1-min demoWe'll run Liquidity Risk Management Program on a past month of your own positions, overrides and written program.