Effective November 9, 2016
These expectations supplement those outlined in the Federal Reserve Bank of New York Policy on Counterparties for Market Operations.
The Federal Reserve Bank of New York's relationships with private sector counterparties described in this policy are business, not regulatory, relationships entered into by the New York Fed for the purposes described herein. That a firm is a New York Fed counterparty is not an endorsement of the firm by the New York Fed and should not be used as a substitute for independent analysis and due diligence by other parties considering a business relationship with the firm.
Role of reverse repo counterparties in New York Fed market operations
Reverse repo (RRP) counterparties only operate with the New York Fed as cash providers in the Desk's reverse repo operations. As such, they play a much more limited role in the Desk's operations than primary dealers, which may serve as counterparties in all of the Desk's domestic open market operations.
RRP counterparties are expected to bid in an operation at least twice every six months.
In order to be eligible as a reverse repo counterparty, a firm must be either:
- A state or federally chartered bank or savings association (or a state or federally licensed branch or agency of a foreign bank) with total assets equal to or greater than $30 billion, or reserve balances equal to or greater than $10 billion on the last quarter for which relevant reports are available;1 or
- A government-sponsored enterprise that either has an average daily outstanding amount of RRP transactions of no less than $1 billion for the past three months, or has an average daily amount outstanding of overnight money market transactions of no less than $100 million over the past three months; or
- An SEC-registered 2a-7 fund that has, measured at each month-end for the most recent six consecutive months, either net assets of no less than $5 billion or an average outstanding amount of RRP transactions of no less than $1 billion.
Firms must already have arrangements in place to operate in the triparty repo market, in transactions collateralized by U.S. government debt, agency debt and agency mortgage-backed securities.
Firms must be able to execute RRPs with securities margined at 100% (i.e. the value of the securities provided by the New York Fed will equal the funds provided by the counterparty).
Once onboarded, RRP counterparties are expected to continue to meet these expectations and eligibility criteria on an ongoing basis.
Firms should contact the New York Fed at RRPInfo@ny.frb.org before formally expressing interest in becoming an RRP counterparty and providing the requested information.
1 FFIEC form 031 for domestic banks, FFIEC form 002 for U.S. branches and agencies of foreign banks, Thrift Financial Report for savings associations.