Effective April 30, 20211
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
The New York Fed Trading Desk conducts reverse repo transactions to help keep the effective federal funds rate from falling below the target range set by the Federal Open Market Committee. In addition to primary dealers, participants in these transactions include reverse repo counterparties.
RRP counterparties are expected to bid in an operation at least twice every six months to ensure robust end-to-end testing of trading and settlement systems.
In order to be eligible to become 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 FFIEC reports are available; or
- A government-sponsored enterprise; 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 $2 billion or an average outstanding amount of RRP transactions of no less than $500 million.
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).
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 This page was updated on August 31, 2021, to describe the purpose of reverse repo transactions and the purpose of the bidding requirement.