Operating Policy
Statement Regarding Agency Mortgage-Backed Securities Small Value Exercise
November 18, 2013

The Federal Reserve Bank of New York’s Open Market Trading Desk (the Desk) has been developing the capability to conduct agency mortgage-backed securities (MBS) transactions over FedTrade, its proprietary trading platform.  To test this capability, the Desk will conduct an exercise consisting of a series of small value purchase and sale operations of agency MBS via FedTrade, the first of which will occur on Thursday, November 21, 2013.  The exercise will run through January 2014 and operations will not exceed $500 million in total.  The operations conducted as part of this exercise will not be counted toward the monthly agency MBS additional purchases and reinvestments the Desk has been conducting at the direction of the Federal Open Market Committee. 

The FedTrade platform is currently used to conduct the Desk’s permanent Treasury purchases and sales, repurchase and reverse repurchase agreements, and securities lending operations.  FedTrade is being expanded in order to add the capability to conduct MBS operations. 

The small value exercise is a matter of prudent advance planning by the Federal Reserve and is being conducted under the annual authorization for domestic open market operations for the purpose of testing operational readiness.1  These operations do not represent a change in the stance of monetary policy, and no inference should be drawn about the timing of any change in the stance of monetary policy in the future. 

Results of the small value agency MBS exercise will be posted on the Federal Reserve Bank of New York’s website following the completion of each operation.  The results will include the security types, total amounts accepted and submitted, settlement months as well other details.  The agency MBS holdings associated with the exercise will be included as a factor supplying reserves in Table 1 of the Federal Reserve's H.4.1 statistical release, their remaining maturity will be included in Table 2, commitments to buy and sell will be included in Table 3, and the holdings will be included as assets in Tables 8 and 9.

1 See paragraph two of the authorization for domestic open market operations at http://www.federalreserve.gov/monetarypolicy/fomcminutes20130130.htm.

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