The following frequently asked questions (FAQs) provide further information about the Federal Reserve's Standing Repo Facility (SRF) operations.
What are SRF operations?
The Federal Open Market Committee (FOMC) established the SRF to serve as a backstop in money markets to support the effective implementation and transmission of monetary policy and smooth market functioning. The FOMC has authorized and directed the New York Fed’s Open Market Trading Desk (the Desk) to conduct standing overnight repurchase agreement (repo) operations at a specified rate. When the Federal Reserve enters into an overnight repo transaction, it buys a security from an eligible counterparty and simultaneously agrees to sell the security back the next day. The difference between the purchase price and the sale price of the securities implies a rate of interest earned by the Federal Reserve on the transaction.
What are the SRF operational parameters?
| Standing Repo Facility Operation Parameters | |
| Operation Schedule: | Morning: 8:15 to 8:30 a.m. ET Afternoon: 1:30 to 1:45 p.m. ET |
| Proposition limit: | $40 billion per eligible security type per operation |
| Rate: | 3.75 percent |
| Settlement: | Same-day settled. Bank of New York (BNY) tri-party repo conventions apply. Funds will generally be delivered within thirty minutes following the operation close time on a best effort basis. |
| Eligible counterparties: | Primary dealers and SRF counterparties, which include depository institutions |
| Eligible securities: | U.S. Treasuries, agency debt, and agency mortgage-backed securities (for additional details on the security types see Repo Securities Schedule) |
How will SRF operations be conducted?
SRF operations will be conducted using FedTrade Plus, the Desk's proprietary trading system, using a full allotment format. During each operation, eligible counterparties may submit one proposition per security type at the SRF rate. Each proposition is limited to a maximum amount of $40 billion in $1 million increments. Following the operation close time, counterparties will be notified of their awarded propositions.
How will changes to SRF operations be communicated?
The FOMC directs the Desk to conduct SRF operations as detailed in its Continuing Directive for Domestic Open Market Operations and the implementation note released after each meeting. Any changes to the operational parameters not provided by the FOMC’s Continuing Directive for Domestic Open Market Operations and implementation note will be announced on the New York Fed’s website.
How is the rate for SRF operations determined?
The rate for SRF operations is set by the FOMC and detailed in the most recent implementation note. All propositions submitted in SRF operations are awarded at this rate.
Why are there two SRF operations each business day?
Twice daily SRF operations are intended to support monetary policy implementation and smooth market functioning. The morning SRF operation allows for execution and settlement of SRF trades earlier in the business day, which may better align with the intraday timing of funding needs for some counterparties. The afternoon SRF operation allows counterparties to participate in an operation later in the day to meet funding needs that arise after the morning operation.
Whom should SRF counterparties call if they experience difficulties during a FedTrade Plus operation?
Counterparties may call the Desk with submission and verification questions. For system-related problems, primary dealers may call primary dealer support.
How are trades resulting from SRF operations settled?
In the tri-party repo market, trades are settled on the books of a clearing bank. Trades resulting from SRF operations are cleared and settled on the tri-party repo platform operated by BNY. BNY acts as an agent to the Desk and the Desk’s counterparty by taking custody of securities, valuing these securities and ensuring the appropriate margin is applied, and settling the transaction on its books.
Trades resulting from SRF operations settle on a same-day basis. Funds will generally be available for settlement within thirty minutes of the operation close time, as the Desk will make a best effort to position necessary funds on the BNY tri-party repo platform within this time frame. Cash settlement amounts arising from SRF trades each day are netted against maturing trades. The repurchase of securities by the Desk on the maturity date will occur following the daily afternoon SRF operation by the tri-party repo market close.
Consistent with tri-party repo conventions, SRF trades may be settled by counterparties with eligible securities of the same type or of higher quality. For example, SRF trades with agency mortgage-backed securities (MBS) can be settled with eligible agency MBS, agency debt, or U.S. Treasury securities, while SRF trades with agency debt can be settled with eligible agency debt or U.S. Treasury securities. SRF trades with U.S. Treasury securities can only be settled with U.S. Treasury securities. Further details on eligible securities for SRF operations are available at Repo Securities Schedule.
How will the Desk communicate SRF operation results?
After the completion of an SRF operation, the Desk publishes a summary of the results that provides the total amount accepted for each security type, as well as the rate. Section 11 of the Federal Reserve Act, as amended by section 1103 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, requires that detailed operational results, including counterparty names, be released two years after each quarterly transaction period.
