Program Terms and Conditions
The SOMA securities lending program offers securities for loan from the SOMA portfolio in accordance with the program terms and conditions, which are updated periodically.

Effective February 15, 2012

Loans will be awarded to primary dealers based on competitive bidding in an auction held each day at noon. As with all domestic operations conducted by the New York Fed, the auctions will have a multiple price format. Dealers may submit two bids per issue on as many issues as they choose. Nonetheless, the New York Fed reserves the right to deny awards at its own discretion when allowing the loan could facilitate a dealer's ability to control a specific issue. Loans will not be granted outside of the auction process.
Bonds-vs.-bonds lending
In order to prevent securities lending from affecting overnight bank reserves, loans will continue to be collateralized with Treasury bills, notes, bonds and inflation-indexed securities rather than cash. Borrowers are required to deliver collateral in exchange for borrowed securities on the loan date, and to return borrowed securities in exchange for the re-delivery of collateral at maturity. Consistent with market practice, all transfers will be made "delivery-vs.-payment," whereby the borrower’s clearing bank account is charged when the New York Fed transfers securities and is subsequently credited when the dealer deliveries are complete.
Minimum bid of 5 basis points
A minimum bid rate of 5 basis points will be imposed to limit borrowing to securities trading on special. Because the lending fee is equivalent to the spread between the general collateral rate and the specials rate, a 5 basis point minimum bid rate removes the economic incentive to bid for securities trading near general collateral rates.
Overnight lending
Lending will be conducted on an overnight basis. The overnight basis will be determined in accordance with market trading conventions. Loaned securities that are not returned on the maturity date prior to the close of Fedwire will be considered fails.
90 percent limit on holdings auctioned
The theoretical supply available for borrowing each day is 90 percent of each Treasury and Agency security owned by SOMA with a maturity greater than thirteen days, unless fewer securities are in the SOMA custody account at the time of auction. If less than 90 percent of holdings in a particular issue are in the SOMA account at the time of auction, then the entire amount will be available at auction.
Dealers limited to 25 percent of the theoretical amount available for borrowing per issue with a maximum of $5 billion in total
Dealers may bid for securities each day up to these stated limits. If re-delivery of borrowed securities is not complete prior to the noon auction time, the securities will be tallied as loans outstanding for purposes of limit calculations.
Failure to deliver collateral
If a dealer fails to deliver collateral against borrowed securities on the loan date, cash will be held overnight against the loan without interest, and a penalty fee equal to the general collateral rate will be assessed, in addition to the lending fee and any applicable Fails Charge.
Failure to re-deliver borrowed securities
If a dealer fails to re-deliver borrowed securities on the maturity date, a penalty fee equal to the prevailing general collateral rate will be assessed in lieu of the lending fee, in addition to any applicable Fails Charge.
Lending and penalty fees and fail charges
Any lending or penalty fee or Fails Charge will be calculated by applying the applicable rate to the market value of the security borrowed on an actual over 360 basis. Any such fees or charges will be collected each business day, and charged to dealers's; clearing bank accounts.
Announcement of auction results
The total amount lent and weighted-average award rate for each issue are released in a timely manner after the auction is complete.
Historical Terms and Conditions
Effective June 9, 2011
Effective June 1, 2010
Effective July 7, 2009
Effective May 1, 2009
Effective April 7, 2009
Effective December 18, 2008
Effective October 27, 2008
Effective October 1, 2008
Effective August 22, 2008
Effective August 21, 2007
Effective January 9, 2006
Effective November 7, 2005
Effective July 1, 2004
Effective June 25, 2003
Effective May 15, 2002
Effective October 18, 2001

Effective September 7, 1999

Back to Top

The Fails Charge is determined in accordance with the Fails Charge Trading Practice published by the Treasury Market Practices Group.
By continuing to use our site, you agree to our Terms of Use and Privacy Statement. You can learn more about how we use cookies by reviewing our Privacy Statement.   Close