On March 8, 2010, the Federal Reserve Bank of New York (the New York Fed) announced the beginning of a program to expand its counterparties for conducting reverse repurchase agreement (RRP) transactions. The expansion of counterparties was intended to enhance the capacity of such operations to drain reserves beyond what could likely be conducted through the New York Fed’s traditional counterparties, namely, Primary Dealers. Over the course of the period from March 8, 2010, to August 16, 2012, the New York Fed adjusted the eligibility criteria in order to accept a broader set of expanded counterparties. Since September 23, 2013, this expanded counterparty list has also been used to conduct overnight RRP transactions. This program to expand counterparties for the conduct of RRP transactions is a matter of prudent advance planning, and no inference should be drawn about the timing of any prospective monetary policy operation.
Effective today, the New York Fed is accepting applications from firms interested in becoming a counterparty eligible to participate in RRP transactions with the New York Fed. The RRP counterparty eligibility criteria for all entity types (banks, government-sponsored enterprises, and money market funds) have substantially remained the same as those announced on August 16, 2012. Applications for banks and government-sponsored enterprises are due on November 24, 2014. For money funds, part I of the application is due on November 24, 2014 and part II is due on December 8, 2014.
The New York Fed is unlikely to further modify the above-mentioned RRP counterparty eligibility criteria, and would likely do so only to the extent needed to ensure that the list of eligible counterparties was sufficient to support the effective implementation of monetary policy. As the ON RRP operations to date have been consistent with a significant degree of control over the federal funds rate, it is therefore anticipated that this will be the last wave of applications accepted. Further, applicants should note that the ON RRP operations currently conducted with expanded reverse repo counterparties will be phased out when no longer needed to help control the federal funds rate. After this last wave of expanded reverse repo counterparties is added, likely at some point in the first quarter of 2015, firms that meet the above-mentioned eligibility criteria will be allowed to submit applications, but these applications will be considered only if the addition of new counterparties is deemed necessary to support the effective implementation of monetary policy. Currently, the New York Fed does not anticipate increasing the total number of expanded reverse repo counterparties after those added from the last wave of applications.