RRP Eligibility Criteria: Government-Sponsored Enterprises

May 24, 2011

This document sets forth the criteria for acceptance of a government-sponsored enterprise
(GSE) as a counterparty eligible to participate in reverse repurchase transactions (RRP) with the Federal Reserve Bank of New York (FRBNY). FRBNY may engage in RRP, if at all, at the direction of the Federal Open Market Committee (FOMC).

In any such RRP, FRBNY will sell securities held in the System Open Market Account (SOMA) to counterparties subject to an agreement to repurchase them at some future date. FRBNY expects to use the existing industry tri-party infrastructure to undertake any such RRP. In addition, as with current operations, FRBNY intends to use an auction format for awarding transactions to counterparties.1

Upon submission of an application word and acceptance of that application by FRBNY, an applicant will be added to a public list, maintained on FRBNY's website, of eligible RRP counterparties. Inclusion on such list simply means that the entity is eligible to engage in RRP with FRBNY. It does not mean that the entity is eligible for any other program or transactional relationship with FRBNY. It does not in any way constitute a public endorsement of that entity by FRBNY, nor should such be viewed as a replacement for prudent counterparty risk management and due diligence. FRBNY reserves the right to amend its list of RRP counterparties at any time and for any reason in its sole discretion. FRBNY reserves the right to disclose information regarding the RRP counterparties. Details of transactions undertaken with RRP counterparties will be disclosed in accordance with the requirements of Section 1103 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. That legislation requires the disclosure of certain information regarding open market transactions between a Federal Reserve Bank and nongovernmental entity that have been authorized under specified provisions of Section 14 of the Federal Reserve Act, which would include RRP.

I. Initial Eligibility2

To be accepted as a RRP counterparty, an applicant must:

A. be a government-sponsored enterprise chartered by the U.S. Congress;

B. be a consistent cash investor in the tri-party repo market (in particular, in transactions collateralized by U.S. government debt, agency debt, and agency MBS securities) with an average daily outstanding amount of RRP transactions of at least $15 billion for the past three months;

C. be able to confirm and arrange settlement of a significant volume of transactions with FRBNY, and

D. be able to satisfy the following transaction requirements: (a) execute RRP with securities margined at 100% (i.e. the value of the securities provided by FRBNY will equal the funds provided by the counterparty), (b) execute RRP with terms of up to 65 business days, (c) submit minimum bids of $1 billion or greater, (d) execute RRP for next day settlement, and (e) execute the requisite RRP documentation including FRBNY's Master Repurchase Agreement, tri-party custody documentation and other documentation, as applicable.

In addition to the foregoing, before being accepted as a RRP counterparty, an applicant must satisfy an FRBNY counterparty review.

II. Continued Eligibility

FRBNY may remove an entity from the RRP counterparty list, or otherwise cease to enter RRP with such counterparty, for any reason including if such counterparty:

A. no longer satisfies any of the eligibility criteria listed in Section I;

B. fails to provide FRBNY, on a timely basis, with any information that FRBNY deems necessary to determine that the counterparty continues to satisfy the eligibility criteria;

C. becomes subject to regulatory or legal proceedings that, in the sole judgment of FRBNY, unfavorably impacts the counterparty relationship;

D. poses, in FRBNY's sole judgment, undue risks to the integrity, reputation, or assets of FRBNY; or

E. does not, in FRBNY's sole judgment, meaningfully participate in RRP transactions with FRBNY over a period of time.

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1Each auction will be a "Multiple Price Auction”, unless “Single Price Auction” is indicated in the auction announcement. In addition, as with current RRP operations, FRBNY may, in its sole discretion, cap or limit any counterparty's awards in a particular auction or on an outstanding RRP basis, exclude a counterparty from any particular auction, and/or reject, in whole or in part, any counterparty’s bids.
2 The eligibility criteria for the RRP program are established by FRBNY and may be changed in its sole discretion. Final determination of whether an applicant is eligible to participate in the RRP program will be made by FRBNY in its sole discretion.