Operating Policy
Statement to Revise the Terms of the Overnight Reverse Repurchase Agreement Operational Exercise
September 17, 2014

As noted in the October 19, 2009, Statement Regarding Reverse Repurchase Agreements, the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York (New York Fed) has been working internally and with market participants on operational aspects of tri-party reverse repurchase agreements (RRPs) to ensure that this tool will be ready to support the monetary policy objectives of the Federal Open Market Committee (FOMC). 

The Federal Reserve continues to enhance operational readiness and increase its understanding of the impact of RRPs through technical exercises.  In further support of its objectives, the FOMC instructed the Desk to change the design of these RRP operations.  Effective Monday, September 22, 2014, each eligible counterparty will be limited to one bid of up to $30 billion per day, an increase from the current $10 billion per-counterparty maximum bid limit, and each operation will be subject to an overall size limit of $300 billion.  Each submitted request must include a rate of interest, subject to a specified maximum, which would apply only in the event that the total amount of offers received by the New York Fed exceeds the overall size limit of the operation.  If the sum of the bids received is less than or equal to the overall size limit, awards will be made at the specified offering rate to all submitters.  If the sum of the bids received is greater than the overall size limit, awards will be allocated using a single-price auction based on the “stopout” rate at which the overall size limit is reached, with all bids below this rate awarded in full at the stopout rate and all bids at this rate awarded on a pro rata basis at the stopout rate.  The stopout rate will be determined by evaluating all bids in ascending order by submitted rate up to the point at which the total quantity of offers equals the overall size limit.  The offering rate will be set at 0.05 percent (five basis points). 

The operations will be open to all eligible RRP counterparties, will use Treasury collateral, will settle same-day, and will have an overnight tenor.  The RRP operations will be held from 12:45 to 1:15 p.m. (Eastern Time).

Any future changes to these RRP operations will be announced with at least one business day’s prior notice on the New York Fed’s website.

Like earlier operational readiness exercises, this work is a matter of prudent advance planning by the Federal Reserve. 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.

The results of these operations will be posted on the public website of the New York Fed, together with the results for other temporary open market operations.  The outstanding amounts of RRPs are reported as a factor absorbing reserves in Table 1 in the Federal Reserve's H.4.1 statistical release and as liability items in Tables 8 and 9 of that release.  The outstanding amounts of RRPs by remaining maturity are reported in Table 2 of the release.

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