|September 23, 2010|
This document sets forth the criteria for acceptance 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 order to drain reserves.
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 will 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 and acceptance of that application by FRBNY, an applicant will be added to a public list, maintained on FRBNY's website, of 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 FBRNY. 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.
To be accepted as a RRP counterparty, an applicant must:
In addition to the foregoing, before being accepted as a RRP counterparty, an applicant must satisfy an FRBNY review, consistent with prudent counterparty risk management, of its and its investment advisers, as applicable, financial condition, compliance program and internal control environment. In connection with this review, FRBNY may consult with the U.S. Securities and Exchange Commission (SEC) and/or the relevant Self-Regulatory Organization (SRO) and other regulators, as applicable, regarding the review considerations listed above, as well as any other matter FRBNY deems relevant.
An applicant and, as applicable, its investment adviser, must maintain a compliance program consistent with the applicable regulatory requirements. FRBNY will not accept as a RRP counterparty any applicant, that, in FRBNYs judgment, poses undue risks to the integrity, reputation, or assets of FRBNY.4
An applicant will need to meet hardware and software requirements for accessing and using FRBNYs auction system and will also be required, initially and from time-to-time, to participate in testing to ensure successful operations.
FRBNY will not accept any applicant as a RRP counterparty if it (or its investment adviser) is or has been within the prior year, subject to litigation, regulatory action, or investigation that FRBNY, in its sole discretion, determines material or otherwise relevant to the potential counterparty relationship. In making such determination, FRBNY will consider, among other things, the stage of any such matters and the applicants history of regulatory compliance.
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: