NEW YORK—The Federal Reserve Bank of New York is launching a pilot program with small broker-dealers in an effort to examine options for further broadening access to monetary policy operations. The limited, one-year pilot program will allow no more than five small firms to participate solely as counterparties in outright purchases and sales of U.S. Treasury securities for the System Open Market Account (SOMA) portfolio. The Treasury Operations Counterparty Pilot Program is being launched as a way for the New York Fed to continue to explore the effectiveness and feasibility of expanding operations to a broader range of counterparties.
Applications will be limited to firms meeting designated eligibility requirements, including size restrictions, transaction capabilities, and compliance controls. The firms will be incorporated into the current business process for Treasury outright operations, and as such, their bids and offers will be put into direct competition with those submitted by Primary Dealers. A full description of eligibility and program requirements, and application materials for firms interested in participating in this pilot program, can be found on the New York Fed’s website.
Participating firms will only have access to permanent open market operations for Treasury securities (subject to a limitation on trade sizes), and will not be eligible to participate in other types of open market operations. The pilot program will run for one year after the firms are announced later this year. The length of the program should not be viewed as providing any information about the stance of monetary policy.