Good morning. I’d like to thank ISDA for the invitation to speak at today’s Legal Forum. ISDA and the New York Fed have a long and rich history of working together.
On the foreign exchange side, two New York Fed sponsored groups—the Foreign Exchange Committee (FXC) and the former Financial Markets Lawyers Group (FMLG)—have worked closely with ISDA on FX documentation and market practice. That work helped shape regional best practices before the FX Global Code was published in 2017. When we dissolved the FMLG in early 2023, ISDA launched its FX Legal Steering Committee, ensuring continuity. I’m glad to see the 2026 FX Definitions on this afternoon’s agenda. ISDA also played a critical role on the Alternative Reference Rates Committee (ARRC), enabling a smooth transition away from LIBOR.
Those are just a couple of examples of the roles the New York Fed plays in supporting an industry that is in constant evolution. I’d like to focus on three other examples today. Two involve repo markets—first, central clearing of the Fed’s standing repo operations, and second, the idea of Treasury investing some of its cash in repo. My third example will focus on tokenization work the New York Fed is involved with. I’ll close with a little advocacy for in-house pro bono work. And I’ll try to save a few minutes for questions at the end.
The usual disclaimer applies: the views I express are my own and not necessarily those of the Federal Reserve Bank of New York or the Federal Reserve System.
Central Clearing of Standing Repo Operations
It was great to hear from the panel earlier this morning about the progress the industry is making on the Treasury clearing mandates. The New York Fed has been a big proponent of central clearing in the Treasury markets as a way to increase market resilience. Given that support, one might then ask, "Fed, if you are such a proponent of central clearing, why aren’t you centrally clearing your standing repo operations?" It’s a fair question, and one we have been discussing.
As a reminder, our monetary policy implementation framework relies on administered rates. Before July 2021, we had two primary tools to influence the federal funds rate: interest on reserve balances (IORB) and overnight reverse repo operations (ON RRP). In July 2021, the FOMC added standing repo operations (SRPs) to that toolkit. SRPs are designed to limit occasional upward pressure that could push overnight rates above the FOMC’s target range.
Under our standing repo operations, the New York Fed buys Treasury and agency securities and agrees to sell them back the next business day. If private repo rates rise above the SRP rate, counterparties can borrow from us instead, which limits upward pressure on money market rates. By providing interest rate control to the upside, SRPs nicely complement ON RRPs, which provide interest rate control to the downside.
But for SRPs to work, counterparties have to be willing to transact with the Fed when it makes economic sense. Recent surveys by the Open Market Trading Desk at the New York Fed suggest willingness has improved. Among factors influencing their increased willingness to use SRPs, Primary Dealers pointed to: (i) the addition of a morning, early-settling operation in June 2025, (ii) the removal of the aggregate operation limit, and (iii) clear communication from Fed officials that these operations should be used when economically sensible.
But some frictions remain. Primary dealers indicated the biggest one is that they can’t net standing repo transactions against their other client activity. Clearing through a central counterparty allows market participants to net offsetting repo and reverse repo transactions for balance sheet purposes. Our operations aren’t centrally cleared, so that benefit isn’t available when transacting with the New York Fed. Many dealers said they would be more likely to use the operations if they were centrally cleared.
The FOMC has taken notice. The minutes of the October 2025 meeting describe a staff briefing on the potential benefits and costs of central clearing. The main benefit noted was greater effectiveness in controlling the federal funds rate. The potential costs cited include the increased systemic importance of clearing providers, the possibility that clearing SRP transactions enables greater nonbank leverage in the Treasury market, and an expanded Federal Reserve footprint in financial markets.
Beyond the operational work, there are legal hurdles that would need to be cleared. Membership models and access would need to be carefully evaluated, as the New York Fed likely could not agree to provide liquidity or financing to the clearinghouse, or agree in advance to share in losses generated by other clearing members. FOMC participants who commented during that briefing generally supported further study, and the March 2026 FOMC minutes again reflected that.
One could argue that as with the market’s shift from bilateral to tri-party repo, which the Fed eventually followed, central clearing is a fundamental market structure change the Fed may need to eventually embrace. But real issues must be addressed first.
TGA Repo
I also wanted to briefly mention Treasury’s ongoing exploration of whether it should invest some of the cash in the Treasury General Account (TGA) in the overnight repo market.
The TGA is Treasury’s checking account at the Fed. It’s currently around $1 trillion, but balances are quite volatile, moving with tax dates and auction settlements. Treasury’s cash balance policy is to hold enough to cover about a week of outflows. Because outflows vary, Treasury often holds more than it needs, and that excess earns nothing.
A natural question is, why doesn’t Treasury earn interest on the TGA, as banks do on their reserve balances? There are two reasons, one legal and one economic. The legal one is that the Fed’s authority to pay interest on reserve balances extends to depository institutions, not to account holders like the Treasury. Section 19(b)(12) of the Federal Reserve Act, added by Congress in 2006 and made effective in October 2008, authorizes Reserve Banks to pay interest on balances maintained "by or on behalf of" depository institutions. Treasury is not a depository institution, and we have no comparable authority to pay interest on its account. The economic reason is that the Fed remits its profits to Treasury, so any interest paid on the TGA would reduce those remittances dollar for dollar. Treasury would essentially be paying itself.
The Treasury Borrowing Advisory Committee (TBAC) studied engaging in repo and published a report in May. It found there may be scope to invest excess TGA cash in repo if positive net returns can be generated without disrupting markets. But it was candid that the returns would likely be modest: perhaps zero to two basis points in an ample reserves regime, perhaps more in a scarce reserves regime, and no value in an abundant reserves regime. The reason is that the cash Treasury lends via repo would flow back into the banking system as reserves, and the Fed would pay interest on those reserves. That would raise the Fed’s interest expense and lower its remittances. Treasury would come out ahead only if the repo rate it earns exceeds IORB.
The TBAC also noted that design questions on execution format, counterparty selection, documentation, timing, and capital implications all need further study. Primary dealers have told Treasury that predictability would be essential to success. Market participants at this year’s U.S. Treasury Market Conference, hosted by the New York Fed, said much the same.
With many open questions, the TBAC understandably suggested further study is warranted.
Digital Innovation and the Treasury Market
The third topic I wanted to cover is digital innovation, which you’ll hear much more about in the panel right after this session.
The New York Fed’s Innovation Center has been a technical observer in industry-led proof-of-concept work regarding using shared ledger technology for multi-asset and cross-network transaction settlement. The New York Fed has also convened a working group of market participants through the Treasury Market Practices Group (or TMPG), to focus on the issues and impacts of digital innovations, including tokenization, in the Treasury markets.
The TMPG, which is sponsored by the New York Fed, is a group of senior market professionals, including legal and compliance professionals, whose mandate is to support the integrity and efficiency of the Treasury, agency debt, and agency MBS markets.
This year the TMPG formed a working group on digital innovations and the Treasury market, covering stablecoins, tokenized assets, and blockchain technologies. The group will begin with stablecoins and their impact on Treasury market liquidity and functioning, then turn to tokenization of Treasuries. Substantial research already exists on stablecoins as digital instruments. The TMPG’s distinctive contribution is to ask what stablecoins likely mean for the various roles the Treasury market plays: as pricing benchmark, as monetary policy tool, and as the funding source for the federal government. I expect the group to engage with stakeholders as its work progresses, and I encourage you to share your views with them.
Pro Bono
Finally, if you’ll permit me the indulgence, I’d like to close by stepping on my soapbox for a minute.
Many of us in this room work as in-house lawyers. We’re often tempted to think of pro bono as something that law firms do. I’d like to challenge that. In the Legal and Compliance Group at the New York Fed, we’ve made pro bono a meaningful part of our work, in partnership with the City Bar Justice Center.
The need for pro bono legal assistance is enormous, especially when it comes to access to civil justice. According to the Legal Services Corporation’s 2022 Justice Gap study, 74 percent of low-income households experienced at least one civil legal problem, and of those, 92 percent received no or inadequate legal help. Here is another data point. Every year the World Justice Project ranks countries on their compliance with various measures of the rule of law. One of the factors measured is the accessibility and affordability of civil justice. On that measure, in 2026 the United States ranks 119th out of the 143 countries ranked, and 51st out of the 51 wealthiest countries ranked.
By partnering with CBJC, the New York Fed’s Legal and Compliance Group is able to do very substantive work. In-house legal departments often do pro bono by partnering with a law firm, which is certainly better than nothing. But in my experience, the outside lawyers did most, if not all, of the work, and I felt like I was along for the ride.
Our partnership with CBJC is different. It lets us volunteer as direct participants in CBJC’s programs and make real contributions. Our projects cover topics such as veteran assistance, shelter advocacy, legal advice for local entrepreneurs, and cancer advocacy.
I have personally participated in a number of projects, including several Neighborhood Entrepreneur Law Project clinics and ABA Free Legal Answers sessions. Some of the questions are highly complex, but most of the time they are straightforward, and we can add a lot of value with fairly simple analysis and direction. It’s easy to forget that what seems simple to trained lawyers is not simple for someone with limited exposure to the legal system.
So my ask is this: look for pro bono opportunities where you, and not just your outside counsel, are doing the work. The need is great, and the skills you use every day are exactly what’s needed.
With that, I would be happy to take a few questions.
