NEW YORK (MNI) – The following is the text of a document from the
New York Federal Reserve Bank Thursday laying out the criteria for
acceptance as a counterparty eligible to participate in reverse
repurchase transactions:

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.

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.

I. Initial Eligibility

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

A. be an open-end management investment company that is organized
under the laws of a State of the United States, registered under the
Investment Company Act of 1940, holds itself out as a money market fund,
and is in compliance with the requirements of Rule 2a-7 under such Act;

B. have net assets of no less than $10 billion for six consecutive
months (measured at each month-end) prior to the submission of the
application;

C. have been in existence for at least one year prior to the
submission of the application;

D. be a consistent investor in the tri-party repo market (in
particular, in transactions collateralized by U.S. government debt,
agency debt, and agency MBS securities);

E. be able to confirm and arrange settlement of a significant
volume of transactions with FRBNY; and

F. 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 term RRPs, with tenors of one-week or longer
(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, triparty 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 review, consistent with
prudent counterparty risk management, of its and its investment
adviser’s, 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 FRBNY’s judgment, poses undue risks to the integrity,
reputation, or assets of FRBNY.

An applicant will need to meet hardware and software requirements
for accessing and using FRBNY’s 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
applicant’s history of regulatory compliance.

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 (including FRBNY’s ongoing satisfaction with the
counterparty’s financial condition and its compliance and internal
controls);

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.

** Market News International New York Bureau: 212-669-6430 **

[TOPICS: M$U$$$,MMUFE$,MK$$$$]