The Federal Reserve Bank of New York today published a revised policy regarding the administration of relationships with primary dealers intended to provide greater transparency about the significant business standards expected of primary dealers and to offer clearer guidance on the process to become a primary dealer.
The revised policy takes into consideration the evolution of the marketplace and of open market operations over the past decade, as well as recent changes in the role of primary dealers. Substantive changes from the previous policy include:
- a more structured presentation of the business standards expected of a primary dealer;
- a more formal application process for prospective primary dealers;
- an increase in the minimum net capital requirement from $50 million to $150 million;
- a seasoning requirement of one year of relevant operations before a prospective dealer may submit an application; and
- a clear notice of actions the New York Fed may take against a noncompliant primary dealer.
The New York Fed will apply this policy to existing as well as prospective primary dealers. Additional details on substantive changes from the previous policy can be found in the accompanying FAQ document.
On behalf of the Federal Reserve System, the New York Fed’s trading desk engages in transactions with primary dealers to implement monetary policy.