RRP Eligibility Criteria for Money Funds

March 8, 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).1 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 triparty infrastructure to undertake any such RRP. In addition, as with current operations, FRBNY intends to use an auction format for awarding transactions to counterparties.2

Upon submission of an application word 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 FRBNY. 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.

I.Initial Eligibility3

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 $20 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 triparty 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 RRP with terms of up to 65 business days or longer,4(c) submit minimum bids of $1 billion or greater,5(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, internal control environment, and recent or pending legal and regulatory matters. 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.6

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.

1FRBNY continues to explore further development of its potential RRP program, and may modify these criteria in the future.
2 The auction may be single or multiple price, to be determined by FRBNY. In addition, as with current RRP operations, FRBNY may, in its sole discretion, cap or limit any counterparty’s awards in a particular auction or on an outstanding RRP basis, exclude a counterparty from any particular auction, and/or reject, in whole or in part, any counterparty’s bids.
3 The eligibility criteria for RRP program are established by FRBNY and may be changed in its sole discretion. Final determination of whether an applicant is eligible to participate in the RRP program will be made by FRBNY in its sole discretion.
4 It is contemplated that for RRP with terms exceeding seven days, the RRP counterparty that meet the criteria herein will be permitted to resell the securities to FRBNY upon seven days prior notice.
5 It is expected that a fund family may submit one aggregate bid on behalf of its funds which are RRP counterparties and which wish to participate in the auction, but the portion of such bid that is allocated to each RRP counterparty must equal to at least $1 billion.
6An applicant will be expected to execute an Information Sharing Agreement when requested by FRBNY that, among other things, authorizes its regulators to share information concerning the applicant, including nonpublic information, with FRBNY upon its request.