Term Securities Lending Facility: Frequently Asked Questions
The following is intended to address operational questions about the System Open Market Account (SOMA) Term Securities Lending Facility (TSLF).
Effective February 3, 2009
What is the TSLF?
What are the differences between the SOMA Securities Lending program and the TSLF?
What are the differences between the TSLF and other Federal Reserve operations, like the TAF and term repo operations?
Do these operations have a reserve impact?
What collateral is eligible for pledging?
How often will the New York Fed lend securities for term?
What is the term of a loan?
Can a dealer terminate a loan early?
How are loans allocated among dealers?
How much can dealers borrow at each auction?
When will the New York Fed announce auction offering amounts?
Which general collateral Treasury securities will SOMA lend?
Which general collateral Treasury securities will be designated to the respective primary dealers awarded through the auction?
Are the auction results released to the public?
Are primary dealers required to bid? Can other market participants bid in the operation?
Can the New York Fed modify program terms?
How do firms bid?
In what sequence are bids considered?
How many bids can a dealer submit?
What is the minimum and maximum amount for which a firm can bid?
What dollar increments should be used when bidding?
How many decimal places should be used when bidding?
How are dealers notified of awards?
Where do dealers call if they experience difficulties?
Fees and Settlement
How and when are the loans and collateral settled?
How are collateral pledges handled?
When are loans delivered?
How is the lending fee calculated?
The lending fee will be calculated* by multiplying: a) the total quoted price of the borrowed securities excluding accrued interest (i.e. the "clean" price) as of the close of business on the day before the auction, by b) the stop-out fee rate, by c) the term of the loan, in days, divided by 360.
*This calculation does not depend on the accrued interest on the securities lent by the New York Fed, or on whether and when coupon payments are required to be remitted back to the New York Fed. Changes to the invoice price of the borrowed securities resulting from changes to the quoted price, accrual of interest and/or coupon payments will affect the value of the collateral required to be pledged, but will not change the total lending fee owed.
Will the New York Fed substitute announced collateral for other general collateral?
Can dealers substitute pledged collateral?
How long will the TSLF be in operation?