BIS central bankers’ speeches  5  Preparedness to implement normalization Extensive testing of ON RRPs and other supplementary tools have provided policymakers with confidence that they will be able to maintain control over interest rates – that is, that rates will move up with increases in the IOER rate – during the normalization process. 12 An important determinant of the effectiveness of an ON RRP facility is whether a sufficiently wide set of nonbank counterparties has access to it. The New York Fed currently executes RRPs with 163 counterparties comprising many of the major cash lenders in secured and unsecured money markets – including money market funds that manage about 70 percent of the total U.S. money market fund assets under management and account for more than a quarter of total tri-party repo lending against government collateral. 13 This provides a high degree of confidence that we are transacting with an adequate set of counterparties to achieve our policy execution objectives. 14 Throughout the testing regime, the Desk has varied the settings and design of the reverse repo operations, with operational results informing subsequent changes. We’ve operated at different times of the day, increased the maximum bid limit per counterparty, and introduced an aggregate cap of $ billion and a single-price auction mechanism to allocate awards should the sum of submitted bids exceed the cap. We’ve also adjusted the offering rates and tested ON RRPs in conjunction with term RRPs at quarter-ends.
Simon M Potter: Money markets and monetary policy normalization Remarks by Mr Simon M Potter, Executive Vice President of the Markets Group of the Federal Reserve Bank of New York, at the Money Marketeers of New York University, New York City, 15 April 2015. *  *  *  I would like to thank Julia Gouny, Deborah Leonard, and Eric LeSueur for their excellent assistance in the preparation of these remarks and colleagues in the Federal Reserve System for numerous insightful comments and suggestions. Accompanying charts can be found at the end of the speech. It is a pleasure to speak again at the Money Marketeers. Much has happened with the implementation of monetary policy in the sixteen months since I last addressed this audience: •  Recognizing a substantial improvement in the outlook for the labor market, the Federal Open Market Committee (FOMC) concluded its outcome-based asset purchase program in October 2014, having completed a total of $ trillion in Treasury and agency MBS purchases over nearly two years. •  The Federal Reserve has continued to test operational tools that it can use to control interest rates with a large balance sheet, through a continuation of the overnight reverse repurchase agreement (ON RRP) exercise that began in September 2013, as well as through term RRPs and the Term Deposit Facility. •  The FOMC revised and augmented its communications around the approach it intends to implement when it becomes appropriate to begin normalizing the stance of monetary policy.