Overnight Reverse Repo Facility: Rate, Auction, and Participants

The Overnight Reverse Repo Facility is a Federal Reserve tool that lets approved financial institutions lend cash to the Fed overnight at a fixed interest rate, receiving Treasury securities as collateral until the trade unwinds the next business day. It exists to put a floor under short-term interest rates: by guaranteeing a safe overnight return, it keeps cash-rich lenders from accepting rates below the Fed’s target. As of March 2026, the facility pays 3.5 percent, matching the bottom of the federal funds target range of 3.5 to 3.75 percent.¹ The New York Fed’s Open Market Trading Desk runs the operation under direction from the Federal Open Market Committee.²

How a Single Transaction Works

In each operation, the Fed sells a Treasury security from its System Open Market Account (SOMA) portfolio to a counterparty and simultaneously agrees to buy it back the next business day at a slightly higher price.³ The price difference is the interest the counterparty earns. In plain terms, the institution hands cash to the Fed and gets a government security to hold until the trade reverses. From the Fed’s side, cash gets temporarily pulled out of the financial system.

Collateral comes from Treasury securities already in the SOMA portfolio, and the Fed does not publicly specify which maturities or types it uses on any given day.⁴ Securities are margined at 100 percent, meaning the collateral value exactly equals the cash invested.⁵ Because the counterparty is holding government-backed collateral the whole time, credit risk is essentially zero.

Each trade matures overnight, so the facility doesn’t permanently change the Fed’s balance sheet. It functions as a daily, adjustable drain on cash. When more institutions show up, more liquidity is absorbed. When fewer show up, less. That flexibility is what makes the tool useful for fine-tuning rates without the commitment of outright securities sales.

Why the Fed Uses It

The ON RRP rate is the lower rail of a two-rate corridor the Fed uses to keep the federal funds rate inside its target range. The upper rail is the Interest on Reserve Balances (IORB) rate, which the Fed pays banks on cash held overnight in their Fed accounts. In late 2025, IORB sat at 3.65 percent, 15 basis points above the ON RRP rate of 3.5 percent.⁶

Banks won’t lend overnight for less than IORB pays them, so that rate anchors the middle and upper portion of federal funds trading. But many of the biggest overnight lenders aren’t banks. Money market funds and government-sponsored enterprises hold enormous pools of cash and have no Fed account, so IORB is unavailable to them. Without ON RRP, those lenders might accept very low rates for overnight investment, dragging the federal funds rate below the target. The facility gives them a guaranteed alternative, so they have no reason to lend at anything under 3.5 percent.⁷

The FOMC moves both the ON RRP and IORB rates together when it shifts the target range, and it can also adjust the spread between them to influence where within the range the effective federal funds rate actually settles.

Who Can Participate

The New York Fed restricts participation to four categories of institutions, each with its own qualification threshold.⁵

Primary dealers, meaning the banks and securities broker-dealers that trade directly with the New York Fed and already maintain a working relationship with the Open Market Trading Desk.
Banks and savings associations, including U.S. branches of foreign banks, that hold at least $30 billion in total assets or $10 billion in reserve balances based on the most recent quarterly regulatory filings.
Government-sponsored enterprises such as Fannie Mae and Freddie Mac.
Money market funds registered with the SEC under Rule 2a-7 that have maintained either net assets of at least $2 billion or an average outstanding reverse repo balance of at least $500 million, measured at each month-end for the most recent six consecutive months.

Money market funds organized for a single beneficial owner are generally disqualified, because the facility is meant to serve broadly held funds rather than give one entity backdoor access to Fed operations.⁵

Every applicant, regardless of category, must already operate in the tri-party repo market for transactions collateralized by U.S. government and agency debt. Applicants sign the New York Fed’s master repurchase agreement, complete tri-party custody documentation, and pass technical testing to connect to the Fed’s auction platform. The New York Fed also reserves the right to reject any applicant it judges to pose undue risk to its integrity, reputation, or assets.

The Offering Rate and Investment Limits

The FOMC sets the offering rate at each policy meeting, and it moves in lockstep with the target range. At 3.5 percent as of March 2026, it equals the lower bound of the 3.5 to 3.75 percent federal funds target.¹ There’s no rate bidding during the auction; every participant earns the same posted rate.

The per-counterparty limit is $160 billion per day.¹ Even the largest money market funds invest far less than this cap, so it rarely binds in practice.

The aggregate limit for all participants combined is not a fixed dollar amount. It’s tied to the value of Treasury securities held outright in the SOMA portfolio, minus securities already committed to other uses such as foreign official accounts, securities lending, and outstanding term reverse repos.³ If total bids ever exceeded available supply, the Fed would allocate proportionally across bidders based on their submission sizes.

The Daily Auction and Settlement

The facility runs on a tight daily schedule. Approved counterparties submit bids through the FedTrade Plus auction platform.⁸ The bidding window opens at 12:45 p.m. and closes at 1:15 p.m. Eastern Time.⁹ During that half hour, each institution specifies the dollar amount it wants to invest at the posted rate.

Shortly after the window closes, the New York Fed publishes aggregate results, including the total cash accepted and the number of counterparties that participated. Settlement runs through the tri-party repo infrastructure, with Bank of New York Mellon acting as the clearing agent for the movement of securities and cash.¹⁰

The daily unwind of the tri-party repo market occurs at 3:30 p.m. Eastern Time the following business day. Treasury securities return to the Fed’s SOMA account, cash and accrued interest flow back to the counterparties, and the cycle resets for the next day’s operation.

How Usage Has Changed Over Time

The facility became part of the Fed’s permanent toolkit in 2014 but barely registered for years. Usage exploded starting in early 2021 as pandemic-era bond purchases flooded the system with cash that had nowhere else to go at acceptable rates. Money market funds sitting on enormous pools of cash poured into the facility. Take-up peaked at roughly $2.2 trillion in December 2022.¹¹

Then it collapsed. As the Fed began quantitative tightening by letting bonds roll off its balance sheet without reinvesting, excess liquidity drained away. Money market funds also shifted cash into short-term Treasury bills, which began offering slightly better yields. By early 2024, balances had fallen to around $700 billion. By March 2026, daily usage had dropped below $1 billion on most days.¹²

Falling balances are not a sign the facility failed. Some Fed officials treat ON RRP usage as a gauge of excess liquidity in the system. Heavy use means cash is abundant and looking for a home; near-zero use suggests reserves are closer to “ample” than “abundant,” which may signal the approaching end of quantitative tightening.¹³

Where To See the Numbers

The Fed publishes results daily. The New York Fed’s website reports the total accepted amount, the number of counterparties, and the offering rate after each operation. For historical analysis, the Federal Reserve Economic Data (FRED) platform maintained by the St. Louis Fed hosts the series “Overnight Reverse Repurchase Agreements: Total Securities Sold by the Federal Reserve in the Temporary Open Market Operations” under series ID RRPONTTLD, reported in billions of dollars on a daily basis.¹⁴ The New York Fed also publishes its full list of approved counterparties, so anyone can see which institutions are eligible to participate.⁵

1
Federal Reserve. Minutes of the Federal Open Market Committee, March 17-18, 2026
2
Federal Reserve Board. Overnight Reverse Repurchase Agreement Operations
3
Federal Reserve Bank of New York. FAQs: Reverse Repurchase Agreement Operations
4
Federal Reserve Bank of New York. Repo and Reverse Repo Agreements
5
Federal Reserve Bank of New York. Reverse Repo Counterparties: List and Eligibility Requirements
6
Federal Reserve Board. Interest on Reserve Balances
7
Liberty Street Economics (Federal Reserve Bank of New York). The Federal Reserve’s Two Key Rates: Similar but Not the Same
8
Federal Reserve Bank of New York. Statement Regarding Use of FedTrade Plus for Repurchase Agreement and Reverse Repurchase Operations
9
Federal Reserve Bank of New York. Reverse Repo Operations
10
Federal Reserve Bank of New York. FAQs: Reverse Repurchase Agreement Operations
11
Liberty Street Economics (Federal Reserve Bank of New York). Dropping Like a Stone: ON RRP Take-up in the Second Half of 2023
12
Federal Reserve Economic Data (FRED). Overnight Reverse Repurchase Agreements: Treasury Securities Sold by the Federal Reserve
13
Brookings Institution. How Will the Federal Reserve Decide When to End Quantitative Tightening
14
Federal Reserve Economic Data (FRED). Overnight Reverse Repurchase Agreements: Total Securities Sold by the Federal Reserve in the Temporary Open Market Operations