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Board of Governors of the Federal Reserve System
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Federal Reserve Board of Governors

Term Securities Lending Facility (TSLF) and TSLF Options Program (TOP)

Background

In March 2008, the Federal Reserve established the Term Securities Lending Facility (TSLF) as a means of addressing the pressures faced by primary dealers in their access to term funding and collateral. Primary dealers often obtain funding by pledging securities as collateral. When the markets for the collateral became illiquid, primary dealers had increased difficulty obtaining funding and, therefore, were less able to support broader markets. The TSLF supported the liquidity of primary dealers and fostered improved conditions in financial markets more generally.

Under this program, the Federal Reserve loaned relatively liquid Treasury securities for a fee to primary dealers for one month in exchange for eligible collateral consisting of other, less liquid securities. Loans were allocated through auctions. For "Schedule 1" auctions, the eligible collateral comprised Treasury securities, agency securities, and agency mortgage-backed securities. For "Schedule 2" auctions, the eligible collateral included Schedule 1 collateral plus highly rated securities.

The Federal Reserve established the TSLF Options Program (TOP) to offer additional liquidity during periods of heightened collateral market pressure, such as quarter-end dates. The TOP auctioned options that gave primary dealers the right, but not the obligation, to draw upon a TSLF loan, in exchange for eligible collateral, on a specified date in the future.

The TSLF extensions under Schedule 2 collateral involved the authority of Section 13(3) of the Federal Reserve Act, which permitted the Board, in unusual and exigent circumstances, to authorize Reserve Banks to extend credit to individuals, partnerships, and corporations. Schedule 1 collateral is eligible for open market operations, so TSLF extenions against such collateral did not require 13(3) authority. The facility was administered by the Federal Reserve Bank of New York.

The TSLF was announced on March 11, 2008, and the first auction took place March 27, 2008. TSLF auctions against Schedule 1 collateral were suspended effective July 1, 2009. TSLF auctions against Schedule 2 collateral closed on February 1, 2010. All securities loans made under the facility were repaid in full, with interest, in accordance with the terms of the facility.

 Data

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The following information on TSLF transactions is provided: 

Data Description
Trade date The date upon which the TSLF loan was requested (operation date)
Loan date The start date of the TSLF loan; the initial date on which the loan (of Treasury securities) and collateral were exchanged
Maturity date The date upon which the loan (of Treasury securities) matured
Schedule Identifies the type of eligible collateral for a given operation. Schedule 1 eligible collateral includes collateral accepted for triparty repurchase agreements arranged by the Open Market Trading Desk. Schedule 2 includes investment-grade corporate securities, municipal securities, mortgage-backed securities (MBS), and asset-backed securities (ABS) in addition to Schedule 1-eligible collateral
TOP-related loan Identifies whether the loan was related to the exercise (in part or in full) of an option purchased from the TOP. "Y" indicates that the loan was related to the exercise of an option purchased from the TOP, while "N" indicates that the loan was not related to the exercise of an option purchased from the TOP
Borrower The name of the primary dealer that borrowed from the facility
Lending fee The nominal annual rate charged to the borrower based on the market value of Treasury securities borrowed, in percent
Par amount lent The par value of the loan (of Treasury securities), in millions of dollars
Market value of loan The market value of the loan (of Treasury securities). Market value accounts for accrued interest and inflation accretion (for Treasury Inflation-Protected Securities (TIPS)), in millions of dollars
Total value of collateral pledged The total market value of the collateral pledged to secure all outstanding loans (of Treasury securities) on the loan settlement date. Market value accounts for accrued interest
Collateral by collateral type (units are in millions of dollars)  
   U.S. Treasury/agency Securities issued by the U.S. Department of the Treasury, federal government agencies, and government-sponsored enterprises, in millions of dollars
    Municipal Securities issued by state and local governments and agencies, in millions of dollar
   Corporate Unsecured securities issued by private corporations, in millions of dollars
   MBS/CMO: agency
   backed
Mortgage-backed securities (MBS) and collateralized mortgage obligations (CMO) issued by government-sponsored enterprises, in millions of dollars
   MBS/CMO: other Mortgage-backed securities (MBS) and collateralized mortgage obligations (CMO) issued by private corporations, in millions of dollars
   Asset-backed Securities collateralized by a non-mortgage pool of assets, in millions of dollars
   International Securities issued by non-U.S. entities, government and private, in millions of dollars
   Other Other categories of program-eligible collateral, in millions of dollars
Collateral by rating  
   Credit rating A composite credit rating for the pledged collateral based on ratings information used by the borrower’s clearing bank

The following information on TOP transactions is provided:  

Data Description
Option trade date The date upon which the option was requested (option operation date)
Expiration date The date upon which the option expired
Loan date The start date of the loan; the initial date upon which the loan (of Treasury securities) and collateral were exchanged
Maturity date The date upon which the loan (of Treasury securities) matured
Option holder The name of the primary dealer that purchased the option
Option premium The nominal annual rate charged to the borrower to obtain the right to draw upon a Schedule 2 TSLF loan, in percent
Par amount awarded The amount of options awarded, in millions of dollars
Exercised Indicates whether the primary dealer exercised its options (in part or in full) on a given option expiration date. "Y" indicates the dealer exercised all or some of the options it purchased. "N" indicates the dealer exercised none of the options it purchased


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Last update: August 2, 2013