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11 13 2015 | by Victor Xing | Central Banks

What is the New York Fed Markets Group?

The New York Fed Markets Group has a trading desk that interfaces with investment banks’ sales and trading units (commonly referred to as “the Desk”).  Via the trading desk, the Markets Group is responsible for implementing FOMC policies.

During various QE programs, the Desk would call dealers on previously announced times to buy bonds.  To this day (Nov 2015), the Desk is responsible for coming to the market to reinvest QE assets’ principal repayment in agency MBS.  This group is also responsible for conducting Overnight Reverse Repurchase Agreement (RRP) and other liquidity operations such as term RRP.

New York Fed Markets Group - Brian Sack
The group was formerly headed by Brian Sack (center front).  Current head is Simon Potter
New York Fed Markets Group operation room
Markets Group operation room
New York Fed Markets Group
Source: Federal Reserve Bank of New York

Since this group involves trading with investment banks, some of its staff are hired from the sell-side, so they know all the little tricks that sell-side traders can use to screw the clients.  The problem being – sell-side traders (especially successful ones) are paid handsomely, and New York Fed isn’t known for its deep pockets (for its staff), and it can be far more bureaucratic in comparison with a sell-side trading unit.  As a result, it is hard for them to acquire best-performing traders from the sell-side (there is an argument to be made that they don’t have to).  This problem is not specific to the New York Fed – traders going to large buy-side mutual funds often have to take a pay-cut in exchange for a more cozy life.

Some industry contacts recently commented that the culture at the institution is changing, and they are hiring more MBAs and the mentality is shifting to be more “investment bank” like.

More about the New York Fed Markets Group:
2009: Brian Sack Engineers Big Moves at Fed
2011: The Fed’s QE2 Traders, Buying Bonds by the Billions

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