Pending FRB ETD ECHO EXPOSURE LIMIT - February 2025

[Stoppers]

A
MOTION
To

Discount Rate Policy - February 2025​

Submitted by: Stoppers
Date: 20 February 2025
Classification: Administrative

1. Justification
To ensure prudent risk management and maintain market stability, it is essential to impose clear exposure limits on the Federal Reserve Bank's (FRB) participation in Echo securities trading. This policy establishes an upper limit for the FRB's exposure, mitigating financial risk while allowing for continued market-making activities in both traditional equities and cryptocurrencies. Adjustments to these limits may be considered by the Federal Reserve Board as market conditions evolve.

2. Exposure Limits Policy
(i) The Federal Reserve Bank's total exposure to Echo securities shall not exceed $10,000,000 Redmont dollars.
(ii) Of this $10,000,000 limit, a maximum exposure of $750,000 Redmont dollars may be allocated toward market-making activities for cryptocurrencies specifically.
(iii) These limits may be reviewed and modified by the Federal Reserve Board through the enactment of future policies as needed to address market changes or institutional objectives.

3. Monitoring and Compliance
(i) The Equities Trading Desk (ETD) will maintain real-time monitoring systems to ensure compliance with the established exposure limits.
(ii) Weekly exposure reports will be generated and submitted to Federal Reserve Board by the Chief Trading Officer for review.

4. Adjustment Requests

• Requests to adjust the exposure limits must be submitted by the Chief Trading Officer to the Federal Reserve Board.
• Approval requires formal board review and passage of a new policy or amendment.

5. Implementation
Within 72 hours of the Board's approval, the ETD will adjust its trading parameters to comply with this policy. A public notice summarizing these changes will be issued to ensure transparency and maintain market confidence.