Expansion of Fedwire® Funds Service and National Settlement Service Operating Hours, 39613-39621 [2024-10117]
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Federal Register / Vol. 89, No. 91 / Thursday, May 9, 2024 / Notices
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39613
Board of Governors of the Federal Reserve
System.
Michele Taylor Fennell,
Deputy Associate Secretary of the Board.
[FR Doc. 2024–10164 Filed 5–8–24; 8:45 am]
BILLING CODE P
FEDERAL RESERVE SYSTEM
[Docket No. OP–1831]
Expansion of Fedwire® Funds Service
and National Settlement Service
Operating Hours
Board of Governors of the
Federal Reserve System.
ACTION: Request for comment.
AGENCY:
The Board of Governors of the
Federal Reserve System (Board) is
seeking input on a proposal to expand
the operating hours of the Fedwire®
Funds Service and the National
Settlement Service (NSS). The Board
proposes to expand the operating hours
of the Fedwire Funds Service to 22
hours per day, 7 days per week, every
day of the year (22x7x365) and to
correspondingly expand the operating
hours of NSS, with NSS closing 30
minutes earlier than the Fedwire Funds
Service. At this time, the Board is not
considering expanding operating hours
for the Fedwire Securities Service. The
Board requests comments on the
potential benefits, risks, and
implementation considerations of the
proposal.
SUMMARY:
Comments on the proposed
actions must be received on or before
July 8, 2024.
ADDRESSES: You may submit comments,
identified by Docket No. OP–1831, by
any of the following methods:
• Agency website: https://
www.federalreserve.gov. Follow the
instructions for submitting comments at
https://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm.
• Email: regs.comments@
federalreserve.gov. Include docket
number in the subject line of the
message.
• FAX: (202) 452–3819 or (202) 452–
3102.
• Mail: Ann Misback, Secretary,
Board of Governors of the Federal
Reserve System, 20th Street and
Constitution Avenue, NW, Washington,
DC 20551.
All public comments will be made
available on the Board’s website at
https://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm as
submitted, unless modified for technical
reasons or to remove personally
identifiable information at the
DATES:
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Federal Register / Vol. 89, No. 91 / Thursday, May 9, 2024 / Notices
commenter’s request. Accordingly,
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weekdays.
FOR FURTHER INFORMATION CONTACT:
Mark Magro, Manager, Division of
Reserve Bank Operations and Payment
Systems (202–452–3944); Ann Sun,
Lead Financial Institution Policy
Analyst, Division of Reserve Bank
Operations and Payment Systems (202–
912–7938); or Gavin Smith, Senior
Counsel, Legal Division (202 452–3474);
or Corinne Milliken Van Ness, Senior
Counsel, Legal Division (202–452–
2421), Board of Governors of the Federal
Reserve System. For users of
Telecommunications Device for the Deaf
(TDD), contact (202–263–4869.)
SUPPLEMENTARY INFORMATION:
I. Background
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The Federal Reserve has a longstanding policy objective to foster a safe
and efficient U.S. payment system. The
Federal Reserve advances its objectives
for the payment system through, among
other things, the Federal Reserve Banks’
(Reserve Banks) operation of two largevalue payment services: the Fedwire®
Funds Service and NSS.1 The Fedwire
Funds Service is a real-time gross
settlement (RTGS) service that allows
participating financial institutions
(participants) to send and receive
individual electronic funds transfers up
to one penny less than $10 billion in
value that are immediate to participants,
final, and irrevocable. NSS is a
multilateral settlement service that
allows for immediate, final, and
irrevocable settlement of obligations
that arise from private-sector clearing
arrangements, such as check
clearinghouses, a private-sector ACH
network, and securities settlement
systems.2 Together, these services,
alongside a large-value payment service
operated by the private sector, provide
1 ‘‘Fedwire’’ is a registered service mark of the
Federal Reserve Banks.
2 Settlement files submitted to NSS can be for an
amount up to one penny less than $10 trillion; each
entry in a settlement file can be for an amount up
to one penny less than $100 billion.
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the backbone for the nation’s payment
system and thereby support a significant
amount of economic activity in the
United States, including large-value
domestic financial market transactions,
the U.S. dollar leg of many cross-border
transactions, and private-sector payment
clearing arrangements.3
The Federal Reserve has consistently
improved its payment services to meet
the evolving needs of the U.S. economy.
As technological advancements and
globalization of commerce continue to
drive change in the large-value payment
landscape, the Board believes that
expanding the availability of the
Fedwire Funds Service and NSS would
enhance the safety and efficiency of the
U.S. payment system by extending the
hours in which settlement in risk-free
central bank money can occur.4 Thus,
the Board is proposing to expand the
operating hours of the Fedwire Funds
Service to 22 hours per day, 7 days per
week, every day of the year and to
expand the operating hours of NSS
correspondingly, with NSS closing 30
minutes earlier than the Fedwire Funds
Service.5 The Board recognizes that a
3 The private-sector large-value payment service
is CHIPS®, which is owned and operated by The
Clearing House Payments Company L.L.C. (TCH).
‘‘CHIPS’’ is a registered service mark of TCH. While
the Fedwire Funds Service supports large-value
payments (often referred to as ‘‘wholesale’’
payments), not all payments sent through the
Fedwire Funds Service would be considered large
value. For example, while the average value of a
payment in 2023 on the Fedwire Funds Service was
$5.625 million, the median value was
approximately $19,000. In general, smaller-value,
general purpose payments sent by consumers and
businesses are made using services designed for
smaller value (‘‘retail’’) transactions such as the
Reserve Banks’ check clearing and automated
clearinghouse (ACH) services, and the FedNow®
Service for instant payments. ‘‘FedNow’’ is a
registered service mark of the Federal Reserve
Banks.
4 Central bank money is a liability of the central
bank that can be used for settlement purposes and
is considered free of credit and liquidity risks.
Central bank money has traditionally taken two
forms: cash and reserve balances held by eligible
financial institutions at the central bank.
5 Fedwire Funds Service is currently open from
9:00 p.m. ET of the preceding calendar day to 7:00
p.m. ET, five days per week, Monday through
Friday excluding holidays observed by the Reserve
Banks. NSS is open from 9:00 p.m. to 6:30 p.m. ET,
five days per week, Monday through Friday
excluding holidays observed by the Reserve Banks.
The Federal Reserve has historically provided at
least 30 minutes between the close of NSS and the
close of the Fedwire Funds Service, recognizing
that the Fedwire Funds Service is the primary
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significant expansion in operations for
large-value payments in the short term
might pose burdensome technical and
operational changes at a time when the
industry will also be adjusting to the
new ISO® 20022 message format for
large-value payments and instant
payment services.6 Therefore, the Board
proposes that the expansion to
22x7x365 would be implemented no
sooner than two years after the
migration of the Fedwire Funds Service
to the ISO 20022 standard, scheduled
for March 2025. The final
implementation timeline for 22x7x365
will be determined based on input from
this request for comment, among other
relevant considerations.
The Board is seeking comment on the
potential benefits, risks, costs, and other
considerations of expanded hours for
the Fedwire Funds Service and NSS, as
described in Section II. The Board is
also requesting comment on
implementation considerations, as
described in Section III. As noted, the
Board is not considering expanding
operating hours for the Fedwire
Securities Service at this time.
II. Proposed Action
A. Proposal
The Board proposes to expand the
operating hours of Fedwire Funds
Service to 22x7x365 and to
correspondingly expand the operating
hours of NSS. It is anticipated that if the
proposal is adopted NSS would
continue to close at 6:30 p.m. ET, 30
minutes prior to the close of Fedwire
Funds Service at 7:00 p.m. ET. Both
services will maintain their current
opening time of 9:00 p.m. ET of the
preceding calendar day for the proposed
weekend operating days. Table 1
summarizes the proposed changes to
operating hours for the Fedwire Funds
Service and NSS.
alternative for orderly and efficient settlement of
bilateral obligations in case a settlement
arrangement is unable to complete its multilateral
settlement through NSS.
6 ‘‘ISO’’ is a registered service mark of the
International Organization for Standardization.
For example, the FedNow Service, which was
launched in July 2023, is an instant payments
service. Instant payments allow consumers and
businesses to send and receive funds from their
accounts at banks and credit unions in real time,
any time of day, any day of the year, with
immediate funds availability to receivers.
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39615
TABLE 1—PROPOSED CHANGES TO OPERATING HOURS FOR THE FEDWIRE FUNDS SERVICE AND NSS
Current operating hours
Fedwire Funds Service 7 ...................................
NSS 8 .................................................................
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B. Rationale for Proposal
The Federal Reserve has expanded
operating hours for the Fedwire Funds
Service and NSS over time in response
to changing market conditions and
industry demand. Most recently, the
Board received public comments on
expanded hours for the Fedwire Funds
Service and NSS in response to Federal
Register notices related to the
development of the FedNow Service.9
Certain commenters indicated that
expanded hours would provide a means
for participants in retail instant payment
services to manage liquidity needs
related to instant payment activity on a
round-the-clock basis.10 To address this
industry input and meet FedNow
Service implementation timelines, the
Board determined that liquidity
management transfer functionality
should be provided within the FedNow
Service at the time of its launch in July
2023. However, the Board indicated it
would continue to explore expanded
hours for the Fedwire Funds Service
and NSS, given the broad benefits that
expanded hours could provide to
financial markets and the payment
systems and market infrastructures that
support those markets.11 Subsequently,
in a 2022 notice regarding the
implementation of the ISO 20022 format
for the Fedwire Funds Service, the
Board indicated that the Reserve Banks
7 The Fedwire Funds Service begins processing
online payment orders beginning at 9:00 p.m. ET on
the preceding calendar day. The Fedwire Funds
Service begins processing online nonvalue
messages at 8:35 p.m. ET on the preceding calendar
day. The cutoff time for special account messages
is 5:00 p.m. ET, the cutoff time for customer
messages is 6:45 p.m. ET, and the cutoff time for
bank messages is 7:00 p.m. ET. The Fedwire Funds
Service closes at 7:00 p.m. ET.
8 The file processing window for NSS begins at
9:00 p.m. ET on the preceding calendar day and
closes at 6:30 p.m. ET.
9 See 83 FR 57351 (Nov. 15, 2018) and 84 FR
39297 (Aug. 9, 2019).
10 The 24x7x365 nature of instant payments
requires banks to have sufficient liquidity to settle
instant payments at any time, any day of the week.
As a result, banks need a method to fund accounts
used to settle instant payment transactions during
hours when large-value payment services are not
currently open. See 83 FR 57351 (Nov. 15, 2018).
11 See 84 FR 39297 (Aug. 9, 2019). The Board
indicated that further analysis was needed to
evaluate fully the relevant operational, risk, and
policy considerations of expanded Fedwire Funds
Service and NSS operating hours.
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Proposed operating hours
9:00 p.m. ET–7:00 p.m. ET, Monday–Friday,
excluding holidays.
9:00 p.m. ET–6:30 p.m. ET, Monday–Friday,
excluding holidays.
9:00 p.m. ET–7:00 p.m. ET, every day.
would conduct engagement with
industry stakeholders as part of its
analysis of expanded operating hours
for the Fedwire Funds Service and
NSS.12
The Reserve Banks conducted this
engagement through outreach sessions
with a broad range of stakeholders,
including large global financial
institutions, small and mid-sized banks
in different regions, and nonbanks and
service providers, to better understand
the needs and concerns of industry.
While these industry outreach sessions
were informal and not as
comprehensive as an information
collection conducted through the
broader Federal Register notice process,
stakeholders raised several initial
themes. Overall, industry stakeholders
that are active in global payments
markets expressed strong support for an
expansion of Fedwire Funds Service
and NSS operating hours up to
24x7x365, stating that expanded hours
would enhance the ability of crossborder payments and international
commerce to be conducted in U.S.
dollars and help preserve the status of
the U.S. dollar as the preferred currency
for global settlements.13 In addition,
industry stakeholders noted that while
24x7x365 operating hours would be an
ideal state in the longer term, other
payment system improvement
initiatives should be prioritized ahead
of an expansion, including
implementation of the new FedNow
Service for instant payments and ISO
20022 migration of the Fedwire Funds
Service. In general, these stakeholders
noted that shifting large-value payment
operations to full 24x7x365, with no
downtime to accommodate system
changes and other operational activities,
would be challenging to implement in
the shorter term.14
Smaller banks provided differing
perspectives on the benefits of Fedwire
Funds Service and NSS expanded
hours, with some institutions expressing
a lack of pressing need and business
case compared with the level of
investment required to operate on a
24x7x365 basis. Other institutions saw
value in expanded hours to provide
increased flexibility in operating hours
among West Coast banks or to maximize
time available to recover from an
operational issue on the same business
day. Overall, smaller banks noted the
importance of maintaining optionality
to participate in Fedwire Funds Service
and NSS operating hours such that
banks are not required to operate or
otherwise maintain staff during
expanded hours.
Concurrent with the Federal Reserve’s
consideration of expanded operating
hours for the Fedwire Funds Service
and NSS, the international community
has been advancing initiatives to
improve the cost, speed, accessibility,
and transparency of cross-border
payments. In 2020, the G20 leaders
endorsed the Roadmap for Enhancing
Cross-Border Payments, which set out a
series of ‘‘building blocks’’ to address
the frictions underlying the challenges
associated with cross-border
payments.15 Building Block 12 focused
on extending and aligning the operating
hours of existing payment
infrastructures and arrangements across
jurisdictions, particularly RTGS
systems. Cross-jurisdiction alignment
could speed up cross-border payments,
improve liquidity management, and
reduce settlement risk, among other
benefits.16 Global alignment of largevalue RTGS system operating hours has
been a driver of past expansions for the
12 See
87 FR 64217 (Oct. 24, 2022).
industry stakeholders have also
expressed these views via the industry-led
Payments Risk Committee. See Payments Risk
Committee: Fedwire Expanded Hours Whitepaper,
available at https://www.newyorkfed.org/
medialibrary/microsites/prc/files/2021/prc-fedwireexpanded-hours-considerations-white-paper.
14 In outreach sessions, industry stakeholders
indicated that the elimination of downtime between
the close and open of the Fedwire Funds Service
and NSS could pose a more significant challenge
than expanding operating hours into the weekend.
13 Certain
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9:00 p.m. ET–6:30 p.m. ET, every day.
15 See Financial Stability Board: Enhancing
Cross-border Payments: Stage 3 Roadmap available
at https://www.fsb.org/wp-content/uploads/
P131020-1.pdf. See also Financial Stability Board:
Enhancing Cross-border Payments: Stage 1 report to
the G20 available at https://www.fsb.org/wpcontent/uploads/P090420-1.pdf which discusses
key frictions in cross-border payments.
16 In February 2023, the Financial Stability Board
published an updated and prioritized Roadmap
centered on three priority themes, which includes
the extension and alignment of the operating hours
of key payment systems. Available at https://
www.fsb.org/2023/02/g20-roadmap-for-enhancingcross-border-payments-priority-actions-forachieving-the-g20-targets/.
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Fedwire Funds Service because of the
risk-reducing benefits.17 Though the
gaps in operating hours between the
Fedwire Funds Service and other RTGS
systems have decreased over time, gaps
still remain, in particular during
weekend hours. Expanding the
operating hours of the Fedwire Funds
Service and NSS into the weekend
would be consistent with the broader
G20 agenda and would be consistent
with the actions of other central banks
that are considering or have already
expanded operating hours for their
large-value payment services.18
Also, the Federal Reserve recognizes
that payment infrastructure needs to
evolve to support commerce that is
increasingly being conducted outside
traditional business hours. Expanded
hours for the Fedwire Funds Service
and NSS alongside the FedNow Service
would bring the benefits of near roundthe-clock payments for large-value,
wholesale payments, such as multimillion dollar business invoices, real
estate transactions, and insurance
payouts, ensuring that the evolution of
commerce is supported across retail and
wholesale infrastructures.19
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C. Analysis of Options for Expanded
Hours
While 24x7x365 operating hours for
the Fedwire Funds Service and NSS
remains a possibility in the longer term,
the Board recognizes that the shift to
17 See 59 FR 8981 (Feb. 24, 1994). Foreign
exchange settlement risk is also commonly known
as ‘‘Herstatt risk.’’ The name comes from an episode
in which a German bank, the Herstatt Bank, was
closed by its supervisor after the bank had received
deutsche mark payments for foreign exchange
transactions, but before it provided U.S. dollars to
its counterparties in those transactions. Overlap in
central bank services operating hours can mitigate
foreign exchange settlement risk by providing an
opportunity to shorten the time between the
settlement of both legs of a foreign exchange
transaction, including enabling simultaneous
settlement.
18 A number of central banks, such as those in
Mexico and South Africa, have operated 24x7x365
large-value payment services for some time. Other
central banks, including those in India and
Switzerland, operate at near 24x7x365. In the
United Kingdom, the Bank of England has
announced that its next-generation large-value
payment service will be capable of near 24x7x365
operations by 2024. The Bank of England will
consider extending the operating hours of its largevalue payment service in line with the industry’s
demand. See the Bank of England’s Roadmap for
Real-Time Gross Settlement service beyond 2024,
available at https://www.bankofengland.co.uk/
paper/2022/roadmap-for-real-time-gross-settlementservice-beyond-2024.
19 The FedNow Service supports real-time,
immediate end-to-end instant payments between
end user senders and receivers, with immediate
funds availability to receivers. The Fedwire Funds
Service supports large-value payments that are
either between banks only or intended for end-user
receivers, with no immediate funds availability
requirement for payments to end user receivers.
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full round-the-clock operations, with no
downtime in operations to complete
end-of-day processing or implement
system upgrades for large-value
payment services, may pose challenges
in the shorter term. The Board
considered multiple alternatives to the
proposed 22x7x365, including the
addition of a short weekend window of
operating hours on Saturday and/or
Sunday; 22 hours per day, 6 days per
week; 24 hours per day, 5 days per
week; and 24x7x365 operating hours.
Overall, the Board believes that
expanding to 22x7x365 could achieve
many of the benefits of 24x7x365 hours
while giving the industry and Reserve
Banks time to adjust technology and
operations for potential future
expansions of operating hours of the
Fedwire Funds Service and NSS.
Participation in expanded hours would
be voluntary. The Board is proposing to
extend the current 22x5 Fedwire Funds
Service and NSS operating hours to
22x7x365 no sooner than two years after
the implementation of the ISO 20022
message format for the Fedwire Funds
Service, scheduled for March 2025. (See
Section III for a further discussion on
implementation considerations).
A key reason for considering a
22x7x365 expansion of Fedwire Funds
Service and NSS operating hours is a
faster and less costly implementation
than a full 24x7x365 expansion, which
would help achieve the Board’s safety
and efficiency policy objectives for
large-value payments in the nearer term.
In addition, industry feedback to date
underscored that investment in
technical infrastructure modernization
for participants to accommodate roundthe-clock availability would pose
challenges that could be reduced by a
shorter move to 22x7x365 operating
hours.
An expansion of Fedwire Funds
Service and NSS operating hours to
22x7x365 could also reduce costs and
risks to the industry and the Federal
Reserve relative to an expansion to
24x7x365 operations. For example, an
expansion to 22x7x365 operating hours
could allow participants to gradually
adapt to seven-day operations for
wholesale payments, which could
reduce operational risks. Additionally,
lessons learned from the expansion
could be applied to the potential future
development of full 24x7x365
operations for the Fedwire Funds
Service and NSS.
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D. Benefits, Costs, Risks, and Other
Considerations
1. Benefits
Expanding current Fedwire Funds
Service and NSS operating hours from
five to seven days per week, each day
of the year, could improve the safety
and efficiency of both domestic and
global large-value U.S. dollar payments.
Domestically, expanded hours could
allow systemically important financial
market utilities (FMUs) (that is, a largevalue payment service, securities and
derivatives clearinghouses, and
securities settlement services) and retail
payment arrangements (that is, check
clearinghouses, an ACH network, and
an instant payment service) that
leverage the Fedwire Funds Service
and/or NSS to have broader options for
settlement of time-critical payments.20
Settlement outside of traditional
windows could reduce credit risk in
certain FMUs and retail payment
arrangements by narrowing the time gap
between the creation of payment
obligations and the discharge of those
obligations in final funds, thereby
reducing the potential for spillover
effects in the financial system from
settlement disruptions. To the extent
that FMUs and retail payment
arrangements operate outside of
traditional windows, these firms could
have the option to receive or send funds
in central bank money seven days per
week, potentially improving their
operational efficiency or reducing the
build-up of credit risk on days when
Fedwire Funds Service and NSS are not
currently operating. Expanded hours
might also spur new or enhanced
private-sector payment solutions that
leverage the Fedwire Funds Service
and/or NSS, or enable financial market
trading and lending activity that
previously could not be supported
during weekend hours.21 Finally, as
noted above, expanded hours for the
Fedwire Funds Service and NSS
alongside the FedNow Service would
bring the benefits of near round-theclock payments for large-value
consumer and business payments, such
20 Currently, the FedNow Service provides
liquidity management transfer capability for
FedNow participants and participants in a privatesector instant payment service to transfer funds to
support instant payment liquidity needs during
certain hours including when the Fedwire Funds
Service is closed. While the hours of liquidity
management transfers in FedNow might be adjusted
if Fedwire Funds Service hours are expanded,
transfers would remain available during the twohour Fedwire Funds Service closure.
21 See the Committee on Payments and Market
Infrastructures final report ‘‘Extending and aligning
operating hours for cross-border payments,’’
available at https://www.bis.org/cpmi/publ/
d203.pdf.
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as multi-million dollar business
invoices, real estate transactions, and
insurance payouts.
Expanded hours would also facilitate
greater overlap and reduced gaps
between the operating hours of the
Fedwire Funds Service/NSS and key
large-value payment services in other
jurisdictions. This overlap and
reduction in gaps would support more
efficient cross-border payments through
faster settlement and improved liquidity
management. For example, some
industry feedback highlighted the value
of Sunday operating hours to support
payment flows in the Middle East and
North Africa region. Increased overlap
in operating hours could provide more
opportunities to settle cross-currency
payments simultaneously via new or
existing payment-versus-payment
mechanisms and arrangements, thereby
reducing settlement risk and potentially
allowing for greater transparency in
global foreign exchange (FX) markets.22
Increased overlap and reduced gaps in
operating hours could also speed up
settlement of large-value corporate trade
payments made through correspondent
arrangements by reducing or eliminating
the time gap between the U.S. leg of a
payment and the leg of the payment in
a foreign jurisdiction. Expanded
operating hours would be consistent
with the actions of other central banks,
some of which have already undertaken
an expansion of operating hours for
their large-value payment services by
targeting near or full 24x7x365
operations or by considering or
positioning themselves for future
expansion.23
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2. Costs and Risks
The potential benefits of expanding
Fedwire Funds Service and NSS
operating hours to 22x7x365 need to be
weighed against potential costs and
risks. Expanded hours would require
operational and technical changes that
would impose costs on the Reserve
Banks and on institutions that
participate in the Fedwire Funds
Service and NSS. The magnitude of
costs would vary by institution. Some
institutions have cited the potential for
significant costs related to upgrades of
legacy infrastructure, as well as
increased staffing, to support expanded
22 As explored in the ‘‘Committee on Payments
and Market Infrastructures final report: Extending
and aligning operating hours for cross-border
payments’’, expansion of large-value payment
system operating hours would also add to the
current global settlement window (i.e., the time
period during which the largest number of largevalue RTGS systems are simultaneously operating).
23 See footnote 20 regarding Mexico, South
Africa, India, Switzerland and the United Kingdom,
for example.
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hours. Others have indicated that costs
would be more incremental because
their institutions could build on existing
infrastructure that they use to support
24x7x365 instant payments. The Board
is seeking comment on the cost burden
to industry stakeholders of moving to
22x7x365 operations, as well as costs
related to potential 24x7x365 operations
in the future. Reserve Bank costs are
discussed in Section 3.a.
In addition to the potential financial
impact, extending current operating
hours to every day of the year could
generate additional risks to participants,
the Reserve Banks, and the U.S.
financial system more broadly.24 For
example, transferring funds to meet
potential rapid deposit outflows during
weekends and holidays could
exacerbate liquidity issues for a bank in
crisis. This risk could have financial
stability implications if large deposit
outflows experienced by a single
participant created contagion to other
participants.
The two-hour window between 7:00
p.m. and 9:00 p.m. ET on Saturday and
Sunday under the Board’s proposal to
expanded hours would serve as a pause
in transferring funds to meet deposit
outflows.25 Participants experiencing
outflows could potentially utilize this
time period to implement liquidity and
risk management measures to address
outflows. The Board is seeking
comments on the likelihood that
expanding Fedwire Funds Service and
NSS hours would exacerbate liquidity
risks arising from deposit outflows, as
well as any additional risk controls that
would be needed during expanded
hours. Relatedly, the Board recognizes
that participants’ ability to access
funding during expanded weekend and
holiday hours will be important and
seeks comments on the potential
benefits and costs of extending discount
window operations.
Expanded operating hours could also
potentially increase operational and
financial risks to participants and the
Reserve Banks by expanding the time
during which cyber-attacks or other
operational disruptions could take
place. While these risks are not new to
the financial sector, the Board is seeking
to understand the industry’s readiness
to manage these types of risks on a near
round-the-clock basis.
24 It is anticipated that not all participants may
choose to participate in the expanded weekend
hours at launch. Please see section III.B. for a
discussion of optional participation in a 22x7x365
operating environment of the Fedwire Funds
Service and NSS.
25 See Section II.A. Proposal for the proposed
operating hours on Saturday and Sunday.
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3. Other Policy Considerations
The proposed expansion of operating
hours to 22x7x365 would constitute
major enhancements to the Fedwire
Funds Service and NSS. Under
longstanding Board policy, any
potential new payment service or major
enhancements to an existing service
must meet the following criteria: (a) the
Federal Reserve must expect to achieve
full cost recovery of costs over the long
run, (b) the Federal Reserve must expect
that its providing the service will yield
a clear public benefit, and (c) the service
should be one that other providers alone
cannot be expected to provide with
reasonable effectiveness, scope, and
equity.26 An analysis of these criteria is
set forth below.
a. Cost Recovery
Section 11A of the Federal Reserve
Act, as added by the Monetary Control
Act of 1980, requires that fees for
Federal Reserve Bank payment services
be set in accordance with the principle
that, over the long run, those fees
recover the costs of providing the
services.27 In addition, Board policy
specifies that each major service
category offered by the Federal Reserve
must separately satisfy the cost recovery
objective of the Monetary Control Act:
in the long run, aggregate revenues
should match costs.28
Initial analysis suggests that over the
long run, the Reserve Banks would be
able to recover the costs associated with
the proposed 22x7x365 expanded
operating hours. Discussions with
industry stakeholders about the need for
expanded hours to support cross-border
activity, innovative use cases, and
additional settlement opportunities for
systemically important and large-value
transactions support the assumption
that, over time, expanding Fedwire
Funds Service and NSS hours would
generate increases in volume and
revenue. The Reserve Banks completed
a cost estimate analysis that included
26 See Board of Governors of the Federal Reserve
System, ‘‘The Federal Reserve in the Payments
System,’’ (issued 1984; revised 1990). Available at
Federal Reserve Board—Policies: The Federal
Reserve in the Payments System.
27 Specifically, section 11A provides that, ‘‘[o]ver
the long run, fees shall be established on the basis
of all direct and indirect costs actually incurred in
providing the Federal Reserve services priced,
including interest on items credited prior to actual
collection, overhead, and an allocation of imputed
costs which takes into account the taxes that would
have been paid and the return on capital that would
have been provided had the services been furnished
by a private business firm, except that the pricing
principles shall give due regard to competitive
factors and the provision of an adequate level of
such services nationwide.’’ 12 U.S.C. 248a.
28 See ‘‘The Federal Reserve in the Payments
System,’’ supra note 28.
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system changes and additional staffing
during the weekends. The Reserve
Banks expect these costs would be offset
by increased revenue, subject to various
factors such as the competitive and/or
economic environment in future years,
new product enhancement
opportunities, and potential Fedwire
Funds Service and NSS pricing changes.
In addition, Reserve Bank operational
costs may be lower for expanded hours
due to efficiency gains that could arise
from leveraging operations and
customer support staff that are already
in place for the FedNow Service. The
Board will conduct a full analysis of
long-term cost recovery impacts to the
Fedwire Funds Service and NSS based
on input received on the proposal.
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b. Public Benefit
The Board believes the expansion of
operating hours for the Fedwire Funds
Service and NSS could have several
important safety and efficiency benefits.
From a domestic perspective, expanded
hours could reduce credit risk and
improve safety in the financial system
by narrowing the time gap between the
creation of payment obligations and the
discharge of those obligations in final
funds, improve operational efficiency in
FMUs and retail payment arrangements,
and spur innovations in large-value
payments such as weekend interbank
lending markets. From an international
perspective, expanded hours would
increase overlap and reduce gaps
between the operating hours of the
Fedwire Funds Service and NSS and
other key large-value real time gross
settlement systems internationally and
would support greater efficiency in
cross-border payments. Please see
previous section II.D.1. for a full
discussion of potential benefits.
c. Other Providers
Board policy also requires that for any
new service or major service change, the
service should be one that other
providers alone cannot be expected to
provide with reasonable effectiveness,
scope, and equity.29 Today, to provide
final settlement, the private-sector largevalue payment service relies on the
Fedwire Funds Service to support its
settlement process. Thus, this service
would likely not be able to effectively
expand its operating hours without a
similar expansion in the operating hours
of the Fedwire Funds Service. In terms
of scope and equity, today the Fedwire
Funds Service and NSS are broadly
accessible to eligible financial
institutions across the country on equal
29 See ‘‘The Federal Reserve in the Payments
System,’’ supra note 28.
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terms.30 Thus, the Federal Reserve
could offer financial institutions
similarly broad access to expanded
operating hours.
III. Implementation Considerations
This section describes (A) the
potential timeline for an expansion of
the Fedwire Funds Service and NSS
operating hours from 22x5 to 22x7x365,
and considerations that will inform the
final timeline, (B) considerations for
optional participation in a 22x7x365
operating environment, (C) other
potential enhancements to the Fedwire
Funds Service and NSS, and (D) the
availability of the discount window.
A. Timeline for Proposal
The implementation timeline for the
expansion of operating hours to
22x7x365 and potentially to 24x7x365
in the future will depend on many
factors, including the operational and
technical challenges to the Federal
Reserve and participants of
implementing and adopting potential
operating hours expansions, industry
preferences related to timing, demand
for 22x7x365 and 24x7x365 operating
hours among participants, and
interdependencies with other
developments in the payments
landscape. Should the Board decide to
proceed with the proposed expansion to
22x7x365, it will consider these and
other factors before determining the
final timeline.
Based on initial industry outreach
conducted after the 2022 Federal
Register notice for the implementation
of the ISO 20022 standard for the
Fedwire Funds Service, there is broad
consensus from stakeholders that
expanding Fedwire Funds Service and
NSS operating hours should not occur
until after the implementation of the
ISO 20022 standard for the Fedwire
Funds Service scheduled for March
2025. Initial analysis suggests an
expansion of Fedwire Funds Service
and NSS operating hours to 22x7x365
could potentially be achieved no sooner
than two years after the implementation
of the ISO 20022 message format for the
Fedwire Funds Service. As a result, if
public comments in response to this
notice indicate support for the proposed
expansion to 22x7x365 operating hours
for the Fedwire Funds Service and NSS,
the Federal Reserve would expand
operating hours to 22x7x365 no sooner
than 2027.
30 Depository institutions may access these
services either directly (settling transactions in their
Federal Reserve account) or indirectly (through
another depository institution that acts as a
correspondent bank for the institution).
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In determining an implementation
timeline for 22x7x365 operating hours,
the Board will consider feedback
received in response to this notice,
including whether an interim step short
of 22x7x365 would be desirable. Key
feedback areas will include the extent to
which participants would benefit from
weekend operating hours for the
Fedwire Funds Service and NSS being
made available as soon as practicable,
and the extent to which participants
may need to adjust their staffing,
internal systems, and processes to take
advantage of weekend operating hours.
Furthermore, the eventual timeline will
also reflect interdependencies between
the development and adoption of
expanded operating hours for the
Fedwire Funds Service and NSS and
other initiatives.
An expansion to full 24x7x365
operating hours for the Fedwire Funds
Service and NSS is a possibility in the
future. The Board is interested in
collecting feedback from industry on
constraints, preferences, and demand
related to full 24x7x365 operating
hours. If the Board does propose to
expand operating hours further to
24x7x365, it would seek public
comment in a separate proposal.
B. Considerations for Optional
Participation in a 22x7x365 Operating
Environment of the Fedwire Funds
Service and NSS
In alignment with current service
terms and in response to industry
feedback from smaller institutions,
participation in proposed 22x7x365
operating hours for the Fedwire Funds
Service and NSS would be optional.
Currently, a Fedwire Funds Service
participant, for example, may decide not
to be open to process payment orders
sent to it over the Fedwire Funds
Service during overnight hours.
Similarly, an institution that
participates in a private-sector clearing
arrangement for which transactions are
settled through NSS may be allowed
under the rules of the clearing
arrangement (i) not to send or receive
transactions using the clearing
arrangement during overnight hours
(and thus not trigger any settlement
obligations) or (ii) to instruct the agent
for the NSS settlement arrangement not
to include any debit or credit entries for
the institution or other institutions for
which it settles in any settlement files
submitted to NSS during that time.31
31 Only institutions that are settlers in an NSS
settlement arrangement may settle debit or credit
entries in an NSS settlement file. Settlers may settle
debit or credit entries for their own account or on
behalf of other institutions that participate in the
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The Board believes the optionality
should be maintained during any
expanded hours.
If a participant chooses not to operate
during some or all potential weekend
and holiday operating hours of the
Fedwire Funds Service, the participant
might continue to receive payment
orders through the Fedwire Funds
Service, just as some participants today
receive payment orders while they are
not operating during overnight hours. If
a participant chooses not to operate
during the weekend or on a holiday, it
would not be required to take action on
any payment orders sent to it during
those days if they are not funds-transfer
business days for the participant.
Alternatively, if a participant wishes to
operate only during part of the weekend
and holiday operating hours, it may set
cutoff or closing times for its fundstransfer business day, after which it
would not be required to take action on
a payment order sent to it until its next
funds-transfer business day.32 For NSS,
if a participant does not settle
transactions through the NSS settlement
arrangement during weekend or holiday
operating hours, it may be unable to
send or receive transactions through the
private-sector clearing arrangement
during that time depending on the rules
of the clearing arrangement.
Although optionality with respect to
participation in a 22x7x365 operating
environment may allow some
participants to avoid certain costs
associated with an expansion in
operating hours of the Fedwire Funds
Service and NSS, it may also present
certain challenges. For example, a
participant that chooses not to operate
(that is, send payments), but continues
to receive payments in its master
account during certain Fedwire Funds
Service operating hours, could become
a source of trapped liquidity, which
could lead to the participant’s
counterparties implementing liquidity
management measures such as
restricting payments to the participant
while they are offline.33 Further, such
optionality could, over time, hinder
broad adoption of expanded hours
across the participant base, which could
limit the full benefits of 22x7x365
Fedwire Funds Service and NSS.
Notwithstanding these considerations,
the Board is not contemplating a change
private-sector clearing arrangement. Settlers must
have their own master account.
32 See 12 CFR part 210, app. A, § 4A–106, 4A–
302(a)(1), 4A–404.
33 However, participants face this same challenge
in the current operating environment of the Fedwire
Funds Service and NSS, which provides similar
optionality in participation.
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to the participation model for Fedwire
Funds Service and NSS.
C. Potential Other Enhancements to
Fedwire Funds Service and NSS
While this notice focuses on the
proposal to expand operating hours to
22x7x365, the Board recognizes there
may be other enhancements to the
Fedwire Funds Service and NSS that
could be considered in the context of or
in addition to expanded hours. For
example, the possibility of a new
participant directory feature that
potentially provides a listing of
participants open for transactions and at
which times has been raised by
participants. Other potential service
enhancements center around further
access to information, such as the
improved ability for institutions to track
payments from sender to beneficiary,
and application programming interfaces
(APIs) to access payments-related data.
In addition, some institutions have
raised the possibility of improved fraud
controls or screening capabilities.
Finally, a significant undertaking could
entail the addition of a liquidity savings
mechanism for the Fedwire Funds
Service.34 The Board is seeking to
understand such functionality
considerations and others, including the
priority institutions place on their
development, particularly in relation to
expanding operating hours.
D. Availability of the Discount Window
The Board recognizes banks’ ability to
access funding during expanded
weekend and holiday hours will be
important and seeks comments on the
need for discount window operations to
support expanded hours.35 The Board
stated in its 2019 notice related to the
development of the FedNow Service
that the Federal Reserve would conduct
analysis on extending discount window
operations to make overnight credit
available on weekends and holidays.
Subsequently, in its 2020 notice
announcing the details of the FedNow
Service, the Board noted that the need
for overnight credit on weekend and
holidays was expected to be limited
initially, and the hours during which
discount window loans could be
originated would remain unchanged.36
34 A liquidity savings mechanism can be defined
as a queuing arrangement for payments, which
conditions the release of queued payments on the
receipt of offsetting or partially offsetting payments,
and as a result economizes on the use of
participants’ cash balances.
35 Discount window office hours vary by district,
but typically begin at 8:00 or 8:30 a.m. local time
and end when the Fedwire Funds Service closes at
7:00 p.m. ET.
36 See 85 FR 48522 (August 11, 2020) Liquidity
management transfer functionality was included as
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39619
This perspective was influenced by the
expected low volumes for a new service
as well as by the lower dollar value of
FedNow Service transactions.
The Board recognizes that the
combination of the FedNow Service
maturing in the coming years and the
Board’s proposal to expand Fedwire
Funds Service and NSS operating hours,
with limits of one penny less than $10
billion per payment order and one
penny less than $10 trillion per
settlement file, respectively, will
increase the importance of accessing
liquidity on weekends and holidays.
The Board is seeking comment on the
potential demand for liquidity via the
discount window during expanded
hours for the Fedwire Funds Service
and NSS and whether its availability
during certain defined hours on
weekends and holidays would affect
industry views on expanded hours.
IV. Expanded Hours Impact on the
Payment System Risk Policy (PSR
Policy)
Part II of the PSR policy governs the
provision of intraday credit (also known
as daylight overdrafts) to institutions
with accounts at the Reserve Banks and
outlines the methods that Reserve Banks
use to control credit risk associated with
providing intraday credit.37 Intraday
credit supports the smooth functioning
of the payment system by supplying
temporary liquidity in order to cover
shortages in institutions’ account that
can result when the timing of payment
inflows and outflows are not balanced.
To be eligible for intraday credit, the
PSR policy requires that an institution
be ‘‘financially healthy’’ and have
regular access to the discount window.
Reserve Banks monitor financial and
supervisory developments to determine
an institution’s eligibility for intraday
credit and have several tools to control
credit risk to Reserve Banks, including
caps on intraday credit, incentivizing or
in some cases requiring collateral, and
the ability to monitor the institution’s
account balance in real time and reject
Fedwire Funds Service or NSS
transactions.
The PSR policy allows for access to
intraday credit up to 24x7x365.
Therefore, if the Federal Reserve
expands the operating hours of the
Fedwire Funds Service and NSS, those
institutions eligible to access intraday
credit and electing to use the services
would have access to intraday credit
during the expanded hours. Reserve
a core part of the FedNow Service at the time of
its launch.
37 The PSR policy is available at https://
www.federalreserve.gov/paymentsystems/psr_
about.htm.
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Banks would continue to use the same
general framework to monitor
institutions and control credit risk as
they use in the current operating
environment. Further, if the Federal
Reserve expands Fedwire Funds Service
and NSS hours, the Board would
continue to expect that institutions
manage their master accounts in
compliance with the Board’s Payment
System Risk Policy and other Federal
Reserve policies, including to avoid
overnight overdrafts.38
If the Board finalizes this proposal to
expand operating hours for the Fedwire
Funds Service and NSS, it would also
make any necessary updates to existing
policies as well, including the PSR
policy.
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V. Exclusion of the Fedwire Securities
Service
At this time, the Board is not
considering expanding operating hours
for the Fedwire Securities Service.39
The Board does not expect the proposed
expansion of Fedwire Funds Service
and NSS operating hours to create
significant changes in secured lending,
derivatives markets, or other market
activity that would necessitate
expanded operating hours for the
Fedwire Securities Service in the near
term. In part, this is because the
aggregate value of transfers during
current off-hours for the large-value
payment services will likely be
relatively low at the outset and thus
unlikely to result in increased demand
for securities transfers during those
hours. It is possible that expanded hours
for the Fedwire Funds Service and NSS
could influence markets in the longerterm, which could in turn increase
demand for the Fedwire Securities
Service during current off-hours.
The Board understands that
expanding operating hours for the
Fedwire Securities Service will require
greater study and coordination with
other FMUs, services, and institutions
that are typically open alongside the
38 To minimize Reserve Bank exposure to
overnight overdrafts, the Board charges a penalty
fee to discourage institutions from incurring
overnight overdrafts. See part III of the PSR policy.
An institution would incur an overnight overdraft
on each calendar day that its account balance is
negative at 7:00 p.m. ET, which is the close of the
business day. All institutions, regardless of the
Reserve Bank payment services that they use, will
incur an overnight overdraft penalty charge for each
calendar day, including weekends and holidays,
that an overnight overdraft is outstanding.
39 The Fedwire Securities Service is currently
open for transfers between participants from 8:30
a.m. ET until 3:30 p.m. ET Monday through Friday,
excluding holidays observed by the Reserve Banks.
In addition, Fedwire Securities Service participants
may reposition securities between their own
securities accounts from 8:30 a.m. ET until 7:00
p.m. ET on those same weekdays.
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service, such as securities pricing
services and repurchase agreement
service providers. The Board will
continue to monitor activity in
securities markets and seek feedback
from institutions to determine whether
to pursue in the future an expansion of
Fedwire Securities Service operating
hours.
VI. Competitive Impact Analysis
Board policy requires that the Board
conduct a competitive impact analysis
when considering changes to a service.
The policy requires the Board to first
determine whether there will be a direct
and material adverse effect on the
ability of other service providers to
compete effectively with the Federal
Reserve in providing similar services
and then, if such an adverse effect is
identified, to determine if that effect is
due to differing legal powers or the
Federal Reserve’s dominant market
position deriving from such legal
differences. Next, if such legal
differences exist, then the proposed
change would be further evaluated to
assess its benefits and the proposal
could be modified.40
40 See The Federal Reserve in the Payments
System (issued 1984; revised 1990), Federal Reserve
Regulatory Service 9–1558. The policy states, ‘‘The
Board will also conduct a competitive impact
analysis when considering an operational or legal
change, such as a change to a price or service, or
a change to Regulation J, if that change would have
a direct and material adverse effect on the ability
of other service providers to compete effectively
with the Federal Reserve in providing similar
services due to differing legal powers or constraints
or due to a dominant market position of the Federal
Reserve deriving from such legal differences. All
operational or legal changes having a substantial
effect on payments-system participants will be
subject to a competitive-impact analysis, even if
competitive effects are not apparent on the face of
the proposal. In conducting the competitive-impact
analysis, the Board would first determine whether
the proposal has a direct and material adverse effect
on the ability of other service providers to compete
effectively with the Federal Reserve in providing
similar services. Second, if such an adverse effect
on the ability to compete is identified, the Board
would then ascertain whether the adverse effect
was due to legal differences or due to a dominant
market position deriving from such legal
differences. Third, if it is determined that legal
differences or a dominant market position deriving
from such legal differences exist, then the proposed
change would be further evaluated to assess its
benefits, such as contributing to payments-system
efficiency or integrity or other Board objectives, and
to determine whether the proposal’s objectives
could be reasonably achieved with a lesser or no
adverse competitive impact. Fourth, the Board
would then either modify the proposal to lessen or
eliminate the adverse impact on competitors’ ability
to compete or determine that the payments-system
objectives may not be reasonably achieved if the
proposal were modified. If reasonable modifications
would not mitigate the adverse effect, the Board
would then determine whether the anticipated
benefits were significant enough to proceed with
the change even though it may adversely affect the
ability of other service providers to compete with
the Federal Reserve in that service.’’
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The Board believes that an expansion
of Fedwire Funds Service and NSS
operating hours would not have a direct
and material adverse effect on the
ability of other service providers to
compete effectively with the Federal
Reserve. In particular, the Federal
Reserve provides the only large-value
payment services in the United States
that allow settlement in central bank
money. The main private-sector
provider of large-value payment services
and a number of depository institutions
offered comments on a previous Federal
Register notice noting that they would
benefit from an expansion of Fedwire
Funds Service operating hours.41 These
organizations indicated that an
expansion of Fedwire Funds Service
operating hours would improve
efficiency and reduce risk in conducting
U.S. dollar payments and settlements
and would support private-sector
payments efforts in the United States.
For instance, expanding Fedwire Funds
Service operating hours could improve
liquidity risk management for payment
systems that rely on the Fedwire Funds
Service for prefunding (for example, a
private-sector instant payment service, a
large-value payment service, and a
foreign exchange settlement system).
Accordingly, an expansion of Fedwire
Funds Service and NSS operating hours
is not expected to adversely impact any
other service provider that competes
with Federal Reserve payment services
and could instead support their
efficiency and resilience.
VII. Request for Comment
The Board requests public comment
on the entire proposal, and specifically
on the following questions:
1. What are the primary benefits to the
banking industry, financial markets, and
broader economy from an expansion to
22x7x365 Fedwire Funds Service and
NSS operating hours? What are the
primary benefits to your institution?
2. What will be the primary sources
of demand for expanded hours for the
Fedwire Funds Service and NSS, from
22x5 to 22x7x365? What types of
transactions or institutions are most
likely to generate demand for the ability
to make payments during weekend
hours? What additional use cases could
be satisfied with the expansion to full
24x7x365 operating hours? Would they
represent sources of new and additional
volume that could flow over the
Fedwire Funds Service, a shift of
41 See comment letters submitted to the
‘‘Potential Federal Reserve Actions to Support
Interbank Settlement of Faster Payments, Request
for Comment,’’ 83 FR 57351.
E:\FR\FM\09MYN1.SGM
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Federal Register / Vol. 89, No. 91 / Thursday, May 9, 2024 / Notices
existing volume over the service, or
both?
3. How might expanded operating
hours of the Fedwire Funds Service and
NSS support private-sector innovation?
4. How does the existence of the
FedNow Service affect your views of the
benefits of expanded hours for the
Fedwire Funds Service and NSS? How
do you anticipate using these services in
the future?
5. Do you prefer an interim expansion
of operating hours before moving to
22x7x365? If so, what operating hours
for the Fedwire Funds Service and NSS
would be most useful for your
institution? What considerations factor
into your preference?
6. What is your preferred timeline for
a potential expansion of Fedwire Funds
Service and NSS operating hours to
22x7x365? What considerations factor
into your preference (for example,
demand, time to implement changes,
adjustments to staffing and internal
systems, other major industry
milestones or payment system
improvements)?
7. Are you interested in full 24x7x365
operating hours for Fedwire Funds
Service and NSS? If so, what is your
preferred time frame for such an
expansion of operating hours? What
considerations factor into your
preference?
8. What costs and risks would arise
for the banking industry, financial
markets, and broader economy from an
expansion to 22x7x365 of Fedwire
Funds Service and NSS operating
hours? What are the costs and risks to
your institution? What is the estimated
incremental cost on a percentage basis
to support 22x7x365 operating hours for
the Fedwire Funds Service and NSS?
What are the implications for
competitiveness?
9. What are the ways in which
benefits, costs, or risks of 22x7x365
Fedwire Funds Service and NSS could
vary for different types of market
participants (for example, for smaller
institutions, non-traditional
participants, or participants in
particular time zones)?
10. Are there infrastructure-related
market conditions or barriers (for
example, the availability of short-term
funding markets over the weekend) that
may prevent or reduce your firm’s
ability to fully achieve the potential
benefits of 22x7x365 operating hours for
the Fedwire Funds Service and NSS? If
so, what are they? What steps might the
industry and/or Federal Reserve take to
remove such barriers?
11. The Federal Reserve plans to
maintain the ability to opt out of
expanded hours. How would the
VerDate Sep<11>2014
17:17 May 08, 2024
Jkt 262001
optionality with respect to participating
in a 22x7x365 operating hours
environment of the Fedwire Funds
Service and NSS, as described in this
notice, benefit or challenge your
institution or the broader industry?
What steps might the Federal Reserve
take to augment potential benefits?
What steps might the Federal Reserve
take to mitigate potential costs and
risks?
12. How does your institution
anticipate managing liquidity needs in
an expanded hours environment? Is the
availability of discount window loan
originations on weekends and holidays
a prerequisite for expanded operating
hours for the Fedwire Funds Service
and NSS? If so, should the discount
window be available 22x7x365, or
alternatively, during certain defined
hours on weekends and holidays?
During what hours should discount
window loan originations be available?
13. What effects, if any, on funding
market activity should be taken into
account when considering the
expansion of operating hours for the
Fedwire Funds Service and NSS?
Would the expansion of operating hours
for the Fedwire Funds Service and NSS
affect existing wholesale funding
markets, including the repurchase
market? Do you expect wholesale
funding market activity to occur on
weekends and holidays?
14. Describe any other enhancements
or initiatives that the Reserve Banks
should consider in addition to, or in the
context of, expanded hours for the
Fedwire Funds Service and NSS. How
would such potential enhancements be
used in the context of expanded hours?
Are there any potential service
enhancements that should be prioritized
ahead of expanded hours?
15. Please describe any other
consideration that you believe should be
taken into account as the Board
contemplates expansion of operating
hours for the Fedwire Funds Service
and NSS.
By order of the Board of Governors of the
Federal Reserve System.
Ann E. Misback,
Secretary of the Board.
[FR Doc. 2024–10117 Filed 5–8–24; 8:45 am]
BILLING CODE 6210–01–P
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Frm 00043
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39621
GENERAL SERVICES
ADMINISTRATION
[Notice–IEB–2024–05; Docket No. 2024–
0002; Sequence No. 23]
Privacy Act of 1974; System of
Records
General Services
Administration (GSA).
ACTION: Notice of a modified system of
records.
AGENCY:
GSA proposes to modify a
system of records subject to the Privacy
Act of 1974, as amended. The system of
records was established to collect and
maintain records needed by the Office
of Inspections to carry out its
responsibilities pursuant to the
Inspector General Act of 1978, as
amended. The Office of Inspector
General (OIG) is statutorily directed to
provide leadership and coordination
and recommend policies for activities
relating to programs and operations of
the General Services Administration, to
promote economy, efficiency, and
effectiveness in the administration of
such programs and operations, and to
prevent and detect fraud, waste, and
abuse in such programs and operations.
Accordingly, the records in this system
are used in the course of inspections
and evaluations, and other special
projects as determined by the Inspector
General. The previously published
notice is being revised to add four new
routine uses and make changes to
update the System Of Records Notice
(SORN).
SUMMARY:
Submit comments on or before
June 10, 2024.
ADDRESSES: Comments may be
submitted to the Federal eRulemaking
Portal, https://www.regulations.gov.
Submit comments by searching for
GSA/ADM–25, Inspection Case Files.
FOR FURTHER INFORMATION CONTACT: Call
or email Richard Speidel, Chief Privacy
Officer at 202–969–5830 and
gsa.privacyact@gsa.gov.
SUPPLEMENTARY INFORMATION: GSA
proposes to modify a system of records
subject to the Privacy Act of 1974, 5
U.S.C. 552a. GSA intends to add four
new routine uses that are consistent
with the purposes of this system of
records.
GSA proposes adding a routine use
(routine use ‘‘o’’) and revising routine
use ‘‘p’’ to reflect the current Office of
Management and Budget (OMB) breach
response guidance in M–17–12,
Preparing for and Responding to a
Breach of Personally Identifiable
Information.
DATES:
E:\FR\FM\09MYN1.SGM
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]]>Agencies
[Federal Register Volume 89, Number 91 (Thursday, May 9, 2024)]
[Notices]
[Pages 39613-39621]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-10117]
-----------------------------------------------------------------------
FEDERAL RESERVE SYSTEM
[Docket No. OP-1831]
Expansion of Fedwire[supreg] Funds Service and National
Settlement Service Operating Hours
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Request for comment.
-----------------------------------------------------------------------
SUMMARY: The Board of Governors of the Federal Reserve System (Board)
is seeking input on a proposal to expand the operating hours of the
Fedwire[supreg] Funds Service and the National Settlement Service
(NSS). The Board proposes to expand the operating hours of the Fedwire
Funds Service to 22 hours per day, 7 days per week, every day of the
year (22x7x365) and to correspondingly expand the operating hours of
NSS, with NSS closing 30 minutes earlier than the Fedwire Funds
Service. At this time, the Board is not considering expanding operating
hours for the Fedwire Securities Service. The Board requests comments
on the potential benefits, risks, and implementation considerations of
the proposal.
DATES: Comments on the proposed actions must be received on or before
July 8, 2024.
ADDRESSES: You may submit comments, identified by Docket No. OP-1831,
by any of the following methods:
Agency website: https://www.federalreserve.gov. Follow the
instructions for submitting comments at https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
Email: [email protected]. Include docket
number in the subject line of the message.
FAX: (202) 452-3819 or (202) 452-3102.
Mail: Ann Misback, Secretary, Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue, NW,
Washington, DC 20551.
All public comments will be made available on the Board's website
at https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as
submitted, unless modified for technical reasons or to remove
personally identifiable information at the
[[Page 39614]]
commenter's request. Accordingly, comments will not be edited to remove
any identifying or contact information. Public comments may also be
viewed electronically or in paper in Room 146, 1709 New York Avenue NW,
Washington, DC 20006, between 9:00 a.m. and 5:00 p.m. eastern time (ET)
on weekdays.
FOR FURTHER INFORMATION CONTACT: Mark Magro, Manager, Division of
Reserve Bank Operations and Payment Systems (202-452-3944); Ann Sun,
Lead Financial Institution Policy Analyst, Division of Reserve Bank
Operations and Payment Systems (202-912-7938); or Gavin Smith, Senior
Counsel, Legal Division (202 452-3474); or Corinne Milliken Van Ness,
Senior Counsel, Legal Division (202-452-2421), Board of Governors of
the Federal Reserve System. For users of Telecommunications Device for
the Deaf (TDD), contact (202-263-4869.)
SUPPLEMENTARY INFORMATION:
I. Background
The Federal Reserve has a long-standing policy objective to foster
a safe and efficient U.S. payment system. The Federal Reserve advances
its objectives for the payment system through, among other things, the
Federal Reserve Banks' (Reserve Banks) operation of two large-value
payment services: the Fedwire[supreg] Funds Service and NSS.\1\ The
Fedwire Funds Service is a real-time gross settlement (RTGS) service
that allows participating financial institutions (participants) to send
and receive individual electronic funds transfers up to one penny less
than $10 billion in value that are immediate to participants, final,
and irrevocable. NSS is a multilateral settlement service that allows
for immediate, final, and irrevocable settlement of obligations that
arise from private-sector clearing arrangements, such as check
clearinghouses, a private-sector ACH network, and securities settlement
systems.\2\ Together, these services, alongside a large-value payment
service operated by the private sector, provide the backbone for the
nation's payment system and thereby support a significant amount of
economic activity in the United States, including large-value domestic
financial market transactions, the U.S. dollar leg of many cross-border
transactions, and private-sector payment clearing arrangements.\3\
---------------------------------------------------------------------------
\1\ ``Fedwire'' is a registered service mark of the Federal
Reserve Banks.
\2\ Settlement files submitted to NSS can be for an amount up to
one penny less than $10 trillion; each entry in a settlement file
can be for an amount up to one penny less than $100 billion.
\3\ The private-sector large-value payment service is
CHIPS[supreg], which is owned and operated by The Clearing House
Payments Company L.L.C. (TCH). ``CHIPS'' is a registered service
mark of TCH. While the Fedwire Funds Service supports large-value
payments (often referred to as ``wholesale'' payments), not all
payments sent through the Fedwire Funds Service would be considered
large value. For example, while the average value of a payment in
2023 on the Fedwire Funds Service was $5.625 million, the median
value was approximately $19,000. In general, smaller-value, general
purpose payments sent by consumers and businesses are made using
services designed for smaller value (``retail'') transactions such
as the Reserve Banks' check clearing and automated clearinghouse
(ACH) services, and the FedNow[supreg] Service for instant payments.
``FedNow'' is a registered service mark of the Federal Reserve
Banks.
---------------------------------------------------------------------------
The Federal Reserve has consistently improved its payment services
to meet the evolving needs of the U.S. economy. As technological
advancements and globalization of commerce continue to drive change in
the large-value payment landscape, the Board believes that expanding
the availability of the Fedwire Funds Service and NSS would enhance the
safety and efficiency of the U.S. payment system by extending the hours
in which settlement in risk-free central bank money can occur.\4\ Thus,
the Board is proposing to expand the operating hours of the Fedwire
Funds Service to 22 hours per day, 7 days per week, every day of the
year and to expand the operating hours of NSS correspondingly, with NSS
closing 30 minutes earlier than the Fedwire Funds Service.\5\ The Board
recognizes that a significant expansion in operations for large-value
payments in the short term might pose burdensome technical and
operational changes at a time when the industry will also be adjusting
to the new ISO[supreg] 20022 message format for large-value payments
and instant payment services.\6\ Therefore, the Board proposes that the
expansion to 22x7x365 would be implemented no sooner than two years
after the migration of the Fedwire Funds Service to the ISO 20022
standard, scheduled for March 2025. The final implementation timeline
for 22x7x365 will be determined based on input from this request for
comment, among other relevant considerations.
---------------------------------------------------------------------------
\4\ Central bank money is a liability of the central bank that
can be used for settlement purposes and is considered free of credit
and liquidity risks. Central bank money has traditionally taken two
forms: cash and reserve balances held by eligible financial
institutions at the central bank.
\5\ Fedwire Funds Service is currently open from 9:00 p.m. ET of
the preceding calendar day to 7:00 p.m. ET, five days per week,
Monday through Friday excluding holidays observed by the Reserve
Banks. NSS is open from 9:00 p.m. to 6:30 p.m. ET, five days per
week, Monday through Friday excluding holidays observed by the
Reserve Banks. The Federal Reserve has historically provided at
least 30 minutes between the close of NSS and the close of the
Fedwire Funds Service, recognizing that the Fedwire Funds Service is
the primary alternative for orderly and efficient settlement of
bilateral obligations in case a settlement arrangement is unable to
complete its multilateral settlement through NSS.
\6\ ``ISO'' is a registered service mark of the International
Organization for Standardization.
For example, the FedNow Service, which was launched in July
2023, is an instant payments service. Instant payments allow
consumers and businesses to send and receive funds from their
accounts at banks and credit unions in real time, any time of day,
any day of the year, with immediate funds availability to receivers.
---------------------------------------------------------------------------
The Board is seeking comment on the potential benefits, risks,
costs, and other considerations of expanded hours for the Fedwire Funds
Service and NSS, as described in Section II. The Board is also
requesting comment on implementation considerations, as described in
Section III. As noted, the Board is not considering expanding operating
hours for the Fedwire Securities Service at this time.
II. Proposed Action
A. Proposal
The Board proposes to expand the operating hours of Fedwire Funds
Service to 22x7x365 and to correspondingly expand the operating hours
of NSS. It is anticipated that if the proposal is adopted NSS would
continue to close at 6:30 p.m. ET, 30 minutes prior to the close of
Fedwire Funds Service at 7:00 p.m. ET. Both services will maintain
their current opening time of 9:00 p.m. ET of the preceding calendar
day for the proposed weekend operating days. Table 1 summarizes the
proposed changes to operating hours for the Fedwire Funds Service and
NSS.
[[Page 39615]]
Table 1--Proposed Changes to Operating Hours for the Fedwire Funds
Service and NSS
------------------------------------------------------------------------
Current operating Proposed operating
hours hours
------------------------------------------------------------------------
Fedwire Funds Service \7\....... 9:00 p.m. ET-7:00 9:00 p.m. ET-7:00
p.m. ET, Monday- p.m. ET, every
Friday, excluding day.
holidays.
NSS \8\......................... 9:00 p.m. ET-6:30 9:00 p.m. ET-6:30
p.m. ET, Monday- p.m. ET, every
Friday, excluding day.
holidays.
------------------------------------------------------------------------
B. Rationale for Proposal
---------------------------------------------------------------------------
\7\ The Fedwire Funds Service begins processing online payment
orders beginning at 9:00 p.m. ET on the preceding calendar day. The
Fedwire Funds Service begins processing online nonvalue messages at
8:35 p.m. ET on the preceding calendar day. The cutoff time for
special account messages is 5:00 p.m. ET, the cutoff time for
customer messages is 6:45 p.m. ET, and the cutoff time for bank
messages is 7:00 p.m. ET. The Fedwire Funds Service closes at 7:00
p.m. ET.
\8\ The file processing window for NSS begins at 9:00 p.m. ET on
the preceding calendar day and closes at 6:30 p.m. ET.
---------------------------------------------------------------------------
The Federal Reserve has expanded operating hours for the Fedwire
Funds Service and NSS over time in response to changing market
conditions and industry demand. Most recently, the Board received
public comments on expanded hours for the Fedwire Funds Service and NSS
in response to Federal Register notices related to the development of
the FedNow Service.\9\ Certain commenters indicated that expanded hours
would provide a means for participants in retail instant payment
services to manage liquidity needs related to instant payment activity
on a round-the-clock basis.\10\ To address this industry input and meet
FedNow Service implementation timelines, the Board determined that
liquidity management transfer functionality should be provided within
the FedNow Service at the time of its launch in July 2023. However, the
Board indicated it would continue to explore expanded hours for the
Fedwire Funds Service and NSS, given the broad benefits that expanded
hours could provide to financial markets and the payment systems and
market infrastructures that support those markets.\11\ Subsequently, in
a 2022 notice regarding the implementation of the ISO 20022 format for
the Fedwire Funds Service, the Board indicated that the Reserve Banks
would conduct engagement with industry stakeholders as part of its
analysis of expanded operating hours for the Fedwire Funds Service and
NSS.\12\
---------------------------------------------------------------------------
\9\ See 83 FR 57351 (Nov. 15, 2018) and 84 FR 39297 (Aug. 9,
2019).
\10\ The 24x7x365 nature of instant payments requires banks to
have sufficient liquidity to settle instant payments at any time,
any day of the week. As a result, banks need a method to fund
accounts used to settle instant payment transactions during hours
when large-value payment services are not currently open. See 83 FR
57351 (Nov. 15, 2018).
\11\ See 84 FR 39297 (Aug. 9, 2019). The Board indicated that
further analysis was needed to evaluate fully the relevant
operational, risk, and policy considerations of expanded Fedwire
Funds Service and NSS operating hours.
\12\ See 87 FR 64217 (Oct. 24, 2022).
---------------------------------------------------------------------------
The Reserve Banks conducted this engagement through outreach
sessions with a broad range of stakeholders, including large global
financial institutions, small and mid-sized banks in different regions,
and nonbanks and service providers, to better understand the needs and
concerns of industry. While these industry outreach sessions were
informal and not as comprehensive as an information collection
conducted through the broader Federal Register notice process,
stakeholders raised several initial themes. Overall, industry
stakeholders that are active in global payments markets expressed
strong support for an expansion of Fedwire Funds Service and NSS
operating hours up to 24x7x365, stating that expanded hours would
enhance the ability of cross-border payments and international commerce
to be conducted in U.S. dollars and help preserve the status of the
U.S. dollar as the preferred currency for global settlements.\13\ In
addition, industry stakeholders noted that while 24x7x365 operating
hours would be an ideal state in the longer term, other payment system
improvement initiatives should be prioritized ahead of an expansion,
including implementation of the new FedNow Service for instant payments
and ISO 20022 migration of the Fedwire Funds Service. In general, these
stakeholders noted that shifting large-value payment operations to full
24x7x365, with no downtime to accommodate system changes and other
operational activities, would be challenging to implement in the
shorter term.\14\
---------------------------------------------------------------------------
\13\ Certain industry stakeholders have also expressed these
views via the industry-led Payments Risk Committee. See Payments
Risk Committee: Fedwire Expanded Hours Whitepaper, available at
https://www.newyorkfed.org/medialibrary/microsites/prc/files/2021/prc-fedwire-expanded-hours-considerations-white-paper.
\14\ In outreach sessions, industry stakeholders indicated that
the elimination of downtime between the close and open of the
Fedwire Funds Service and NSS could pose a more significant
challenge than expanding operating hours into the weekend.
---------------------------------------------------------------------------
Smaller banks provided differing perspectives on the benefits of
Fedwire Funds Service and NSS expanded hours, with some institutions
expressing a lack of pressing need and business case compared with the
level of investment required to operate on a 24x7x365 basis. Other
institutions saw value in expanded hours to provide increased
flexibility in operating hours among West Coast banks or to maximize
time available to recover from an operational issue on the same
business day. Overall, smaller banks noted the importance of
maintaining optionality to participate in Fedwire Funds Service and NSS
operating hours such that banks are not required to operate or
otherwise maintain staff during expanded hours.
Concurrent with the Federal Reserve's consideration of expanded
operating hours for the Fedwire Funds Service and NSS, the
international community has been advancing initiatives to improve the
cost, speed, accessibility, and transparency of cross-border payments.
In 2020, the G20 leaders endorsed the Roadmap for Enhancing Cross-
Border Payments, which set out a series of ``building blocks'' to
address the frictions underlying the challenges associated with cross-
border payments.\15\ Building Block 12 focused on extending and
aligning the operating hours of existing payment infrastructures and
arrangements across jurisdictions, particularly RTGS systems. Cross-
jurisdiction alignment could speed up cross-border payments, improve
liquidity management, and reduce settlement risk, among other
benefits.\16\ Global alignment of large-value RTGS system operating
hours has been a driver of past expansions for the
[[Page 39616]]
Fedwire Funds Service because of the risk-reducing benefits.\17\ Though
the gaps in operating hours between the Fedwire Funds Service and other
RTGS systems have decreased over time, gaps still remain, in particular
during weekend hours. Expanding the operating hours of the Fedwire
Funds Service and NSS into the weekend would be consistent with the
broader G20 agenda and would be consistent with the actions of other
central banks that are considering or have already expanded operating
hours for their large-value payment services.\18\
---------------------------------------------------------------------------
\15\ See Financial Stability Board: Enhancing Cross-border
Payments: Stage 3 Roadmap available at https://www.fsb.org/wp-content/uploads/P131020-1.pdf. See also Financial Stability Board:
Enhancing Cross-border Payments: Stage 1 report to the G20 available
at https://www.fsb.org/wp-content/uploads/P090420-1.pdf which
discusses key frictions in cross-border payments.
\16\ In February 2023, the Financial Stability Board published
an updated and prioritized Roadmap centered on three priority
themes, which includes the extension and alignment of the operating
hours of key payment systems. Available at https://www.fsb.org/2023/02/g20-roadmap-for-enhancing-cross-border-payments-priority-actions-for-achieving-the-g20-targets/.
\17\ See 59 FR 8981 (Feb. 24, 1994). Foreign exchange settlement
risk is also commonly known as ``Herstatt risk.'' The name comes
from an episode in which a German bank, the Herstatt Bank, was
closed by its supervisor after the bank had received deutsche mark
payments for foreign exchange transactions, but before it provided
U.S. dollars to its counterparties in those transactions. Overlap in
central bank services operating hours can mitigate foreign exchange
settlement risk by providing an opportunity to shorten the time
between the settlement of both legs of a foreign exchange
transaction, including enabling simultaneous settlement.
\18\ A number of central banks, such as those in Mexico and
South Africa, have operated 24x7x365 large-value payment services
for some time. Other central banks, including those in India and
Switzerland, operate at near 24x7x365. In the United Kingdom, the
Bank of England has announced that its next-generation large-value
payment service will be capable of near 24x7x365 operations by 2024.
The Bank of England will consider extending the operating hours of
its large-value payment service in line with the industry's demand.
See the Bank of England's Roadmap for Real-Time Gross Settlement
service beyond 2024, available at https://www.bankofengland.co.uk/paper/2022/roadmap-for-real-time-gross-settlement-service-beyond-2024.
---------------------------------------------------------------------------
Also, the Federal Reserve recognizes that payment infrastructure
needs to evolve to support commerce that is increasingly being
conducted outside traditional business hours. Expanded hours for the
Fedwire Funds Service and NSS alongside the FedNow Service would bring
the benefits of near round-the-clock payments for large-value,
wholesale payments, such as multi-million dollar business invoices,
real estate transactions, and insurance payouts, ensuring that the
evolution of commerce is supported across retail and wholesale
infrastructures.\19\
---------------------------------------------------------------------------
\19\ The FedNow Service supports real-time, immediate end-to-end
instant payments between end user senders and receivers, with
immediate funds availability to receivers. The Fedwire Funds Service
supports large-value payments that are either between banks only or
intended for end-user receivers, with no immediate funds
availability requirement for payments to end user receivers.
---------------------------------------------------------------------------
C. Analysis of Options for Expanded Hours
While 24x7x365 operating hours for the Fedwire Funds Service and
NSS remains a possibility in the longer term, the Board recognizes that
the shift to full round-the-clock operations, with no downtime in
operations to complete end-of-day processing or implement system
upgrades for large-value payment services, may pose challenges in the
shorter term. The Board considered multiple alternatives to the
proposed 22x7x365, including the addition of a short weekend window of
operating hours on Saturday and/or Sunday; 22 hours per day, 6 days per
week; 24 hours per day, 5 days per week; and 24x7x365 operating hours.
Overall, the Board believes that expanding to 22x7x365 could achieve
many of the benefits of 24x7x365 hours while giving the industry and
Reserve Banks time to adjust technology and operations for potential
future expansions of operating hours of the Fedwire Funds Service and
NSS. Participation in expanded hours would be voluntary. The Board is
proposing to extend the current 22x5 Fedwire Funds Service and NSS
operating hours to 22x7x365 no sooner than two years after the
implementation of the ISO 20022 message format for the Fedwire Funds
Service, scheduled for March 2025. (See Section III for a further
discussion on implementation considerations).
A key reason for considering a 22x7x365 expansion of Fedwire Funds
Service and NSS operating hours is a faster and less costly
implementation than a full 24x7x365 expansion, which would help achieve
the Board's safety and efficiency policy objectives for large-value
payments in the nearer term. In addition, industry feedback to date
underscored that investment in technical infrastructure modernization
for participants to accommodate round-the-clock availability would pose
challenges that could be reduced by a shorter move to 22x7x365
operating hours.
An expansion of Fedwire Funds Service and NSS operating hours to
22x7x365 could also reduce costs and risks to the industry and the
Federal Reserve relative to an expansion to 24x7x365 operations. For
example, an expansion to 22x7x365 operating hours could allow
participants to gradually adapt to seven-day operations for wholesale
payments, which could reduce operational risks. Additionally, lessons
learned from the expansion could be applied to the potential future
development of full 24x7x365 operations for the Fedwire Funds Service
and NSS.
D. Benefits, Costs, Risks, and Other Considerations
1. Benefits
Expanding current Fedwire Funds Service and NSS operating hours
from five to seven days per week, each day of the year, could improve
the safety and efficiency of both domestic and global large-value U.S.
dollar payments. Domestically, expanded hours could allow systemically
important financial market utilities (FMUs) (that is, a large-value
payment service, securities and derivatives clearinghouses, and
securities settlement services) and retail payment arrangements (that
is, check clearinghouses, an ACH network, and an instant payment
service) that leverage the Fedwire Funds Service and/or NSS to have
broader options for settlement of time-critical payments.\20\
Settlement outside of traditional windows could reduce credit risk in
certain FMUs and retail payment arrangements by narrowing the time gap
between the creation of payment obligations and the discharge of those
obligations in final funds, thereby reducing the potential for
spillover effects in the financial system from settlement disruptions.
To the extent that FMUs and retail payment arrangements operate outside
of traditional windows, these firms could have the option to receive or
send funds in central bank money seven days per week, potentially
improving their operational efficiency or reducing the build-up of
credit risk on days when Fedwire Funds Service and NSS are not
currently operating. Expanded hours might also spur new or enhanced
private-sector payment solutions that leverage the Fedwire Funds
Service and/or NSS, or enable financial market trading and lending
activity that previously could not be supported during weekend
hours.\21\ Finally, as noted above, expanded hours for the Fedwire
Funds Service and NSS alongside the FedNow Service would bring the
benefits of near round-the-clock payments for large-value consumer and
business payments, such
[[Page 39617]]
as multi-million dollar business invoices, real estate transactions,
and insurance payouts.
---------------------------------------------------------------------------
\20\ Currently, the FedNow Service provides liquidity management
transfer capability for FedNow participants and participants in a
private-sector instant payment service to transfer funds to support
instant payment liquidity needs during certain hours including when
the Fedwire Funds Service is closed. While the hours of liquidity
management transfers in FedNow might be adjusted if Fedwire Funds
Service hours are expanded, transfers would remain available during
the two-hour Fedwire Funds Service closure.
\21\ See the Committee on Payments and Market Infrastructures
final report ``Extending and aligning operating hours for cross-
border payments,'' available at https://www.bis.org/cpmi/publ/d203.pdf.
---------------------------------------------------------------------------
Expanded hours would also facilitate greater overlap and reduced
gaps between the operating hours of the Fedwire Funds Service/NSS and
key large-value payment services in other jurisdictions. This overlap
and reduction in gaps would support more efficient cross-border
payments through faster settlement and improved liquidity management.
For example, some industry feedback highlighted the value of Sunday
operating hours to support payment flows in the Middle East and North
Africa region. Increased overlap in operating hours could provide more
opportunities to settle cross-currency payments simultaneously via new
or existing payment-versus-payment mechanisms and arrangements, thereby
reducing settlement risk and potentially allowing for greater
transparency in global foreign exchange (FX) markets.\22\ Increased
overlap and reduced gaps in operating hours could also speed up
settlement of large-value corporate trade payments made through
correspondent arrangements by reducing or eliminating the time gap
between the U.S. leg of a payment and the leg of the payment in a
foreign jurisdiction. Expanded operating hours would be consistent with
the actions of other central banks, some of which have already
undertaken an expansion of operating hours for their large-value
payment services by targeting near or full 24x7x365 operations or by
considering or positioning themselves for future expansion.\23\
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\22\ As explored in the ``Committee on Payments and Market
Infrastructures final report: Extending and aligning operating hours
for cross-border payments'', expansion of large-value payment system
operating hours would also add to the current global settlement
window (i.e., the time period during which the largest number of
large-value RTGS systems are simultaneously operating).
\23\ See footnote 20 regarding Mexico, South Africa, India,
Switzerland and the United Kingdom, for example.
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2. Costs and Risks
The potential benefits of expanding Fedwire Funds Service and NSS
operating hours to 22x7x365 need to be weighed against potential costs
and risks. Expanded hours would require operational and technical
changes that would impose costs on the Reserve Banks and on
institutions that participate in the Fedwire Funds Service and NSS. The
magnitude of costs would vary by institution. Some institutions have
cited the potential for significant costs related to upgrades of legacy
infrastructure, as well as increased staffing, to support expanded
hours. Others have indicated that costs would be more incremental
because their institutions could build on existing infrastructure that
they use to support 24x7x365 instant payments. The Board is seeking
comment on the cost burden to industry stakeholders of moving to
22x7x365 operations, as well as costs related to potential 24x7x365
operations in the future. Reserve Bank costs are discussed in Section
3.a.
In addition to the potential financial impact, extending current
operating hours to every day of the year could generate additional
risks to participants, the Reserve Banks, and the U.S. financial system
more broadly.\24\ For example, transferring funds to meet potential
rapid deposit outflows during weekends and holidays could exacerbate
liquidity issues for a bank in crisis. This risk could have financial
stability implications if large deposit outflows experienced by a
single participant created contagion to other participants.
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\24\ It is anticipated that not all participants may choose to
participate in the expanded weekend hours at launch. Please see
section III.B. for a discussion of optional participation in a
22x7x365 operating environment of the Fedwire Funds Service and NSS.
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The two-hour window between 7:00 p.m. and 9:00 p.m. ET on Saturday
and Sunday under the Board's proposal to expanded hours would serve as
a pause in transferring funds to meet deposit outflows.\25\
Participants experiencing outflows could potentially utilize this time
period to implement liquidity and risk management measures to address
outflows. The Board is seeking comments on the likelihood that
expanding Fedwire Funds Service and NSS hours would exacerbate
liquidity risks arising from deposit outflows, as well as any
additional risk controls that would be needed during expanded hours.
Relatedly, the Board recognizes that participants' ability to access
funding during expanded weekend and holiday hours will be important and
seeks comments on the potential benefits and costs of extending
discount window operations.
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\25\ See Section II.A. Proposal for the proposed operating hours
on Saturday and Sunday.
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Expanded operating hours could also potentially increase
operational and financial risks to participants and the Reserve Banks
by expanding the time during which cyber-attacks or other operational
disruptions could take place. While these risks are not new to the
financial sector, the Board is seeking to understand the industry's
readiness to manage these types of risks on a near round-the-clock
basis.
3. Other Policy Considerations
The proposed expansion of operating hours to 22x7x365 would
constitute major enhancements to the Fedwire Funds Service and NSS.
Under longstanding Board policy, any potential new payment service or
major enhancements to an existing service must meet the following
criteria: (a) the Federal Reserve must expect to achieve full cost
recovery of costs over the long run, (b) the Federal Reserve must
expect that its providing the service will yield a clear public
benefit, and (c) the service should be one that other providers alone
cannot be expected to provide with reasonable effectiveness, scope, and
equity.\26\ An analysis of these criteria is set forth below.
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\26\ See Board of Governors of the Federal Reserve System, ``The
Federal Reserve in the Payments System,'' (issued 1984; revised
1990). Available at Federal Reserve Board--Policies: The Federal
Reserve in the Payments System.
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a. Cost Recovery
Section 11A of the Federal Reserve Act, as added by the Monetary
Control Act of 1980, requires that fees for Federal Reserve Bank
payment services be set in accordance with the principle that, over the
long run, those fees recover the costs of providing the services.\27\
In addition, Board policy specifies that each major service category
offered by the Federal Reserve must separately satisfy the cost
recovery objective of the Monetary Control Act: in the long run,
aggregate revenues should match costs.\28\
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\27\ Specifically, section 11A provides that, ``[o]ver the long
run, fees shall be established on the basis of all direct and
indirect costs actually incurred in providing the Federal Reserve
services priced, including interest on items credited prior to
actual collection, overhead, and an allocation of imputed costs
which takes into account the taxes that would have been paid and the
return on capital that would have been provided had the services
been furnished by a private business firm, except that the pricing
principles shall give due regard to competitive factors and the
provision of an adequate level of such services nationwide.'' 12
U.S.C. 248a.
\28\ See ``The Federal Reserve in the Payments System,'' supra
note 28.
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Initial analysis suggests that over the long run, the Reserve Banks
would be able to recover the costs associated with the proposed
22x7x365 expanded operating hours. Discussions with industry
stakeholders about the need for expanded hours to support cross-border
activity, innovative use cases, and additional settlement opportunities
for systemically important and large-value transactions support the
assumption that, over time, expanding Fedwire Funds Service and NSS
hours would generate increases in volume and revenue. The Reserve Banks
completed a cost estimate analysis that included
[[Page 39618]]
system changes and additional staffing during the weekends. The Reserve
Banks expect these costs would be offset by increased revenue, subject
to various factors such as the competitive and/or economic environment
in future years, new product enhancement opportunities, and potential
Fedwire Funds Service and NSS pricing changes. In addition, Reserve
Bank operational costs may be lower for expanded hours due to
efficiency gains that could arise from leveraging operations and
customer support staff that are already in place for the FedNow
Service. The Board will conduct a full analysis of long-term cost
recovery impacts to the Fedwire Funds Service and NSS based on input
received on the proposal.
b. Public Benefit
The Board believes the expansion of operating hours for the Fedwire
Funds Service and NSS could have several important safety and
efficiency benefits. From a domestic perspective, expanded hours could
reduce credit risk and improve safety in the financial system by
narrowing the time gap between the creation of payment obligations and
the discharge of those obligations in final funds, improve operational
efficiency in FMUs and retail payment arrangements, and spur
innovations in large-value payments such as weekend interbank lending
markets. From an international perspective, expanded hours would
increase overlap and reduce gaps between the operating hours of the
Fedwire Funds Service and NSS and other key large-value real time gross
settlement systems internationally and would support greater efficiency
in cross-border payments. Please see previous section II.D.1. for a
full discussion of potential benefits.
c. Other Providers
Board policy also requires that for any new service or major
service change, the service should be one that other providers alone
cannot be expected to provide with reasonable effectiveness, scope, and
equity.\29\ Today, to provide final settlement, the private-sector
large-value payment service relies on the Fedwire Funds Service to
support its settlement process. Thus, this service would likely not be
able to effectively expand its operating hours without a similar
expansion in the operating hours of the Fedwire Funds Service. In terms
of scope and equity, today the Fedwire Funds Service and NSS are
broadly accessible to eligible financial institutions across the
country on equal terms.\30\ Thus, the Federal Reserve could offer
financial institutions similarly broad access to expanded operating
hours.
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\29\ See ``The Federal Reserve in the Payments System,'' supra
note 28.
\30\ Depository institutions may access these services either
directly (settling transactions in their Federal Reserve account) or
indirectly (through another depository institution that acts as a
correspondent bank for the institution).
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III. Implementation Considerations
This section describes (A) the potential timeline for an expansion
of the Fedwire Funds Service and NSS operating hours from 22x5 to
22x7x365, and considerations that will inform the final timeline, (B)
considerations for optional participation in a 22x7x365 operating
environment, (C) other potential enhancements to the Fedwire Funds
Service and NSS, and (D) the availability of the discount window.
A. Timeline for Proposal
The implementation timeline for the expansion of operating hours to
22x7x365 and potentially to 24x7x365 in the future will depend on many
factors, including the operational and technical challenges to the
Federal Reserve and participants of implementing and adopting potential
operating hours expansions, industry preferences related to timing,
demand for 22x7x365 and 24x7x365 operating hours among participants,
and interdependencies with other developments in the payments
landscape. Should the Board decide to proceed with the proposed
expansion to 22x7x365, it will consider these and other factors before
determining the final timeline.
Based on initial industry outreach conducted after the 2022 Federal
Register notice for the implementation of the ISO 20022 standard for
the Fedwire Funds Service, there is broad consensus from stakeholders
that expanding Fedwire Funds Service and NSS operating hours should not
occur until after the implementation of the ISO 20022 standard for the
Fedwire Funds Service scheduled for March 2025. Initial analysis
suggests an expansion of Fedwire Funds Service and NSS operating hours
to 22x7x365 could potentially be achieved no sooner than two years
after the implementation of the ISO 20022 message format for the
Fedwire Funds Service. As a result, if public comments in response to
this notice indicate support for the proposed expansion to 22x7x365
operating hours for the Fedwire Funds Service and NSS, the Federal
Reserve would expand operating hours to 22x7x365 no sooner than 2027.
In determining an implementation timeline for 22x7x365 operating
hours, the Board will consider feedback received in response to this
notice, including whether an interim step short of 22x7x365 would be
desirable. Key feedback areas will include the extent to which
participants would benefit from weekend operating hours for the Fedwire
Funds Service and NSS being made available as soon as practicable, and
the extent to which participants may need to adjust their staffing,
internal systems, and processes to take advantage of weekend operating
hours. Furthermore, the eventual timeline will also reflect
interdependencies between the development and adoption of expanded
operating hours for the Fedwire Funds Service and NSS and other
initiatives.
An expansion to full 24x7x365 operating hours for the Fedwire Funds
Service and NSS is a possibility in the future. The Board is interested
in collecting feedback from industry on constraints, preferences, and
demand related to full 24x7x365 operating hours. If the Board does
propose to expand operating hours further to 24x7x365, it would seek
public comment in a separate proposal.
B. Considerations for Optional Participation in a 22x7x365 Operating
Environment of the Fedwire Funds Service and NSS
In alignment with current service terms and in response to industry
feedback from smaller institutions, participation in proposed 22x7x365
operating hours for the Fedwire Funds Service and NSS would be
optional. Currently, a Fedwire Funds Service participant, for example,
may decide not to be open to process payment orders sent to it over the
Fedwire Funds Service during overnight hours. Similarly, an institution
that participates in a private-sector clearing arrangement for which
transactions are settled through NSS may be allowed under the rules of
the clearing arrangement (i) not to send or receive transactions using
the clearing arrangement during overnight hours (and thus not trigger
any settlement obligations) or (ii) to instruct the agent for the NSS
settlement arrangement not to include any debit or credit entries for
the institution or other institutions for which it settles in any
settlement files submitted to NSS during that time.\31\
[[Page 39619]]
The Board believes the optionality should be maintained during any
expanded hours.
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\31\ Only institutions that are settlers in an NSS settlement
arrangement may settle debit or credit entries in an NSS settlement
file. Settlers may settle debit or credit entries for their own
account or on behalf of other institutions that participate in the
private-sector clearing arrangement. Settlers must have their own
master account.
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If a participant chooses not to operate during some or all
potential weekend and holiday operating hours of the Fedwire Funds
Service, the participant might continue to receive payment orders
through the Fedwire Funds Service, just as some participants today
receive payment orders while they are not operating during overnight
hours. If a participant chooses not to operate during the weekend or on
a holiday, it would not be required to take action on any payment
orders sent to it during those days if they are not funds-transfer
business days for the participant. Alternatively, if a participant
wishes to operate only during part of the weekend and holiday operating
hours, it may set cutoff or closing times for its funds-transfer
business day, after which it would not be required to take action on a
payment order sent to it until its next funds-transfer business
day.\32\ For NSS, if a participant does not settle transactions through
the NSS settlement arrangement during weekend or holiday operating
hours, it may be unable to send or receive transactions through the
private-sector clearing arrangement during that time depending on the
rules of the clearing arrangement.
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\32\ See 12 CFR part 210, app. A, Sec. 4A-106, 4A-302(a)(1),
4A-404.
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Although optionality with respect to participation in a 22x7x365
operating environment may allow some participants to avoid certain
costs associated with an expansion in operating hours of the Fedwire
Funds Service and NSS, it may also present certain challenges. For
example, a participant that chooses not to operate (that is, send
payments), but continues to receive payments in its master account
during certain Fedwire Funds Service operating hours, could become a
source of trapped liquidity, which could lead to the participant's
counterparties implementing liquidity management measures such as
restricting payments to the participant while they are offline.\33\
Further, such optionality could, over time, hinder broad adoption of
expanded hours across the participant base, which could limit the full
benefits of 22x7x365 Fedwire Funds Service and NSS. Notwithstanding
these considerations, the Board is not contemplating a change to the
participation model for Fedwire Funds Service and NSS.
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\33\ However, participants face this same challenge in the
current operating environment of the Fedwire Funds Service and NSS,
which provides similar optionality in participation.
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C. Potential Other Enhancements to Fedwire Funds Service and NSS
While this notice focuses on the proposal to expand operating hours
to 22x7x365, the Board recognizes there may be other enhancements to
the Fedwire Funds Service and NSS that could be considered in the
context of or in addition to expanded hours. For example, the
possibility of a new participant directory feature that potentially
provides a listing of participants open for transactions and at which
times has been raised by participants. Other potential service
enhancements center around further access to information, such as the
improved ability for institutions to track payments from sender to
beneficiary, and application programming interfaces (APIs) to access
payments-related data. In addition, some institutions have raised the
possibility of improved fraud controls or screening capabilities.
Finally, a significant undertaking could entail the addition of a
liquidity savings mechanism for the Fedwire Funds Service.\34\ The
Board is seeking to understand such functionality considerations and
others, including the priority institutions place on their development,
particularly in relation to expanding operating hours.
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\34\ A liquidity savings mechanism can be defined as a queuing
arrangement for payments, which conditions the release of queued
payments on the receipt of offsetting or partially offsetting
payments, and as a result economizes on the use of participants'
cash balances.
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D. Availability of the Discount Window
The Board recognizes banks' ability to access funding during
expanded weekend and holiday hours will be important and seeks comments
on the need for discount window operations to support expanded
hours.\35\ The Board stated in its 2019 notice related to the
development of the FedNow Service that the Federal Reserve would
conduct analysis on extending discount window operations to make
overnight credit available on weekends and holidays. Subsequently, in
its 2020 notice announcing the details of the FedNow Service, the Board
noted that the need for overnight credit on weekend and holidays was
expected to be limited initially, and the hours during which discount
window loans could be originated would remain unchanged.\36\ This
perspective was influenced by the expected low volumes for a new
service as well as by the lower dollar value of FedNow Service
transactions.
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\35\ Discount window office hours vary by district, but
typically begin at 8:00 or 8:30 a.m. local time and end when the
Fedwire Funds Service closes at 7:00 p.m. ET.
\36\ See 85 FR 48522 (August 11, 2020) Liquidity management
transfer functionality was included as a core part of the FedNow
Service at the time of its launch.
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The Board recognizes that the combination of the FedNow Service
maturing in the coming years and the Board's proposal to expand Fedwire
Funds Service and NSS operating hours, with limits of one penny less
than $10 billion per payment order and one penny less than $10 trillion
per settlement file, respectively, will increase the importance of
accessing liquidity on weekends and holidays. The Board is seeking
comment on the potential demand for liquidity via the discount window
during expanded hours for the Fedwire Funds Service and NSS and whether
its availability during certain defined hours on weekends and holidays
would affect industry views on expanded hours.
IV. Expanded Hours Impact on the Payment System Risk Policy (PSR
Policy)
Part II of the PSR policy governs the provision of intraday credit
(also known as daylight overdrafts) to institutions with accounts at
the Reserve Banks and outlines the methods that Reserve Banks use to
control credit risk associated with providing intraday credit.\37\
Intraday credit supports the smooth functioning of the payment system
by supplying temporary liquidity in order to cover shortages in
institutions' account that can result when the timing of payment
inflows and outflows are not balanced. To be eligible for intraday
credit, the PSR policy requires that an institution be ``financially
healthy'' and have regular access to the discount window. Reserve Banks
monitor financial and supervisory developments to determine an
institution's eligibility for intraday credit and have several tools to
control credit risk to Reserve Banks, including caps on intraday
credit, incentivizing or in some cases requiring collateral, and the
ability to monitor the institution's account balance in real time and
reject Fedwire Funds Service or NSS transactions.
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\37\ The PSR policy is available at https://www.federalreserve.gov/paymentsystems/psr_about.htm.
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The PSR policy allows for access to intraday credit up to 24x7x365.
Therefore, if the Federal Reserve expands the operating hours of the
Fedwire Funds Service and NSS, those institutions eligible to access
intraday credit and electing to use the services would have access to
intraday credit during the expanded hours. Reserve
[[Page 39620]]
Banks would continue to use the same general framework to monitor
institutions and control credit risk as they use in the current
operating environment. Further, if the Federal Reserve expands Fedwire
Funds Service and NSS hours, the Board would continue to expect that
institutions manage their master accounts in compliance with the
Board's Payment System Risk Policy and other Federal Reserve policies,
including to avoid overnight overdrafts.\38\
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\38\ To minimize Reserve Bank exposure to overnight overdrafts,
the Board charges a penalty fee to discourage institutions from
incurring overnight overdrafts. See part III of the PSR policy. An
institution would incur an overnight overdraft on each calendar day
that its account balance is negative at 7:00 p.m. ET, which is the
close of the business day. All institutions, regardless of the
Reserve Bank payment services that they use, will incur an overnight
overdraft penalty charge for each calendar day, including weekends
and holidays, that an overnight overdraft is outstanding.
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If the Board finalizes this proposal to expand operating hours for
the Fedwire Funds Service and NSS, it would also make any necessary
updates to existing policies as well, including the PSR policy.
V. Exclusion of the Fedwire Securities Service
At this time, the Board is not considering expanding operating
hours for the Fedwire Securities Service.\39\ The Board does not expect
the proposed expansion of Fedwire Funds Service and NSS operating hours
to create significant changes in secured lending, derivatives markets,
or other market activity that would necessitate expanded operating
hours for the Fedwire Securities Service in the near term. In part,
this is because the aggregate value of transfers during current off-
hours for the large-value payment services will likely be relatively
low at the outset and thus unlikely to result in increased demand for
securities transfers during those hours. It is possible that expanded
hours for the Fedwire Funds Service and NSS could influence markets in
the longer-term, which could in turn increase demand for the Fedwire
Securities Service during current off-hours.
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\39\ The Fedwire Securities Service is currently open for
transfers between participants from 8:30 a.m. ET until 3:30 p.m. ET
Monday through Friday, excluding holidays observed by the Reserve
Banks. In addition, Fedwire Securities Service participants may
reposition securities between their own securities accounts from
8:30 a.m. ET until 7:00 p.m. ET on those same weekdays.
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The Board understands that expanding operating hours for the
Fedwire Securities Service will require greater study and coordination
with other FMUs, services, and institutions that are typically open
alongside the service, such as securities pricing services and
repurchase agreement service providers. The Board will continue to
monitor activity in securities markets and seek feedback from
institutions to determine whether to pursue in the future an expansion
of Fedwire Securities Service operating hours.
VI. Competitive Impact Analysis
Board policy requires that the Board conduct a competitive impact
analysis when considering changes to a service. The policy requires the
Board to first determine whether there will be a direct and material
adverse effect on the ability of other service providers to compete
effectively with the Federal Reserve in providing similar services and
then, if such an adverse effect is identified, to determine if that
effect is due to differing legal powers or the Federal Reserve's
dominant market position deriving from such legal differences. Next, if
such legal differences exist, then the proposed change would be further
evaluated to assess its benefits and the proposal could be
modified.\40\
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\40\ See The Federal Reserve in the Payments System (issued
1984; revised 1990), Federal Reserve Regulatory Service 9-1558. The
policy states, ``The Board will also conduct a competitive impact
analysis when considering an operational or legal change, such as a
change to a price or service, or a change to Regulation J, if that
change would have a direct and material adverse effect on the
ability of other service providers to compete effectively with the
Federal Reserve in providing similar services due to differing legal
powers or constraints or due to a dominant market position of the
Federal Reserve deriving from such legal differences. All
operational or legal changes having a substantial effect on
payments-system participants will be subject to a competitive-impact
analysis, even if competitive effects are not apparent on the face
of the proposal. In conducting the competitive-impact analysis, the
Board would first determine whether the proposal has a direct and
material adverse effect on the ability of other service providers to
compete effectively with the Federal Reserve in providing similar
services. Second, if such an adverse effect on the ability to
compete is identified, the Board would then ascertain whether the
adverse effect was due to legal differences or due to a dominant
market position deriving from such legal differences. Third, if it
is determined that legal differences or a dominant market position
deriving from such legal differences exist, then the proposed change
would be further evaluated to assess its benefits, such as
contributing to payments-system efficiency or integrity or other
Board objectives, and to determine whether the proposal's objectives
could be reasonably achieved with a lesser or no adverse competitive
impact. Fourth, the Board would then either modify the proposal to
lessen or eliminate the adverse impact on competitors' ability to
compete or determine that the payments-system objectives may not be
reasonably achieved if the proposal were modified. If reasonable
modifications would not mitigate the adverse effect, the Board would
then determine whether the anticipated benefits were significant
enough to proceed with the change even though it may adversely
affect the ability of other service providers to compete with the
Federal Reserve in that service.''
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The Board believes that an expansion of Fedwire Funds Service and
NSS operating hours would not have a direct and material adverse effect
on the ability of other service providers to compete effectively with
the Federal Reserve. In particular, the Federal Reserve provides the
only large-value payment services in the United States that allow
settlement in central bank money. The main private-sector provider of
large-value payment services and a number of depository institutions
offered comments on a previous Federal Register notice noting that they
would benefit from an expansion of Fedwire Funds Service operating
hours.\41\ These organizations indicated that an expansion of Fedwire
Funds Service operating hours would improve efficiency and reduce risk
in conducting U.S. dollar payments and settlements and would support
private-sector payments efforts in the United States. For instance,
expanding Fedwire Funds Service operating hours could improve liquidity
risk management for payment systems that rely on the Fedwire Funds
Service for prefunding (for example, a private-sector instant payment
service, a large-value payment service, and a foreign exchange
settlement system). Accordingly, an expansion of Fedwire Funds Service
and NSS operating hours is not expected to adversely impact any other
service provider that competes with Federal Reserve payment services
and could instead support their efficiency and resilience.
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\41\ See comment letters submitted to the ``Potential Federal
Reserve Actions to Support Interbank Settlement of Faster Payments,
Request for Comment,'' 83 FR 57351.
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VII. Request for Comment
The Board requests public comment on the entire proposal, and
specifically on the following questions:
1. What are the primary benefits to the banking industry, financial
markets, and broader economy from an expansion to 22x7x365 Fedwire
Funds Service and NSS operating hours? What are the primary benefits to
your institution?
2. What will be the primary sources of demand for expanded hours
for the Fedwire Funds Service and NSS, from 22x5 to 22x7x365? What
types of transactions or institutions are most likely to generate
demand for the ability to make payments during weekend hours? What
additional use cases could be satisfied with the expansion to full
24x7x365 operating hours? Would they represent sources of new and
additional volume that could flow over the Fedwire Funds Service, a
shift of
[[Page 39621]]
existing volume over the service, or both?
3. How might expanded operating hours of the Fedwire Funds Service
and NSS support private-sector innovation?
4. How does the existence of the FedNow Service affect your views
of the benefits of expanded hours for the Fedwire Funds Service and
NSS? How do you anticipate using these services in the future?
5. Do you prefer an interim expansion of operating hours before
moving to 22x7x365? If so, what operating hours for the Fedwire Funds
Service and NSS would be most useful for your institution? What
considerations factor into your preference?
6. What is your preferred timeline for a potential expansion of
Fedwire Funds Service and NSS operating hours to 22x7x365? What
considerations factor into your preference (for example, demand, time
to implement changes, adjustments to staffing and internal systems,
other major industry milestones or payment system improvements)?
7. Are you interested in full 24x7x365 operating hours for Fedwire
Funds Service and NSS? If so, what is your preferred time frame for
such an expansion of operating hours? What considerations factor into
your preference?
8. What costs and risks would arise for the banking industry,
financial markets, and broader economy from an expansion to 22x7x365 of
Fedwire Funds Service and NSS operating hours? What are the costs and
risks to your institution? What is the estimated incremental cost on a
percentage basis to support 22x7x365 operating hours for the Fedwire
Funds Service and NSS? What are the implications for competitiveness?
9. What are the ways in which benefits, costs, or risks of 22x7x365
Fedwire Funds Service and NSS could vary for different types of market
participants (for example, for smaller institutions, non-traditional
participants, or participants in particular time zones)?
10. Are there infrastructure-related market conditions or barriers
(for example, the availability of short-term funding markets over the
weekend) that may prevent or reduce your firm's ability to fully
achieve the potential benefits of 22x7x365 operating hours for the
Fedwire Funds Service and NSS? If so, what are they? What steps might
the industry and/or Federal Reserve take to remove such barriers?
11. The Federal Reserve plans to maintain the ability to opt out of
expanded hours. How would the optionality with respect to participating
in a 22x7x365 operating hours environment of the Fedwire Funds Service
and NSS, as described in this notice, benefit or challenge your
institution or the broader industry? What steps might the Federal
Reserve take to augment potential benefits? What steps might the
Federal Reserve take to mitigate potential costs and risks?
12. How does your institution anticipate managing liquidity needs
in an expanded hours environment? Is the availability of discount
window loan originations on weekends and holidays a prerequisite for
expanded operating hours for the Fedwire Funds Service and NSS? If so,
should the discount window be available 22x7x365, or alternatively,
during certain defined hours on weekends and holidays? During what
hours should discount window loan originations be available?
13. What effects, if any, on funding market activity should be
taken into account when considering the expansion of operating hours
for the Fedwire Funds Service and NSS? Would the expansion of operating
hours for the Fedwire Funds Service and NSS affect existing wholesale
funding markets, including the repurchase market? Do you expect
wholesale funding market activity to occur on weekends and holidays?
14. Describe any other enhancements or initiatives that the Reserve
Banks should consider in addition to, or in the context of, expanded
hours for the Fedwire Funds Service and NSS. How would such potential
enhancements be used in the context of expanded hours? Are there any
potential service enhancements that should be prioritized ahead of
expanded hours?
15. Please describe any other consideration that you believe should
be taken into account as the Board contemplates expansion of operating
hours for the Fedwire Funds Service and NSS.
By order of the Board of Governors of the Federal Reserve
System.
Ann E. Misback,
Secretary of the Board.
[FR Doc. 2024-10117 Filed 5-8-24; 8:45 am]
BILLING CODE 6210-01-P
