Fedwire Securities Service

As fiscal agents of the United States, the Federal Reserve Banks act as the securities depository for all marketable U.S. Treasury securities, many federal agency securities, and certain mortgage-backed securities issued by GSEs.The Federal Reserve also acts as agent and depository for the securities of certain international organizations, such as the World Bank. U.S. government securities are issued in book-entry form through the Federal Reserve's Fedwire Securities Service using either an auction process or dealer syndicate mechanisms. The Federal Reserve's Fedwire Securities Service provides for the safekeeping and transfer of these securities. The safekeeping function involves the records of securities balances, and the transfer and settlement function involves the transfer of securities between parties.

When book-entry securities transfers are processed using Fedwire Security Service, the institution sending the transfer receives immediate credit in its Federal Reserve (funds) account for the payment associated with the transfer, and its securities account is correspondingly debited. The Federal Reserve (funds) account of the institution receiving a book-entry securities transfer is debited for the payment amount, and its securities account is credited. There are more than 9,000 participants in the system and they are largely composed of depository institutions.

The Federal Reserve's Fedwire Securities Service is supported by a real-time, delivery-versus-payment (DVP) gross settlement system that provides for the immediate, final, and simultaneous transfer of securities against the settlement of funds. This system, known as the National Book-Entry System (NBES), provides for the safekeeping and transfer of U.S. Treasury, government agency, and GSE securities as well as securities issued by certain international organizations. The safekeeping function involves the electronic storage of securities records in custody accounts, and the transfer and settlement function involves the transfer of securities between parties.

Financial institutions may access the Fedwire Securities Service via high-speed direct CI, FedLine, or with off-line telephone connectivity with a Federal Reserve Bank. Financial institutions may also access certain Fedwire Securities Service inquiry information via FedLine for the Web. On-line participants, using either a mainframe or FedLine PC connection to Fedwire Securities Service, require no manual processing by the Federal Reserve Banks. Off-line participants provide funds transfer instructions to their Federal Reserve Bank by telephone, and once authenticated, the Federal Reserve Bank enters the transfer instruction into the Fedwire Securities Service system for execution. The manual processing required for off-line requests makes them more costly and suitable only for institutions processing a small number of funds transfer payment orders.

 

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