- Dealers will need geographically dispersed secondary locations
- New systems expected to be phased in over transition period
The Federal Reserve Bank of New York announced new standards for the securities dealers with which it trades, requiring them to establish backup locations that could be utilized in the event of a disaster.
“Open market operations, Treasury auctions, and settlement activities need to be conducted even amid wide-scale disruptions in large metropolitan areas such as the New York region where many market participants are located,” the New York Fed said in a statement on Thursday. “The new geographic dispersion standards require primary dealers to employ geographic dispersion between their primary and secondary locations to allow participation in desk operations even amid wide-scale disruptions.”
Terror attacks in New York on Sept. 11, 2001, and the damage done in 2012 by Hurricane Sandy highlighted the vulnerability of a financial system heavily concentrated in a single geographic area.
The 22 primary dealers will be allowed a transition period to put new systems in place, the New York Fed said in the statement, without specifying a time frame.