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System Open Market Account

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The System Open Market Account (SOMA) is one of the monetary policy tools used by the United States' Federal Reserve System that contains assets acquired by open market operations (OMOs). It is managed by the Federal Reserve Bank of New York, which the Federal Open Market Committee (FOMC) designated to execute OMOs on behalf of the entire Federal Reserve System.

Contents

Purpose

SOMA's primary purpose is to assist the New York Fed in carrying out open market operations (OMOs) and foreign exchange interventions (the U.S. Treasury, in consultation with the Federal Reserve System, is responsible for setting U.S. exchange rate policy). The U.S. monetary authorities—the Treasury and the Fed—may intervene in the foreign exchange market to counter disorderly market conditions, using funds that belong to the Federal Reserve and to the Exchange Stabilization Fund (ESF) of the Treasury Department.

Since the onset of the financial crisis, the FOMC has "increased the size and adjusted the composition of the SOMA portfolio in efforts to promote the Committee’s mandate to foster maximum employment and price stability".

SOMA securities serve three purposes:

  • Collateral for U.S. currency in circulation and other reserve factors that show up as liabilities on the Fed's balance sheet
  • A tool for the Fed’s management of reserve balances
  • A store of liquidity in case of emergency
  • SOMA portfolio

    The resulting investments are held in the SOMA portfolio. Interest on the portfolio provides virtually all of the Fed's income, but the central bank buys and sells securities purely to implement U.S. monetary policy and not for profit.

    SOMA consists of the Federal Reserve's domestic and foreign portfolios. As of the end of 2008, the domestic portfolio consisted of U.S. Treasury securities held $496 billion in securities outright and $80 billion in repurchase agreements (i.e., on a temporary basis). The SOMA foreign currency portfolio consisted of $25 billion denominated in euros and yen. Reciprocal currency arrangements with foreign institutions totaled $554 billion.

    The New York Fed has an open data web page that allows people to export historical data of SOMA holdings from 2003 to the present as a Microsoft Excel spreadsheet. SOMA holdings data is updated weekly.

    References

    System Open Market Account Wikipedia


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