What is the Primary Dealer Credit Facility?

The Primary Dealer Credit Facility is a service provided by the Federal Reserve Bank of New York, the most important of the 12 regional reserve banks. It is an overnight loan facility made available to those individuals and institutions - 'primary dealers' - who are approved bidders for US government stocks.

Where have you heard about the Primary Dealer Credit Facility?

You may have come across mention of the Primary Dealer Credit Facility in guides to US investment and in books and articles explaining the workings of the American bond market. If you take an interest in the Federal Reserve system, you may have learned about it.

What you need to know about the Primary Dealer Credit Facility.

The New York Fed says that the facility 'is intended to foster the functioning of financial markets'. In return for 'eligible collateral', primary dealers can borrow for one day, starting at about 5pm. New loans can be taken out each day but there is a 'frequency-based fee' after they have used the service for more than 45 days.

The New York Fed says: 'Access to the facility on the 46th and subsequent days will result in additional fees to be paid by the dealer.' Because it covers Wall Street, the New York Fed is the primary Federal Reserve Bank in the US, all 12 of which sit under the Federal Reserve Board, America's central bank.