Open Market Operations

Open market operations play an important role in steering interest rates, managing the liquidity situation in the market and signalling the monetary policy stance. Five types of instruments are available to the Eurosystem for its open market operations. The most important instrument is the reverse transaction. The Eurosystem may also make use of outright transactions, the issuance of ECB debt certificates, foreign exchange swaps and collection of fixed-term deposits. Open market operations are initiated by the ECB, which decides on the instrument to be used and on the terms and conditions. It is possible to execute open market operations on the basis of standard tenders, quick tenders or bilateral procedures.

Four types of open market operation:

Depending on their aim, regularity and procedure, open market operations can be grouped under following categories:

(1) The main refinancing operations are regular liquidity-providing reverse transactions with a frequency and maturity of normally one week. These operations are executed on a decentralised manner by the NCBs on the basis of standard tenders and according to an indicative calendar for the Eurosystem's regular tender operations'. The main refinancing operations play a pivotal role in fulfilling the aims of the Eurosystem's open market operations and normally provide the bulk of refinancing to the financial sector.

(2) The longer-term refinancing operations are liquidity-providing reverse transactions with a monthly frequency and a maturity of normally three months. The Eurosystem may also conduct non-regular longer-term operations, with a maturity longer than that of the MROs. These operations are aimed at providing counterparties with additional longer-term refinancing and are executed by the NCBs on the basis of standard tenders.

(3) Fine-tuning operations are executed on an ad hoc basis to manage the liquidity situation in the market and to steer interest rates, in particular in order to smooth the effects on interest rates caused by unexpected liquidity fluctuations. Fine-tuning operations are primarily executed as reverse transactions, but may also take the form of foreign exchange swaps or the collection of fixed-term deposits. The instruments and procedures applied in the conduct of fine-tuning operations are adapted to the types of transaction and the specific objectives pursued in performing the operations. Fine-tuning operations are normally executed by the NCBs through quick tenders or bilateral procedures. The Eurosystem may select a limited number of counterparties to participate in fine-tuning operations. Under exceptional circumstances, the ECB's Governing Council shall decide whether fine-tuning operations may be executed by the ECB itself or by the selected NCBs.

(4) In addition, structural operations can be carried out by the Eurosystem through reverse transactions, outright transactions and the issuance of debt certificates. These operations are executed whenever the ECB wishes to adjust the structural position of the Eurosystem vis-à-vis the financial sector. Structural operations in the form of reverse transactions and the issuance of ECB debt certificates are carried out by the NCBs through standard tenders. Structural operations in the form of outright transactions are normally executed through bilateral procedures.

For terms, conditions and results of tender operations see:

https://www.ecb.europa.eu/press/calendars/caleu/html/index.en.html

https://www.ecb.europa.eu/mopo/implement/omo/html/index.en.html

Another important links:

https://www.ecb.europa.eu/mopo/implement/omt/html/index.en.html

https://www.ecb.europa.eu/mopo/implement/omo/tltro/html/index.en.html