details aren ’ t ultimately very important to the transmission of monetary policy, they may well have implications for important aspects of the financial markets, such as the cost effectiveness of banks ’ liquidity management, bank business and funding models, and financial stability. 18 so these considerations should influence the type of questions we ask ourselves when it comes to improving the operating frameworks of central banks. we should, of course, consider the traditional parts of an operating framework, for example, possible interest rate targets and the mechanisms used to achieve the target. but recent experience strongly suggests that we need to consider options beyond just a classic interest rate targeting regime that ’ s based on a scarcity of reserve balances. we will need to think about the composition and structure of our balance sheet on both the asset and liability sides. 19 this consideration will be important should large - scale asset purchases ( lsaps ) become a more standard tool for central banks, which could happen if lower levels of equilibrium real rates imply an increasing frequency of very low overnight rates. further, some analysts have argued that there might be a role for balance to support the implementation of monetary policy and the analysis of money market conditions, the federal reserve began collecting transaction - level data on federal funds, eurodollars, and certificates of deposits from a large set of domestic banks and agencies of foreign banks operating in the united states on april 1, 2014. in february 2015, the new york fed announced plans to begin using the new data to calculate the daily federal funds effective rate and to begin publishing an overnight bank funding rate based on transactions in both federal funds and eurodollar markets. see http : / / www. newyorkfed. org / markets / opolicy / operating _ policy _ 150202. html and http : / / libertystreeteconomics. newyorkfed. org / 2015 / 04 / the - fr - 2420 - data - collection - a - newbase - for - the - fed - funds - rate. html. a staff memo from 2008 suggested that in a floor system the level of excess reserves “ might be on the order of $ 35 billion but could be larger on some days. ” for context, at the time, a number like $ 150 billion would have been held up as an extremely large level of excess reserves, well beyond anything we might have seriously considered as the level of reserves needed to implement a floor on rates. see http : / / www. federalreserve

clearing banks provided huge amounts of intraday credit to their tri - party repo borrowers when cash invested overnight was returned to lenders. these temporary extensions of credit have been largely eliminated. this is an important structural reform because these exposures had proven to be destabilizing during the financial crisis. in particular, when a major dealer became stressed, the clearing banks were motivated to reassess their large overdraft exposures to the dealer, and that turned out to be an important channel of contagion. another important change has been the shift in over - the - counter derivatives activity from bilateral settlement to central clearing. although this shift was already underway at the time of the financial crisis, it has now been underpinned by important changes to the capital and collateral regime, which has accelerated the process by strengthening the incentives to structure and clear trades centrally. when banks settle their trades with central counterparties ( ccps ), it reduces risk in the system. exposures can be netted, and the counterparty risk is shifted from many individual firms to the single ccp that clears the trades. although this shift in clearing activity still has some way to go, the proportion of centrally cleared trades will continue to rise as legacy trades mature. a third important structural change is the increased focus on the strength and resiliency of ccps. because ccps are now going to play a more significant role, they must be strong and resilient. there have been many important initiatives in this regard. foremost, perhaps, is the promulgation of the international standards embodied in the principles for financial market infrastructures ( pfmi ) — which were developed when i chaired the committee on payment and settlement systems ( cpss ) — and the work currently underway on financial market infrastructure resolution. a fourth significant structural change has been reform of the u. s. money market mutual fund industry. the october 14th implementation of floating net asset values ( navs ) for prime institutional money market mutual funds has dramatically reduced their use and has encouraged banks and other borrowers to find sources of funding that are less prone to runs. the financial crisis exposed two important flaws of the money market mutual fund industry. first, the fixed nav structure created a first - mover advantage that encouraged runs. that is, if a fund came under stress, investors who quickly withdrew their funds received par value. second, although money market mutual fund investments are often collateralized, the funds themselves have no desire to take possession