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Bulletin No.: 2017-09
March 16, 2017

TO: MEMBERS

SUBJECT: Bank Introduces Two New Auction Formats for Advance Auctions

The Federal Home Loan Bank of Dallas (Bank) is excited to announce two new formats for advance auctions –
a Dutch Auction and a Reverse Auction.

Dutch Auction
 Unlike a traditional auction, where the rate of your accepted bid is the rate you submit, a Dutch Auction format allows all winning bid rates to clear at the lowest accepted bid rate. The Dutch Auction format could help you secure advance funding at reduced rates.

Prior to the auction opening, the Bank sets a reservation rate, or a floor, which represents the lowest advance rate the Bank will accept in the Dutch Auction. Once the Dutch Auction closes, funds will be awarded to the bidders from highest to lowest bid rates, until all funds have been awarded. All winning bidders will pay the rate on the lowest accepted bid. The first Dutch auction will be held Thursday, March 23, 2017. Watch fhlb.com for details, or select the box for Members-Only Communications at fhlb.com/signup.

How It Works

  • The Bank announces a Dutch Auction with specific advance types and maturities offered
  • Members submit bids, including their bid amounts and the desired advance rate, during the specified auction times
  • Bids are ranked from highest to lowest rates; if the Bank receives multiple bids at the same level, the bids will be ranked based on the time they were submitted up to the amount remaining in the offering
  • If the Dutch Auction is oversubscribed, a member may be awarded a partial amount at the winning bid rate, or the member may not be awarded any amount if all of the funds were already awarded to higher bidders

Benefits to Members

  • The potential to secure funding at or below your submitted bid rate
  • All winning bids will receive the same lowest bid rate accepted

Following the Dutch Auction, the winning bidders will receive an advance confirmation. All bids submitted via the Dutch Auction are considered firm commitments, and once submitted, cannot be cancelled or modified. For more information on the bid process please view the Dutch Auction education video at fhlb.com/videos/products.
 
Name Your Own Rate - Reverse Auction
The Name Your Own Rate (NYOR) – Reverse Auction is a variation of, and works similarly to, the Dutch Auction. With the NYOR – Reverse Auction, however, the Bank does not secure funding prior to the auction. Instead, you submit a bid for the amount of funding you want and the rate you would like to pay for the funding. The Bank then accesses the capital markets to fulfill your funding requests. 

Unlike the Dutch Auction, the Bank will not predetermine the advances offering size, or the minimum bid rate, prior to the NYOR – Reverse Auction. The NYOR – Reverse Auction provides the same benefits as a Dutch Auction and enables members to indirectly access liquid capital markets and take advantage of favorable intraday market movements.

For more information on the NYOR – Reverse Auctions process, please view the NYOR – Reverse Auction educational video at fhlb.com/videos/products.
 
Sincerely,
 

Kalyan Madhavan
Executive Vice President, Group Head of Members and Markets