The Federal Reserve Bank of New York said it will use additional firms "to enhance the capacity of such operations to drain reserves beyond what could likely be conducted through" the Fed's 18 primary dealers. "This is another step in the laying of the groundwork in what will eventually become policy normalization," said Dan Greenhaus, chief economic strategist at Miller Tabak. "The private markets have long known the Fed would have to expand eligible counterparties. It's a good thing in the respect that the Fed recognizes that they have to do this."

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