ng transaction costs as low as possible. Many overnight federal funds transactions occur under a continuing contract that is renewed automatically until either the lender or the borrower terminates it. The most commonly used method to transfer funds between depository i!
             nstitutions is for the leading institution to authorize its district Federal Reserve Bank to debit its reserve account and to credit the reserve account of the borrowing institution. All types of depository institutions, commercial banks, thrifts, and credit unions, as well as agencies and branches of foreign banks in the United States, federal agencies and government securities dealers participate in the federal funds market. Many relatively small institutions that accumulate excess reserves lend these reserves overnight to money center and large regional banks and to foreign banks operating in the United States. Federal agencies also lend funds in the federal funds market. Other financial institutions serve as intermediaries by borrowing and lending federal funds on the same day, usually channeling funds from relatively small to large banks. Broker firms earn commissions by arranging transactions between lenders and borrowers.
             By aiding in the transfer of reserves among depository institutions, the federal funds market plays a major role in the execution of monetary poli
             ...