According to Federal Reserve Flow of Funds Table F208, Funding Corporations, followed by Money Market Mutual Funds, were the principal buyers of open market paper in Q3 2005. The main suppliers were issuers of asset-backed-securities and foreign financial institutions.

The graph shows variations in demand for open market paper in the U.S. over the last decade.

	Who Buys Open Market Paper?

The term “open market paper” refers to commercial paper and bankers acceptances with tenures of less than a year, issued by the private sector.

Over the decade, demand for open market paper grew steadily until 2000 when the stock market crashed and the country entered into recession. Between 2001 and 2003, sellers dominated the market, but after 2004, with economic recovery, the demand for open market paper has returned to pre-crash levels.

Funding corporations are financial entities associated with foreign banks or non-bank holding companies, and custodial accounts for reinvested collateral associated with securities lending operations.

For an explanation of developments in the market for these securities, see the article, “The evolution of the U.S. commercial paper market since 1980“, by Mitchell A. Post, published in the Federal Reserve Bulletin (Dec. 1992).