Will the Fed Expand Operating Hours of Fedwire and NSS?

The Federal Reserve’s Fedwire® Funds Service, formerly known as the Federal Reserve Wire Network, has existed since 1915. In the beginning, the Fed used telegraph wires to send messages between Federal Reserve Banks about transferring funds on behalf of member banks. This was a special process offered for banks whose business customers needed a “fast” way to complete a transaction, but it took nearly an hour. Member banks also used the wire system to lend money to other member banks or to settle securities transactions. In the 1930s, operators began using teletype machines rather than Morse code to transmit messages. Over time, the Fed’s system incorporated new technologies to reduce transaction times while simultaneously handling a vast increase in transaction volume: 2MM in 1953 to 200MM in 2022.The Federal Reserve now wants to expand operating hours for Fedwire® Funds Service (Fedwire), as well as for the National Settlement Service (NSS), and has extended the comment period from July 8 to Sept. 6 to allow financial stakeholders and institutions additional time to analyze the proposal and provide feedback.Currently, both payment services run Monday through Friday, with the exception of holidays. The proposal would expand services to every day of the calendar year, including holidays. The daily operating hours would not change: Fedwire will remain open 22 hours a day, and NSS 21.5 hours a day.The expansion is slated for 2027, due to the stakeholder request that it does not occur until after the ISO 20022 message format has been implemented, which is scheduled for March 2025. The new format, developed by the International Organization for Standardization, provides enhanced efficiency of domestic and cross-border payments and robust payment data to help financial institutions comply with sanctions and anti-money laundering requirements, the Fed asserts.Pros of ExpansionExpanding the operating hours for both Fedwire and NSS to seven days a week, 365 days a year has a number of benefits:

Saturday and Sunday’s operating hours would also provide a two-hour window between 7 p.m. and 9 p.m. ET to serve as a fund transfer pause to help address deposit outflow issues. This would allow financial institutions experiencing outflows the chance to implement liquidity and risk management measures to address those outflows.Cons to ConsiderThis expansion would require operational and technical changes that could prove costly. According to the Fed, the costs would be unique to each institution, depending on what changes would need to be made to accommodate the expansion. Related costs could include the following: 

Expanding operating hours to every day of the year could also increase risks to participants, the Reserve banks, and the US financial system. If a financial institution was in crisis, for example, fund transfers on weekends and holidays could exacerbate their liquidity issues. This risk could impact the financial stability of other participants if large deposit outflows from a single participant have a contagion effect.Longer operating hours also extend the risk of operational disruptions and the occurrence of cyberattacks. The extended operating hours of Fedwire and NSS could be a boon to your business, though there may be costs and other risks that your institution would have to prepare for. Now is the time to make your desires and concerns known by submitting your comments to the Fed about its proposed changes. We will keep you up to date as new developments arise.