Jefferies & Co. Wednesday became the first firm in more than three years designated as one of the Federal Reserve Bank of New York's primary dealers.

The New York Fed uses its network of roughly 20 primary dealers to conduct open market operations. When it wants to add reserves to the banking system, it purchases government securities from the firms. But it sells securities to the firms when it seeks to drain reserves from the system.

Primary dealers have taken on an even greater role during the financial crisis.

Any firm that wishes to borrow from the Federal Reserve's Term Asset-Backed Securities Loan Facility or TALF must work through a primary dealer.

Cantor Fitzgerald & Co. was the last previous firm to become a primary dealer, in August 2006.

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