The purchase and sale of government securities in the open market by the New York Federal Reserve Bank. Open market operations are undertaken at the direction of the Federal Reserve Open Market Committee (FOMC) with the intention of influencing interest rates and the supply of money in the economy. If the FOMC purchases securities, reserves are injected into the depository system. If the FOMC sells securities, then reserves are removed. The securities buyer gives up cash to buy the securities, which removes money from the system. In return, the buyer receives the securities.
Webster's New World Finance
The Federal Reserve’s purchase and sale of financial securities in order to affect the level of money supply. This tactic influences short-term interest rates. When the Fed wants to increase the money supply, it buys debt instruments, such as repos (repurchase agreements). When it wants to decrease the money supply, it sells debt instruments.