E6-21668. Sale and Issue of Marketable Book-Entry Treasury Bills, Notes, and Bonds-Customer Confirmation Reporting Requirement Threshold Amount

AGENCY:

Bureau of the Public Debt, Fiscal Service, Treasury.

ACTION:

Final rule.

SUMMARY:

The Department of the Treasury (“Treasury,” “We,” or “Us”) is issuing in final form an amendment to 31 CFR part 356 (Uniform Offering Circular for the Sale and Issue of Marketable Book-Entry Treasury Bills, Notes, and Bonds) that raises the customer confirmation reporting requirement threshold amount from $500 million to $750 million. Beginning on December 31, 2006, any customer awarded a par amount of $750 million or more in a Treasury marketable securities auction must send us a confirmation of its awarded bid(s) by 10 a.m. on the day following the auction. This final rule also clarifies that customer confirmations may now be sent by e-mail as well as by fax or hand delivery.

DATES:

Effective Date: January 1, 2007.

ADDRESSES:

You may download this final rule from the Bureau of the Public Debt's Web site at http://www.treasurydirect.gov or from the Electronic Code of Federal Regulations (e-CFR) Web site at http://www.gpoaccess.gov/​ecfr. It is also available for public inspection and copying at the Treasury Department Library, Room 1428, Main Treasury Building, 1500 Pennsylvania Avenue, NW., Washington, DC 20220. To visit the library, call [phone] for an appointment.

FOR FURTHER INFORMATION CONTACT:

Lori Santamorena (Executive Director) or Chuck Andreatta (Associate Director), Bureau of the Public Debt, Government Securities Regulations Staff, [phone] or e-mail us at [e-mail].

SUPPLEMENTARY INFORMATION:

The Uniform Offering Circular (UOC), in conjunction with the announcement for each auction, provides the terms and conditions for the sale and issuance in an auction to the public of marketable Treasury bills, notes and bonds.^[1] Since 1992 Treasury has required customers ^[2] awarded a par amount of $500 million or more in a Treasury marketable securities auction to provide a written confirmation of their awarded bids, including the name of the submitter that submitted the bids on their behalf.^[3] The confirmation must also include a statement with certain information related to the customer's net long position.^[4] The confirmation must be sent no later than 10 a.m. on the day following the auction. According to the UOC, the confirmation must be in writing and signed by the customer or by an authorized representative.^[5] In addition, since November 2005, we have permitted customers to e-mail us their confirmations.

The customer confirmation requirement helps prevent large, false (unauthorized) customer bids from being awarded securities in an auction. On May 3, 2006, Treasury announced that it was contemplating changes to the customer confirmation requirement and cited the fact that the reporting threshold has never been changed despite changes in average auction sizes and transaction volumes.^[6] On August 2, 2006, Treasury announced that, beginning on December 31, 2006, the customer confirmation reporting requirement threshold amount will be raised from $500 million or more to $750 million or more.^[7] We are raising the threshold amount to reduce the regulatory burden on customers complying with this requirement, since auction offering amounts, on average, are substantially higher than they were when the requirement was first implemented.

We are also adding e-mail into the UOC as an acceptable method for customers to send confirmations. This addition supports our goal of allowing securities auction transactions to be conducted with us electronically whenever possible.

We are not making any changes to the requirement that a submitter or intermediary submitting bids for a customer notify the customer of the confirmation requirement if its auction awards are equal to or greater than the threshold. Also, no change is being made to the information that is required on the confirmation and the deadline for us to receive it.

This final rule will be effective for all marketable Treasury securities auctions occurring after December 31, 2006.

Procedural Requirements

This final rule is not a significant regulatory action for purposes of Executive Order 12866. The notice and public procedures requirements of the Administrative Procedure Act do not apply, under 5 U.S.C. 553(a)(2).

Since a notice of proposed rulemaking is not required, the provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) do not apply.

The Office of Management and Budget previously approved the collections of information in this final amendment in accordance with the Paperwork Reduction Act under control number 1535-0112. We are not making substantive changes to these requirements that would impose additional burdens on auction bidders.

List of Subjects in 31 CFR Part 356

• Bonds
• Federal Reserve System
• Government securities
• Securities

For the reasons stated in the preamble, 31 CFR part 356 is amended as follows:

PART 356—SALE AND ISSUE OF MARKETABLE BOOK-ENTRY TREASURY BILLS, NOTES, AND BONDS (DEPARTMENT OF THE TREASURY CIRCULAR, PUBLIC DEBT SERIES NO. 1-93)

1. The authority citation for part 356 continues to read as follows:

Authority: 5 U.S.C. 301; 31 U.S.C. 3102 et seq.; 12 U.S.C. 391.

2. Revise § 356.24 (d) to read as follows:

§ 356.24

Will I be notified directly of my awards and, if I am submitting bids for others, do I have to provide confirmations?

* * * * *

(d) Customer confirmation. Any customer awarded a par amount of $750 million or more in an auction must send us a confirmation in written form or via e-mail containing the information in paragraphs (d)(1) and (2) of this section. The confirmation must be sent no later than 10 a.m. on the day following the auction. If sent in written form, the confirmation must be signed by the customer or authorized representative. Confirmations sent by e-mail must be sent by the customer or authorized representative. Confirmations signed or sent by an authorized representative must include the capacity in which the representative is acting. A submitter or intermediary submitting or forwarding bids for a customer must notify the customer of this reporting requirement if we award the customer $750 million or more as a result of those bids. The information the customer must provide is:

(1) A confirmation of the awarded bid(s), including the name of the submitter that submitted the bid(s) on the customer's behalf, and

(2) A statement indicating whether the customer had a reportable net long position as defined in § 356.13. If a position had to be reported, the statement must provide the amount of the position and the name of the submitter that the customer requested to report the position.

Dated: December 12, 2006.

Donald V. Hammond,

Fiscal Assistant Secretary.

Footnotes

1.  The Uniform Offering Circular was published as a final rule on January 5, 1993 (58 FR 412). The circular, as amended, is codified at 31 CFR part 356. A final rule converting the UOC to plain language and making certain other minor changes was published in the Federal Register on July 28, 2004 (69 FR 45202).

2.  “Customer” is defined in the UOC as a bidder that directs a depository institution or dealer to submit or forward a bid for a specific amount of securities in a specific auction on the bidder's behalf. See § 356.2.

3.  Department of the Treasury, Securities and Exchange Commission and Board of Governors of the Federal Reserve System Joint Report on the Government Securities Market, pp. 7-8. (January 1992). See also § 356.24(d).

4.  See § 356.24(d)(2).

5.  If an authorized representative signs the confirmation, it must include the capacity in which the representative is acting.

6.  See Quarterly Refunding Statement by Emil W. Henry, Jr., Assistant Secretary for Financial Institutions (May 2006).

7.  See Quarterly Refunding Statement by Emil W. Henry, Jr., Assistant Secretary for Financial Institutions (August 2006).