[Federal Register Volume 59, Number 106 (Friday, June 3, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-13621]
[[Page Unknown]]
[Federal Register: June 3, 1994]
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DEPARTMENT OF THE TREASURY
Fiscal Service
[Department of the Treasury Circular, Public Debt Series No. 1-93]
31 CFR Part 356
Sale and Issue of Marketable Book-Entry Treasury Bills, Notes and
Bonds
AGENCY: Bureau of the Public Debt, Fiscal Service, Department of the
Treasury.
ACTION: Final rule.
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SUMMARY: The Department of the Treasury (``Department'') is issuing in
final form an amendment to 31 CFR part 356, published as a final rule
on January 5, 1993 (58 FR 412). 31 CFR part 356, also referred to as
the uniform offering circular, sets out terms and conditions for the
sale and issue by the Department to the public of marketable book-entry
Treasury bills, notes and bonds. The amendment contained herein allows
for Treasury securities awarded to a submitter that is a member of a
clearing corporation to be delivered to an account of the clearing
corporation at a depository institution, provided the securities are
for the submitter's own account and certain agreements have been
executed by the parties and filed with the appropriate Federal Reserve
Bank. Specifically, this change will enable a clearing corporation to
net securities awarded at an auction to submitters that are its members
with the when-issued and secondary market trades of such members in the
same securities.
EFFECTIVE DATE: June 3, 1994.
FOR FURTHER INFORMATION CONTACT: Don Hammond, Acting Director,
Government Securities Regulations Staff, Bureau of the Public Debt
(202) 219-3632, or Margaret Marquette, Attorney-Adviser, Office of the
Chief Counsel, Bureau of the Public Debt (202) 219-3320. (TDD for
hearing impaired: (202) 219-9274.)
SUPPLEMENTARY INFORMATION:
I. Background and Analysis
Clearing corporations play an increasingly important role in the
clearance and settlement of securities transactions. To date, clearing
corporation involvement in the clearance and settlement of Treasury
securities has been limited to the secondary market. The Department
believes that including Treasury auction purchases in a multilateral
netting system operated by a clearing agency registered with the
Securities and Exchange Commission (``SEC'') can be beneficial to the
efficiency of the government securities market. For example, with
respect to the book-entry system for Treasury securities, it can reduce
the number of securities transfers. In addition, it can enable the
clearing agency to improve its risk management by providing a more
complete picture of its members' positions.
This amendment to the uniform offering circular specifies the
conditions under which Federal Reserve Banks may deliver to an account
of a clearing corporation at a depository institution securities
awarded at auction to submitters that are members of the clearing
corporation. The amendment permits only securities awarded to a
submitter for its own account to be delivered through a clearing
corporation. To qualify as a clearing corporation for purposes of this
rule, an entity must be registered with the SEC as a clearing agency.
Currently, the only SEC-registered clearing agency that nets trades
in Treasury securities is the Government Securities Clearing
Corporation (``GSCC''). GSCC has proposed to net GSCC netting member
auction awards of Treasury securities against their when-issued and
secondary market trades in the same securities. On March 10, 1994, the
SEC published the GSCC's proposed rule amendments necessary to
implement the netting of the proprietary auction awards of its members
(59 FR 11345). The SEC comment period ended on March 31, 1994.
This rule amends Secs. 356.2, 356.11, 356.16, and 356.24 of the
uniform offering circular.
Specifically, in Sec. 356.2, the definition of the term
``autocharge agreement'' has been expanded to allow for an autocharge
between a clearing corporation and a depository institution. In
addition, the term ``clearing corporation'' is defined as a clearing
agency, as defined by Sec. 3 of the Securities Exchange Act of 1934,
that is registered with the SEC.
The term ``delivery and payment agreement'' has also been added to
the definitions in Sec. 356.2. This term refers to an agreement between
a submitter and a clearing corporation authorizing a Federal Reserve
Bank to deliver securities awarded to a submitter to, and accept
payment from, a depository institution for the clearing corporation.
This new agreement is needed to authorize the delivery of securities to
a clearing corporation's account rather than to the submitter's
account. Any existing autocharge agreements between a submitter and a
depository institution will continue to govern delivery and payment for
submitters not taking delivery through a clearing corporation. In
addition, any existing autocharge agreements will continue to govern
the delivery of and payment for securities awarded to customers.
New paragraph 356.11(b)(2) makes clear that for competitive bids
submitted in paper form, a submitter that is a clearing corporation
member and is submitting bids for its own account and for customers
must submit a separate tender for each specific delivery instruction.
This requirement also applies to any other submitter instructing
delivery of awarded securities to more than one account.
New paragraph 356.16(b)(2)(iii) has been added to clarify that, if
awarded securities are to be delivered to an account of a clearing
corporation at a depository institution, a delivery and payment
agreement must be acknowledged by, and on file with, the appropriate
Federal Reserve Bank prior to the submission of a tender for the
securities. By entering into such an agreement, the submitter
authorizes the Federal Reserve Bank to provide to the clearing
corporation notice of the submitter's auction awards. Further, a
clearing corporation entering into delivery and payment agreements with
submitters must have an acknowledged autocharge agreement on file at
the Federal Reserve Bank maintaining the accounts of the clearing
corporation's agent banks. By entering into an autocharge agreement,
the clearing corporation authorizes the Federal Reserve Bank to provide
the depository institution whose funds account will be charged on
issuance notice of certain payment related information for securities
to be delivered.
Finally, paragraph 356.24(a) has been expanded to provide that, if
securities are to be delivered to an account of a clearing corporation
at a depository institution, notice of awards will be provided to the
clearing corporation. Also, paragraph 356.24(c) has been modified to
correspond to the expanded definition of autocharge agreement.
II. Special Analysis
This final rule does not meet the criteria for a ``significant
regulatory action'' pursuant to Executive Order 12866.
Because this rule relates to public contracts and procedures for
United States securities, the notice, public comment, and delayed
effective date provisions of the Administrative Procedure Act are
inapplicable, pursuant to 5 U.S.C. 553(a)(2).
In addition, because this rule is in the public interest, expedites
the handling and processing of government securities, offers a new
option for delivery and payment of securities, and does not adversely
affect holders of government securities, the Department has determined
not to publish the rule for public comment and to make the rule
effective immediately upon publication.
As no notice of proposed rulemaking is required, the provisions of
the Regulatory Flexibility Act (5 U.S.C. 601, et seq.) do not apply.
List of Subjects in 31 CFR Part 356
Bonds, Federal Reserve System, Government securities, Securities.
For the reasons set forth in the preamble, 31 CFR Chapter II,
subchapter B, part 356, is hereby 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.
2. The heading for part 356 is revised as set forth above.
3. Section 356.2 is amended by revising the definition of
``Autocharge agreement'' and adding in alphabetical order the
definitions of ``Clearing corporation'' and ``Delivery and payment
agreement'' to read as follows:
Sec. 356.2 Definitions.
* * * * *
Autocharge agreement means a written agreement between a submitter
and a depository institution or between a clearing corporation and a
depository institution, acknowledged by a Federal Reserve Bank, which
authorizes a Federal Reserve Bank to deliver securities awarded at
auction to the book-entry account of the depository institution or,
when authorized, to a TREASURY DIRECT account, and to charge a funds
account of the depository institution for the settlement amount of the
securities. (See exhibit B for a sample autocharge agreement between a
submitter and a depository institution.)
* * * * *
Clearing corporation means a clearing agency as defined in Section
3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(23)) that is
registered with the Securities and Exchange Commission pursuant to
Section 17A of the Securities Exchange Act of 1934 and the rules
thereunder.
* * * * *
Delivery and payment agreement means a written agreement between a
clearing corporation and a submitter, acknowledged by a Federal Reserve
Bank, authorizing the Federal Reserve Bank, with respect to securities
awarded to the submitter for its own account, to deliver such
securities to, and accept payment from, a depository institution acting
on behalf of the clearing corporation pursuant to an acknowledged
autocharge agreement.
* * * * *
4. Section 356.11 is amended by redesignating paragraphs (b)(2) and
(b)(3) as (b)(3) and (b)(4) and adding a new paragraph (b)(2) to read
as follows:
Sec. 356.11 Submission of bids.
* * * * *
(b) * * *
(2) For competitive bids, if securities are to be delivered to more
than one account, a separate paper tender must be submitted for each
delivery instruction specified.
* * * * *
5. Section 356.16 is amended by revising paragraph (b)(2)(ii) and
adding a new paragraph (b)(2)(iii) to read as follows:
Sec. 356.16 Responsibility for payment.
* * * * *
(b) * * *
(2) * * *
(ii) A submitter that chooses not to pay by charge to its funds
account or a submitter that does not have a funds account must, prior
to the submission of a tender, have an acknowledged autocharge
agreement on file at the Federal Reserve Bank to which the tender is
submitted. By submitting a tender for securities to be paid for under
such autocharge agreement, the submitter authorizes the Federal Reserve
Bank to provide, to the depository institution whose funds account will
be charged under the agreement, notice of the total par amount of, and
price to be charged for, securities awarded as a result of the
submitter's tender.
(iii) In addition, a submitter that is a member of a clearing
corporation may instruct that delivery and payment be made through the
clearing corporation for securities awarded to the submitter for its
own account, provided that the following requirements are met:
(A) The submitter must, prior to the submission of a tender for
such securities, have a delivery and payment agreement with the
clearing corporation acknowledged by, and on file at, the Federal
Reserve Bank to which the tender is submitted. By entering into such an
agreement, the submitter authorizes the Federal Reserve Bank to provide
to the clearing corporation notice of the par amounts of, prices to be
charged for, and total payment amounts for, securities awarded to the
submitter for its own account.
(B) An autocharge agreement between the clearing corporation and
the depository institution must, prior to the submission of a tender
for such securities, be acknowledged by, and on file at, the Federal
Reserve Bank servicing the depository institution. By entering into
such an agreement, the clearing corporation authorizes the Federal
Reserve Bank to which the tender is submitted to provide, to the
depository institution whose funds account will be charged under the
agreement, notice of the total aggregate par amount of, prices to be
charged for, and total payment amounts for, securities to be delivered
to the clearing corporation's designated account at the depository
institution.
* * * * *
6. Section 356.24 is amended by revising paragraphs (a) and (c) to
read as follows:
Sec. 356.24 Notice of awards; confirmations.
(a) Notice of awards--(1) Notice to submitters. Notice of awards
will be provided by a Federal Reserve Bank or the Department to
submitters of successful competitive bids. Submitters of noncompetitive
bids will be notified only when the price to be paid by noncompetitive
bidders is over par or if noncompetitive bids are not accepted in full.
(2) Notice to clearing corporation. If awarded securities are to be
delivered pursuant to a delivery and payment agreement, notice of the
awards also will be provided by a Federal Reserve Bank or the
Department to the clearing corporation that is a party to such
agreement.
* * * * *
(c) Confirmation of award and settlement amount to a depository
institution having an autocharge agreement with a submitter or a
clearing corporation. Not later than the day after each auction, the
appropriate Federal Reserve Bank will notify each depository
institution that has entered into an autocharge agreement with either a
submitter or a clearing corporation as to the amount to be charged to
the institution's funds account at the Federal Reserve Bank on the
issue date.
* * * * *
7. The title to Exhibit B to Part 356 is revised to read as
follows:
Exhibit B to Part 356. Sample Autocharge Agreement To Deliver and
Charge for Securities Awarded in Department of the Treasury Auctions
(Submitter and Depository Institution).
* * * * *
Dated: May 11, 1994.
Gerald Murphy,
Fiscal Assistant Secretary.
[FR Doc. 94-13621 Filed 6-1-94; 8:45 am]
BILLING CODE 4810-39-P
