[Federal Register Volume 62, Number 171 (Thursday, September 4, 1997)]
[Rules and Regulations]
[Pages 46860-46861]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-23351]
[[Page 46859]]
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Part III
Department of the Treasury
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Fiscal Service
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31 CFR Part 357
Regulations Governing Book-Entry Treasury Bonds, Notes, and Bills;
Final Rule
Federal Register / Vol. 62, No. 171 / Thursday, September 4, 1997 /
Rules and Regulations
[[Page 46860]]
DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Part 357
Regulations Governing Book-Entry Treasury Bonds, Notes and Bills
AGENCY: Bureau of the Public Debt, Fiscal Service, Treasury.
ACTION: Final rule.
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SUMMARY: The Department of the Treasury (Department or Treasury) is
issuing in final form an amendment to its regulations governing book-
entry Treasury Bonds, Notes and Bills which will offer investors
holding marketable securities within the TREASURY DIRECT system the
option of having Treasury, through a designated Federal Reserve Bank,
acting as fiscal agent of the United States, sell such securities in
the secondary market. Previously, if investors needed or wanted to sell
their Treasury securities, they were required to first transfer their
securities from their TREASURY DIRECT accounts to accounts with
financial institutions or broker-dealers within TRADES, the commercial
book-entry system. Investors who did not already have broker-dealer
accounts established were required to first establish such accounts for
the transaction. The new service will benefit such investors by
providing them with the option of having the designated Federal Reserve
Bank sell the securities and transmit the settlement amounts to the
investors.
EFFECTIVE DATE: September 4, 1997.
FOR FURTHER INFORMATION CONTACT: Richard Koch, Director, Division of
Customer Service, Bureau of the Public Debt (304) 480-6748; Susan
Klimas, Attorney-Adviser, Office of the Chief Counsel, Bureau of the
Public Debt (304) 480-5192; Edward C. Gronseth, Deputy Chief Counsel,
Office of the Chief Counsel, Bureau of the Public Debt (304) 480-5192.
SUPPLEMENTARY INFORMATION: This final rule amends the general
regulations governing book-entry Treasury Bonds, Notes and Bills to
offer TREASURY DIRECT investors the service of selling their unmatured
marketable securities in the secondary market. At the request of the
investor, the securities will be transferred to the designated Federal
Reserve Bank, acting as fiscal agent of the United States, to be sold
on behalf of the investor. This will enhance customer service to
TREASURY DIRECT investors who do not already have an account
established with a financial institution or broker-dealer and who wish
to liquidate some or all of their securities. In addition, legal
representatives and heirs of a decedent with securities held in
TREASURY DIRECT who may wish to sell the securities would not have the
added burden of establishing a broker-dealer account.
Investors wishing to use the new service will authorize Treasury to
transfer their securities to the designated Federal Reserve Bank to be
sold on their behalf. Once all evidence which may be required to
support such a transfer is received and approved, the securities will
be transferred to the Federal Reserve Bank. Generally, on the same day
that the Federal Reserve Bank receives the securities, the Federal
Reserve Bank will make a reasonable effort to obtain three price quotes
from dealers and will enter into an agreement to sell the securities to
the dealer with the highest price quote for next day settlement. The
day that the agreement to sell the securities is entered into is
referred to as the trade date. If the Federal Reserve Bank is unable to
obtain at least one price quote for the security, the security will be
returned to the TREASURY DIRECT account of the investor on the next
full business day following the receipt of the securities by the
Federal Reserve Bank, and the investor will be notified. On the next
full business day after the trade date, the settlement amount will be
released electronically by the Federal Reserve Bank to the account at
the financial institution which the investor has previously designated
to receive TREASURY DIRECT payments. The electronic payments will be by
the Automated Clearing House method, as provided in this part. A
confirmation will be sent to the investor by the Federal Reserve Bank
upon the completion of the transaction. Because the Federal Reserve
Bank enters into an agreement to sell the securities on the same day
that it receives the securities, the authorization of the investor for
the transfer and sale of the securities becomes irrevocable when the
transfer from the TREASURY DIRECT account of the owner to the Federal
Reserve Bank is made.
The customer agrees to accept the price received by the Federal
Reserve Bank from the dealer selected as having the highest price
quote. The Department and the Federal Reserve Bank are not liable for
changes in market conditions which may affect the price received by the
investor, or any loss which the investor may incur as a result of the
transaction or the failure of the Federal Reserve Bank to complete the
transaction. The settlement amount, also referred to as the net amount
on the confirmation, may be less than the par amount of the security.
Such settlement amount is derived by taking the par amount of the
security (that is, the stated value of the security at original
issuance), multiplying that amount by the price, adding any interest
which may have accrued, and subtracting the transaction fee. For
inflation indexed securities, the settlement amount will also include
any applicable inflation adjustment, as provided in 31 CFR part 356.
A transaction fee will be charged for each security sold on behalf
of the investor. For purposes of computing the transaction fee, a
security is considered as any amount within a TREASURY DIRECT account
which is identified by a separate CUSIP number. Thus, if an investor
has several holdings within a TREASURY DIRECT account of varying
amounts, but all are identified by the same CUSIP number, and all are
transferred in one transaction, only one transaction fee will be
charged, since the holdings are considered as one security. If the
investor has several holdings within a TREASURY DIRECT account, each
with a different CUSIP number, then a separate transaction fee will be
charged for each holding, as each holding with a separate CUSIP number
is considered a separate security. If an investor has two TREASURY
DIRECT accounts, and each account has a security with a CUSIP identical
to the security in the other account, then two transaction fees will be
charged, since each security within each account is considered a
separate security. If the Federal Reserve Bank is unable to complete
the sale of the security, no transaction fee will be charged. The
transaction fee will be deducted prior to the Federal Reserve Bank
initiating the payment of the settlement amount to the investor's
account at the financial institution designated to receive TREASURY
DIRECT payments. The amount of the transaction fee will be published by
notice in the Federal Register.
The Department has reserved the right to terminate the service at
any time at its discretion without prior notice.
The TREASURY DIRECT rules found in subpart C of this part apply to
the transaction, rather than the TRADES rules found in subpart B.
Several definitions have been added to the part to further clarify
the process.
Procedural Requirements
It has been determined that this final rule does not meet the
criteria for a ``significant regulatory action,'' as defined in
Executive Order 12866. Therefore, the regulatory review
[[Page 46861]]
procedures contained therein do not apply.
This final rule relates to matters of public contract and
procedures for U.S. securities. Accordingly, pursuant to 5 U.S.C.
553(a)(2), the notice, public comment and delayed effective date
provisions of the Administrative Procedure Act do not apply. 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.
There are no new collections of information contained in this final
rule, therefore, the Paperwork Reduction Act (44 U.S.C. 3507) does not
apply.
List of Subjects in 31 CFR Part 357
Banks, Banking, Bonds, Federal Reserve System, Government
securities.
Dated: August 20, 1997.
Gerald Murphy,
Fiscal Assistant Secretary.
For the reasons set out in the preamble, 31 CFR part 357 is amended
as follows:
PART 357--GENERAL REGULATIONS GOVERNING BOOK-ENTRY TREASURY BONDS,
NOTES AND BILLS
1. The authority citation for part 357 continues to read as
follows:
Authority: 31 U.S.C. Chapter 31, 5 U.S.C. 301 and 12 U.S.C. 391.
2. Section 357.22 is amended by redesignating paragraphs (b)
through (e) as (c) through (f), respectively, and adding a new
paragraph (b), as follows:
Sec. 357.22 Transfers.
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(b) Transfer to Federal Reserve Bank for sale of securities in the
secondary market.
(1) Upon authorization by the investor, an unmatured security may
be transferred to a Federal Reserve Bank acting as the designated
fiscal agent of the United States, to be sold on behalf of the
investor.
(2) Definitions. In this section, unless the context indicates
otherwise:
Dealer means an entity that is registered or has given notice of
its status as a government securities broker or government securities
dealer, pursuant to Section 15C(a)(1) of the Securities Exchange Act of
1934.
Par amount means the stated value of a security at original
issuance.
Price means the dollar amount to be paid for a security expressed
as a percent of its current par amount.
Security means any amount held in a TREASURY DIRECT account which
is represented by a separate CUSIP number.
Settlement amount, also referred to as net amount, is the amount
deposited by the Federal Reserve Bank to the account of the investor at
the financial institution designated by the investor to receive
TREASURY DIRECT payments. This amount is equal to the par amount of the
securities multiplied by the price, plus any accrued interest, and less
the transaction fee. For inflation indexed securities, the settlement
amount also includes any applicable inflation adjustment, as provided
in 31 CFR Part 356. The settlement amount may be less than the par
amount of the security.
Settlement date is the date the settlement amount is released to
the account at the financial institution designated by the investor for
receipt of TREASURY DIRECT payments.
Trade date means the date on which the Federal Reserve Bank enters
into an agreement with a dealer for the sale of the security.
Yield, also referred to as yield to maturity, means the annualized
rate of return to maturity on a fixed principal security expressed as a
percentage. For an inflation-indexed security, yield means real yield,
as defined in 31 CFR part 356.
(3) Procedure. On an approved Treasury form, the owner must
authorize a transfer of the security from the investor's TREASURY
DIRECT account to the designated Federal Reserve Bank, and authorize
the Federal Reserve Bank to sell the security. Rules in subpart C of
this part governing the transfer of securities will apply to the
transfer of the security to the Federal Reserve Bank. Generally, on the
day that the security is transferred to the Federal Reserve Bank, the
Federal Reserve Bank will make reasonable efforts to obtain a price
quote from at least three dealers, and will enter into an agreement to
sell the security to the dealer with the highest price quote for next
day settlement. What constitutes reasonable effort shall be determined
solely by the Federal Reserve Bank. On the next full business day after
the trade date, the settlement amount shall be released by direct
deposit (electronic funds transfer), as provided in Sec. 357.26 of this
part, to the account at the financial institution designated by the
investor to accept TREASURY DIRECT payments, except when the Department
determines that extraordinary circumstances exist that require payment
by other means. In the event that the Federal Reserve Bank is unable to
obtain at least one price quote for the security, the security will be
returned to the TREASURY DIRECT account of the investor on the next
full business day following the receipt of the securities by the
Federal Reserve Bank, and the Federal Reserve Bank will notify the
investor.
(4) Confirmation. The Federal Reserve Bank will send a confirmation
of the sale to the investor upon completion of the transaction. Such
confirmation will include such information as price, trade date,
settlement date, settlement amount, also referred to as net amount,
transaction fee, and yield to maturity.
(5) Price. By authorizing the transfer and sale of the securities,
the investor agrees to accept the price received by the Federal Reserve
Bank from the dealer selected as having the highest price quote.
(6) Transaction Fee. A transaction fee shall be charged for each
security sold on behalf of the investor. If the Federal Reserve Bank is
unable to complete the sale of the security, no fee will be charged. By
authorizing the sale of the security, the investor authorizes the
Federal Reserve Bank to withhold the transaction fee prior to the
Federal Reserve Bank initiating the payment of the settlement amount to
the account at the financial institution designated by the investor to
receive TREASURY DIRECT payments. The amount of the transaction fee
will be published by notice in the Federal Register.
(7) Termination. This service may be terminated at anytime without
prior notice at the discretion of the Department.
(8) Rights. The provisions applicable to TREASURY DIRECT
transactions in subpart C shall apply to this section. The provisions
applicable to transactions in TRADES in subpart B shall not apply to
this section.
(9) Irrevocability. The authorization of the investor for the
transfer and sale of the securities shall be irrevocable when the
transfer from the TREASURY DIRECT account of the investor to the
account at the Federal Reserve Bank is effected.
(10) Liability. The Department and the designated Federal Reserve
Bank shall not be liable for changes in market conditions affecting the
price received for the security, or for any loss which the investor may
incur as a result of the transaction or the inability of the Federal
Reserve Bank to complete the transaction.
* * * * *
[FR Doc. 97-23351 Filed 9-2-97; 8:45 am]
BILLING CODE 4810-39-P
