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8-82 Beg. T-73 T1WKRPRETATTQN of law op regulation (Copies to be sent to all Federal reserve banks) March 21, 1938. Mr. , Assistant Vice President, Federal Reserve Bank, Dear Mr. : Reference is made to your letters of February 9 and March 2, 1938, regarding a question which has arisen under Regulation T. The question which you present may be restated as follows: A customer has an account in which the adjusted debit balance exceeds the maximum loan value of the securities and in which there is required under Regulation T the deposit of $2,500 in connection with a transaction on a preceding day. The account includes a short position of 100 shares of X stock having a current market value of $5,000. The customer deposits with the creditor 100 shares of X stock to be delivered against the short position, and requests the creditor to permit him to withdraw on the same day $5,000 in cash. There are no other transactions in the account on the given day, and the $2,500 deposit is the only one required in the account because of any transactions on any previous day. May the creditor permit such withdrawal? It is the view of the Board that in the circumstances stated, the receipt of 100 shares of X stock in the account to be delivered against the short position has the effect of reducing the adjusted debit balance of the account by $5,000 (the market value of the securities short) plus $2,500 (the margin required on the short position under the present supplement to Regulation T), or $7,500, while leaving unchanged the maximum loan value of the securities in the account. The creditor may, if he desires, treat the receipt of securities as consisting of two portions. One portion may be considered to be a "covering or other liquidating" transaction effected in the account for the purposes of section 3(e)> in lieu of th$ deposit of $2,500 in connection with the transaction on the preceding day; and the remaining portion may be considered to be a deposit of securities in connection with a withdrawal • On this basis, the creditor may permit the withdrawal from the account on the given day of $5,000 in cash. Very truly yours, (Signed) L. P. Bethea L. P. Bethea, Assistant Secretary.
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