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F ederal reserve Bank of Dallas DALLAS, T E X A S 75222 C i r c u l a r No. 78-31 M arch 21, 1978 PROPOSED AMENDMENTS TO THE SUPPLEMENTS TO REGULATIONS C , T , AND U P T C Listing R e q u ire m e n ts TO ALL BANKS, BROKERS/DEALERS, REGULATION G REGISTRANTS, AND OTHERS CONCERNED IN THE ELEVENTH FEDERAL RESERVE DISTRICT: T h e B oard of G o v e rn o rs of th e F e d e ra l R e s e rv e System h a s p ro p o s e d a c h a n g e in r e q u ir e m e n t s fo r in c lu sio n of sto ck s on th e B o a r d 's List of O v e r - t h e C o u n te r (OTC) Sto ck s t h a t a r e s u b je c t to m a rg in r e q u i r e m e n t s . T h e p ro p o sa l would r e q u i r e th a t to b e in c lu d e d among sto ck s on the B o a r d 's OTC List, d e a l e r s in the stock m ust s u b m it bona fide b id s a n d offers for t h e stock to an autom ated q u otation sy stem su c h a s NASDAQ (National A ssociation of S e c u r itie s D e ale rs Automated Q uotations — linking m ajor b r o k e r s th r o u g h o u t the c o u n try ) . C u r r e n t l y , sto ck s in c lu d e d on the list a r e those for w hich d e a l e r s r e g u l a r l y p u b li s h bona fide b id s a n d o ffers. To a n d in c o n s id e ra tio n of th is m a tte r b y the B o ard , in t e r e s te d p e r s o n s a r e in v ited to su b m it r e l e v a n t d a ta , v i e w s , co m m en ts, o r a r g u m e n ts to the S e c r e t a r y , B oard of G o v e rn o rs of th e Federal R e s e r v e S y ste m , W ash in g to n , D .C . 20551. All comments m u st be re c e iv e d on o r b e fo re April 14, 1978. All material su bm itted sh o u ld r e f e r to Docket No. R-0147. A c opy of th e B o a r d 's p ro p o s a l is p r i n t e d on th e following p a g e s . Q u e s tion s on th is m a tte r may be d ir e c t e d to Ms. Laura Homer, C h ief A t t o r n e y , S e c u r itie s R eg ulatio n , Division of B anking S u p e r v is io n a n d R e g u latio n , B oard of G o v e rn o rs of th e F ed eral R e s e rv e S y stem , W ash in g ton , D .C . 20551 (202-452-2781), o r to o u r C o n su m e r A ffairs Section a t Ext. 6171. S in c e re ly y o u r s , R o b ert H . Boykin F ir s t Vice P r e s id e n t Banks and others are encouraged to use the following incoming W A T S numbers in contacting this Bank: 1-8 00 -492 -440 3 (intrastate) and 1 -8 00 -527 -497 0 (interstate). For calls placed locally, please use 651 plus the extension referred to above. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) FEDERAL RESERVE SYSTEM [12 CFR Parts 207, 220, 221] [R e g s . O , T , U ; D o c k e t N o. R -0 1 4 7 ] OTC LIST REQUIREMENTS P ro p o se d Rulo E x tra c t From FEDERAL REGISTER, VOL. 43, NO. 53, F r i d a y , March 17, 1978 p p . 11214 - 11215 AGENCY: Board of Governors of the Federal Reserve System. ACTION: Proposed rule. SUMMARY: These proposed amend ments to th e Supplem ents to Regula tions G, T and U will require that dealers m ust submit bona fide bids and offers for an OTC stock to an automated quotation system if they are to be counted as market-makers in that stock for the purpose of being in cluded on th e Board’s List of OTC Margin Stocks. The minimum market maker requirements for a stock to be included on th e List under the present rule recognizes those dealers who make “regularly published bona fide bids and offers for such stock.” When th e List was first published by th e Board in 1969 the “pink sheets” of the National Quotation Bureau were the only consistent source of th e required price information. Since that time an automated quotation system, the Na tional Association of Security Dealers Automated Quotations (NASDAQ), has been developed to a point where price information on all stocks on the Board’s list can now be obtained from it. T he Board is presently using data from both th e “pink sheets” and NASDAQ for its surveys. The proposed amendment will elimi nate the necessity of reviewing data from the "pink sheets” most of which is considered duplicative and reduce staff review and computer time. DATE: Comments m ust be received on or before April 14, 1978. ADDRESS: Secretary, Board of Gov ernors of the Federal Reserve System, W ashington, D C. 20551. FOR FURTHER INFORMATION CONTACT: Laura Homer. Chief Attorney, Secu rities Regulation, Division of Bank ing Supervision and Regulation, Board of Governors of the Federal Reserve System, Washington, D.C. 20551, 202-452-2781. SUPPLEMENTARY INFORMATION: The Board proposes to amend the Supplements to Regulations G, T and U (12 CFR Parts 207, 220 and 221) to eliminate the necessity of reviewing data from the "pink sheets” when sur veying stocks for inclusion on the Board’s List of OTC margin Stocks. Most of th e data is now duplicative of material from NASDAQ, and review ing it requires an expenditure of staff and computer tim e no longer deemed necessary to complete the analysis re quired in surveying th e stocks eligible for th e Board’s List. Further, an anal ysis of available price information in dicates that NASDAQ is th e m ost con venient and com plete source of bid and offer data for more actively traded OTC stocks in addition to sup plying other needed data which are unavailable from th e “pink sheets.” The proposed amendments will permit th e Board to use survey data from NASDAQ only. Accordingly, pursuant to sections 7 and 23 of th e Securities Exchange Act of 1934, as amended (15 U.S.C. 78 g and w) th e Board proposes to amend 12 CFR Parts 207, 220, and 221 as fol lows: PART 2 0 7 — SECURITIES CREDIT BY PERSONS OTHER THAN BANKS, BROKERS, OR DEALERS 1. Section 207.5(d)(2) and 207.5(e)(2) of Part 207, Securities Credit by Per sons other than Banks, Brokers or Dealers, would be amended as follows: § 207.5 Supplement. • « • • • (d) Requirements for inclusion on List of OTC margin stock. * • • (2) Four or more dealers stand will ing to, and do in fact, make a market in such stock and regularly submit bona fide bids and offers to an auto mated quotations system for their own accounts, or the stock is registered on a securities exchange that is exempted by the Securities and Exchange Com mission from registration as a national securities exchange pursuant to sec tion 5 of th e Securities Exchange Act of 1934 (15 U.S.C. 78e). • * » • • (e) Requirements for continued in clusion on List of OTC margin stock. • * * « • (2) Three or more dealers stand will ing to, and do in fact, make a market in such stock and regularly submit bona fide bids and offers to an auto mated quotations system for their own accounts, or the stock is registered bn a securities exchange that is exempted by the Securities and Exchange Com mission from registration as a national securities exchange pursuant to sec tion 5 of th e Securities Exchange Act of 1934 (15 U.S.C. 78e). PART 220— CREDIT BY BROKERS AND DEALERS 2. Section 220.8(h)(2) and 220.8(i)(2) of Part 220, Credit by Brokers and Dealers, would be amended as set forth below: mated quotations system for their own accounts, or th e stock is registered on a securities exchange that is exempted § 220.8 Supplement. by the Securities and Exchange Com mission from registration as a national securities exchange pursuant to sec (h) Requirements for inclusion on tion 5 of the Securities Exchange Act List of OTC margin stock. * * * of 1934 (15 U.S.C. 78e). (2) Four or more dealers stand will To aid in consideration of this ing to, and do in fact, make a market m atter by th e Board, interested per in such stock and regularly submit sons are invited to submit relevant bona fide bids and offers to an auto data, views, comments, or arguments. mated quotations system for their own All material should Include the docket accounts, or th e stock is registered on R-0147. Such material will be a securities exchange that is exempted number by th e Securities and Exchange Com made available for inspection and mission from registration as a national copying upon request, except as pro securities exchange pursuant to sec vided in § 261.6(a) of th e Board’s Rules tion 5 of th e Securities Exchange Act Regarding Availability of Information (12 CFR 261.6(a)). of 1934 (IS U.S.C. 78e). By order of th e Board of Governors, March 13,1978. (1) Requirements for continued in T h e o d o r e E. A l l i s o n , clusion on List of OTC margin stock. Secretary of the Board. m m m (2) Three or more dealers stand will ing to, and do in fact, make a market in such stock and regularly submit bona fide bids and offers to an auto mated quotations system for their own accounts, or th e stock is registered on a securities exchange that is exempted by the Securities and Exchange Com mission from registration as a national securities exchange pursuant to sec tion 5 of the Securities Exchange Act of 1934 (15 U.S.C. 78e). PART 221— CREDIT BY BANKS FOR THE PURPOSE OF PURCHASING OR CARRYING MARGIN STOCKS 3. Section 221.4(d)(2) and 221.4(e)(2) of Part 221, Credit by Banks for the Purpose of Purchasing or Carrying Margin Stocks, would be amended as follows: § 221.4 Supplement. (d) Requirements for inclusion on List of OTC margin stock. * * * (2) Four or more dealers stand will ing to, and do in fact, make a market in such stock and regularly submit bona fide bids and offers to an auto mated quotations system for their own accounts, or the stock is registered on a securities exchange that is exempted by the Securities and Exchange Com mission from registration as a national securities exchange pursuant to sec tion 5 of the Securities Exchange Act of 1934 (15 U.S.C. 78e). (e) Requirements for continued in clusion on List of OTC margin stock. mmm (2) Three or more dealers stand will ing to, and do in fact, make a market in such stock and regularly submit bona fide bids and offers to an auto- [ F R D oc. 7 8 -7 204 F ile d 3 -1 4 -7 8 ; 5:10 p m ]
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